Brazilian law reignites debate on framework for distributed solar, storage

<p class="p1"><span class="s1">Provisional measure (MP) 1,304 introduces a charge for certain distributed-generation (DG) system operators if an Energy Development Account (CDE) spending cap is breached.</span></p><p><strong>From <a href="https://www.ess-news.com/2025/10/09/brazilian-law-reignites-debate-on-framework-for-energy-storage/" rel="noopener" target="_blank">pv magazine Brazil</a></strong></p>
<p>MP 1,304, introduced by Brazil’s federal government, has again highlighted the dilemmas facing the Brazilian electricity sector: how to balance tariffs, subsidies, and investment without compromising regulatory stability.</p>
<p>The bill creates a Resource Complement Charge (ECR), a mechanism triggered if the CDE spending cap is exceeded.</p>
<p>Although MP 1,304 does not repeal Law 14,300 – which established the legal framework for distributed generation – industry insiders have warned it could introduce risk for DG operators. At the same time, however, the new regulation could offer an opportunity to discuss issues such as opening up the country’s free market for energy and drafting a legal framework for energy storage.</p>
<p>To understand the possible impact of MP 1,304, <strong>pv magazine Brasil</strong> spoke with Barbara Rubim, vice president of DG at the Brazilian Association of Photovoltaic Solar Energy (ABSolar), and president of Bright Strategies; tax and renewable energy legal expert Thiago Bao; and Hewerton Martins, president of the Free Solar Movement (MSL). All three highlighted risks, contradictions, and opportunities the legislation could embody for DG and the wider electricity sector.</p>
<h3 class="wp-block-heading"><strong>Opinion</strong> divided</h3>
<p>The heart of MP 1,304 is the ECR. If the CDE is exceeded, an ECR charge of 50% will be triggered in 2027, and the charge will be 100% from 2028. The resulting charges will be divided among agents considered subsidy recipients.</p>
<p>ABSolar’s Rubim said the new rule will saddle consumers with a responsibility that should be the government’s. She said, “It’s as if, in the Bolsa Família program, if the budget were exceeded, families themselves receive a bill to repay part of the benefit. This is exactly what the ECR rule proposes for the electricity sector.”</p>
<p>The mechanism could dampen enthusiasm for investment, according to Bao, who said, “In practice, the ECR is a new expense to be apportioned. For existing projects, it can reduce margins. For new projects, it increases regulatory risk and puts pressure on investment attractiveness.”</p>
<p>MSL’s Martins warned the mechanism could disproportionately punish small solar energy users. He said, “Small solar energy consumers already have a payment rule, until 2029. But large free-market consumers continue to receive lifetime subsidies. If the ECR is poorly designed, small consumers, who already pay, may end up paying even more.”</p>
<h3 class="wp-block-heading"><strong>DG classification</strong></h3>
<p>The ECR payment would not be levied on microgeneration systems – classed as DG I – with a scale of up to 75 kW as they are not funded by the CDE. Operators of “DG II” and “DG III” systems – which are in a regulatory transition period provided for by Law 14,300 – would have to pay any ECR.</p>
<p>“If the CDE’s budget assessment is serious and thorough, the impact may be minimal,” said ABSolar’s Rubim. “But if there’s intentional undersizing, it becomes a way to shift an extra burden.”</p>
<p>Lawyer Bao warned that contracts registered with the Electric Energy Trading Chamber may lose their legal security, stating, “The provisional measure opens up loopholes for regulatory review. Even formalized contracts, considered safe assets, may have their economic and financial stability questioned.”</p>
<h3 class="wp-block-heading"><strong>Regulatory instability</strong></h3>
<p>MSL’s Martins said any prospect of regulatory uncertainty could affect the Brazilian DG market, which has consolidated thanks to stable rules. “Without regulatory certainty, investors think twice before investing in the sector,” he said. “This could slow the growth of distributed solar in Brazil.”</p>
<p>Bao agreed, adding, “DG grew because the rules were clear. If the legal framework remains disputed and subject to amendments that change tariffs and compensation, capital will migrate to other models, or even other countries.”</p>
<h2 class="wp-block-heading"><strong>Storage</strong> opportunities</h2>
<p>MP 1,304 could also open up the free market for energy to all consumers. While not confirmed, congressional leaders have said the point could be debated again in Senator Eduardo Braga’s report.</p>
<p>Momentum is also gathering for a legal framework for energy storage. Representatives of ABSolar, the Brazilian Association of Energy Storage Solutions, and the Brazilian Wind Energy Association called for regulation at a breakfast held at the Federal Senate on Wednesday. The attendees proposed models for standalone, transmission grid-connected energy storage systems; for projects coupled with generation sites; and for DG equipment used directly by consumers. The associations stressed the DG option would be easiest to regulate in the short term.</p>
<p>ABSolar’s Rubim said, “MP 1,304 could be an excellent opportunity to leverage the development of energy storage, which is part of the solution to the country’s supply security challenges.”</p>
<h3 class="wp-block-heading"><strong>At stake</strong></h3>
<p>MP 1,304 goes far beyond a fiscal measure to curb CDE spending. It opens the door to rethinking subsidies, redistributing burdens, and potentially advancing the opening up of the free market for energy and a storage framework.</p>
<p>While industry opinions differ on the immediate impact of the legislation on DG, the consensus is that regulatory instability is the greatest risk. Until Senator Braga’s report is presented, the sector will remain on high alert, balanced between a promise of predictability and the fear new regulations will curb the growth of DG solar in Brazil.</p>