Brazil: Solar energy subscription on Aneel's radar; what could change?

The solar energy subscription model, which has spread across the country in recent years, is being questioned by the National Electric Energy Agency (Aneel), which has begun internal discussions on tightening regulations for this market segment.

Based on the sharing of production from mini solar power plants among multiple consumers, the business has been explored by groups ranging from major utilities such as Cemig and Energisa, to banks and investment funds, telecommunications companies, and even the Heineken brewery.

Ultimately, the market may be a victim of its own success. Aneel’s technical assessment is that the entry of investors from various sectors into the field demonstrates the “commercialization” of a model originally created to allow consumer cooperatives to pool resources to invest in power plants solely to meet their own consumption.

In a technical note recommending several changes to the rules, the agency’s distribution services regulation department stated that the fixed discounts on electricity bills offered by companies to their solar subscribers – typically between 5% and 20% – constitute a “conceptual distortion” of the law that gave rise to these businesses.

This is because, as partners in the mini-plants, consumers should share their results proportionally, subject to variation according to the volume of energy produced.

The Aneel document also specifically mentions the involvement in this sector of groups such as Heineken, which began offering renewable energy through generating partners, TIM, which partnered with Thopen Energia, and FIT Energia, acquired by Santander in 2023.

“Such a move reinforces the perception that a significant portion of these arrangements has come to be exploited as a structured economic activity, and not merely as an instrument intended for sharing the benefits of generation among consumers,” the technical note states.

Aneel staff have proposed measures to rein in the sector, which would include stricter rules for the allocation of power plant generation among “subscribers” and the establishment of a minimum 12-month commitment period for plans, as well as a waiting period before customers who leave can return.

Behind the agency’s concerns, in addition to legal and regulatory issues, is a growing subsidy bill.

The mini-plants that generate the energy behind solar subscription models benefit from discounts on grid usage fees, which ultimately result in costs for other consumers.

This year alone, this subsidy to mini-generators, which also includes individuals and companies with rooftop solar panels, reached 14.2 billion reais by September, up from 2.8 billion reais in 2022.

Following inspections, Aneel assessed that the structure of subscription-based energy “has started to function as a disguised sale of energy using subsidies intended for self-consumption generation,” said an industry expert who has followed the discussion at the agency for years.

"This could produce a 'reverse Robin Hood' effect, as those who bear this cost (of the subsidies) include vulnerable consumers without access to the same model."

For companies that have entered the subscription-based energy business, however, the proposed regulatory change "could be a bomb," said a source who provides consulting services to various groups.

Although the rules under review at Aneel do not in fact prohibit the model, they would in practice make the management of credits generated by mini-plants "much more complicated," increasing the operational risks and costs involved, the source said.

The discussion at the agency is also taking place at a time when many industry players are already facing difficulties due to intensified competition for customers following the market's strong growth – which has increased the discounts offered on electricity bills and the vacancy rate of shared-generation mini-plants, pressuring returns.

The issue is controversial not only because of the potential impact on companies in the segment, but also because of the large number of consumers who have adopted the subscription model.

For now, the issue has not reached the Aneel board, and there is still no consensus on the regulatory path forward, a source close to the regulator told Brazil Journal.

“I think the discussion may remain focused on preserving what already exists and potentially addressing only future cases.”

Felipe Zaratini, head of the energy practice at Felsberg Advogados, noted that the Federal Court of Accounts (TCU) had already ruled in 2024 that Aneel should present a plan to improve the regulation of “solar subscriptions,” and praised the agency’s initiative, as well as its indication that any eventual decision would not have retroactive effect.

“There are power plants, financing arrangements, and long-term contracts structured based on the rules and interpretations available,” Zaratini said.

Alexandre Bueno, a consultant at Allez Estratégia and co-founder of a solar subscription platform later sold to Prisma Capital, said the sector has indeed grown “in the fringes of regulation” and by exploiting “gaps.”

"This is a segment that is currently underserved from a regulatory standpoint. It requires a framework to operate in a more predictable manner. A very serious issue, for example, is customer churn. It is a highly competitive market, including what I consider irrational moves by some players. Therefore, regulatory action to reduce volatility in this market is a positive development."

The Aneel technicians' recommendations for regulating the sector will still be subject to review by the agency's board of directors and a public consultation.

In the meantime, however, it is not ruled out that industry executives may also seek support from another body in Brasília – Congress.

"It is a segment with a very strong lobbying force. Over the past few years, they have managed to exert significant influence in Congress to maintain their benefits," said a lawyer who has been following the discussions.

At Petrobras, fuel prices become the elephant in the room