“Wind Energy in Brazil:
Regulatory Overview”
Hamburg, September 25, 2014
Dr. Jan Curschmann
Brazilian Energy Mix Overview
The Brazilian Electric Energy Supply
Mix
> Generation Overview
Brazil has a total of 131,23 GW of installed
capacity.
> Mainly hydroelectric generation
Hydroelectric plants are responsible for over 67%
of the electricity generated in the country.
> Opportunities for alternative Sources
According to the Energy Research Office (EPE),
Hydropower in the Brazilian electricity mix shall
decline and the generation of electricity from wind
shall increase to 11% over the next 10 years
Source: ANNEL September/2014
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Wind Energy Overview
The Brazilian Wind Power Market
> Actual scenario
Brazil actually has 3.7 GW of installed wind
capacity, enough to power more than 4 million
households, accounting for 2,89% of national
electricity generation.
> Fastest growing source of power generation in
Brazil
In 2013, approximately 4.7 GW was procured, a
growth of 1.571% in relation to 2012.
> Perspectives for the Wind Power Market
The Brazilian Wind Power potential is estimated in
300 GW and the energy industry expectation is to
contract at least another 2GW per year until 2020.
> Wind Power Overview
180 plants in operation, 118 projects under
construction and 300 approved.
Source: Chamber of Commercialization of Electric Energy (CCEE)
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Wind Energy Overview
Major Energy Players
> ANEEL
Regulates and supervises all electricity supply services in the country
including oversight of the procurement process.
> Energy Research Office (EPE)
Determines where and when to run an auction for energy generation
capacity. It determines the type, size, location and technology of new
energy to be generated.
> The Energy Commercialization Chamber (CCEE)
Runs the auctions. The objective is to strive for the lowest possible
price of electricity for captive customers.
> Regional distribution companies
Required to contract supply for their customers through regulated
auctions
> Generation companies (Wind Farms)
Bid into the auctions to sell their available generation capacity under
long term contracts.
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Wind Energy Regulatory Framework
Alternative Energy Legal Framework
(Including Wind)
Main Wind Energy Regulations
> Law 10.438/02 - Creates the Program for Incentive of Alternative Energy
Sources – PROINFA
> Law 10.848/04 - Establish the new model for the Brazilian electric power
sector (ACR/ACL).
> Law 10,847/04 - Creates the Energy Research Office - EPE
> Decree 5081/04 - Governs the National System Operator - ONS
> Decree 5163/04 - Regulates the sale of electricity
> Decree 5175/04 - Install the Electricity Sector Monitoring Committee - CMSE
> Decree 5177/04 - Governs the Energy Commercialization Chamber - CCEE
> Normative Resolution No. 109/04 – Convention on Electricity Trading
> ANEEL NR77/04 - Established the procedures for reduction of the tariff for
use of transmission and distribution systems for wind plants.
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Wind Energy Regulatory Framework
Program for Incentive of Alternative Energy
Sources – PROINFA (created 2002)
PHASE 1 – Increase of the participation of alternative renewable energy
sources, by means of mandatory contracting of 3.3 GW shared among
wind power, small hydro and biomass plants;
Conditions – Long term power procurement agreements (20 years) with
ELETROBRÁS, by means of previous Public Calls; Mandatory minimum
nationalization index of 60%. “FiT-like” program: each technology
receives a fixed price of 150 USD/MWh.
PHASE 2 (not yet implemented) – Shall guarantee that 10% of the total
annual Brazilian electric energy consumption be met by the chosen
alternative renewable energy sources (wind power, small hydro and
biomass plants).
Conditions – Similar to Phase 1, however with a Mandatory minimum
nationalization index of 90%.
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Wind Energy Regulatory Framework
ACL
( Free Customers – Those
who consume more than
3MW/year)
Energy Procurement Model (2004):
Laws n. 10,848/04 and 10,847/04
Freely negotiated
agreements between
large customers and
generators
> Provide the basis of the electricity Market.
>Main Objectives
>
>
>
>
(i) low tariffs,;
(ii) continuity and quality of service;
(iii) fair return on investment; and
(iv) universal service.
ACR
(Captive Customers - Those
who consume less than
3MW/year)
>Two procurement environments
> Free Contracting Environment (ACL) – encompasses the
procurement of electricity by non-regulated entities (such as Free
Consumers, that are allowed, by law, to select their electricity suppliers
- and energy traders) by means of bilateral agreements, setting
volumes, prices and terms of supply.
> Regulated Contracting Environment (ACR) - contemplates the
procurement by distribution companies of all electricity necessary to
supply their Captive Consumers by means of public auctions
regulated by ANEEL and conducted by CCEE.
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Existing Generation:
Tender for agreements of
3-15 years of duration
New Generation:
Tender for agreements of
15-30 years of duration
Wind Energy Regulatory Framework
Regulated Contracting Environment (ACR)
Existing Energy Auction (LEE) - Decree 5163/04 - bidding process for
the procurement of electricity from existing generation facilities, carried out
(0-1) year prior to the start of the supply. Consists of short and medium‐term contracts between electricity distributors and built plants ( A-1 and
Adjust Auctions).
New Energy Auctions (LEN) - Law 10.848/04 - bidding process for the
procurement of electricity from new generation projects, conducted (3-5)
years prior to the start of the supply. Consists of long‐term contracts in
order to ensure investment in new plants (A-3 and A5 Auctions).
Alternative Sources Auctions (LFA) - Decree nº 6.048/07 - refer to long‐term contracts in order to promote the construction of power plants of a
given alternative energy source (LFA Auctions).
Reserve Energy Auction (LEE) - Decree nº 6.353/08 - refer to long‐term
contracts in order to provide more security in order to raise the level of
security of electricity supply to the National Interconnected System (SIN).
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Wind Energy Regulatory Framework
Regulatory scheme of the Brazilian energy sector:
Coexistence of Free and Regulated Markets
Free environment: Prices are freely negotiated in the generation and trading.
Regulated environment: auctions and tenders for lower rate.
Distinction before free and Captive Consumers
Funding through public and private resources
Companies classified by activity: generation, transmission, distribution, trading, import and export.
Coexistence of State and Private Companies
Competition in the generation and trading
Planning by the Energy Research Company (EPE)
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Wind Energy Regulatory Framework
Wind Enviromental Framework
Environmental regulations
> Law 6.938/81- established the national environmental policy, and
delegates to CONAMA the definition standards and criteria for licensing
effectiveer or potentially polluting activities.
> CONAMA Resolution No. 279/01 - Defines Wind Power as a venture
with small potential of a environmental impact and therefore eligible to
licensing by means of Simplified Environmental Report (RAS)
(maximum analysis period of 60 days)
> Law 12,651/12 - Forest Code – Defines the permanent preservation
areas (APP)
> Law 7661/88 - establishes the National Plan of Coastal Management.
> CONAMA Resolution No. 369/06 - enables intervention or suppression
of native vegetation of APPs.
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Wind Energy Regulatory Framework
CONAMA Resolution No. 462/14
Defines specific proceedings for the environmental permitting and simplified
licensing of wind-power plants.
Simplified Licensing Proceeding
To be eligible for the simplified licensing process the Wind venture shall
not:
> be located in environmentally sensitive areas
> intervene in the Conservation Unit of Integral Protection,
> generate direct impacts involving sociocultural inviability of
communities or their complete removal.
The licensing authority may, in a single stage, attest the environmental
viability, approve the location, authorize the execution of the wind project
and forthwith issue an LI.
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Instruments for Wind Power Growth
Conditions for financial support of Wind
Renewable Energy Generation - Auctions 2014
– BNDES
Who can apply - Companies with headquarters and administration in
Brazil and legal persons of public law.
Minimum funding – R$ 20 million. For lower values​​, there are other
lines of funding from BNDES.
*
Indirect Support
(transaction made ​through
accredited financial
institution)
Wind Generation Projects
Direct Support
(Transaction done directly
by BNDES)
Amortization Schedule (up
to) in years
16
Maximum Credit
80%
80%
Interest Rates
as of 8,87% *
as of 6,1% (+) Bank Fees
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Adjustable according to the TJPL Rate
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Instruments for Wind Power Growth
The Brazilian Main applicable Taxes
TAX
AMOUNT
WIND ENERGY SPECIFICS
II
Import tax
Varies by NCM*
Doesn’t apply for products not available
in Brazil
IPI
Tax over industrialized
products
Varies by NCM*
No specific treatment
ICMS
Tax over circulation of goods
and services
Varies per state
(usually 7%-25%)
Exempted for wind-energy specific
products until Dec 2021
PIS
Social contribution tax
1.65%
May be exempted by the Ministry of
Mines and Energy (REIDI)
COFINS
7.6%
May be exempted by the Ministry of
Mines and Energy (REIDI)
NCM: Numero Comum Mercosul, product classification system used for import tariff calculation
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Elections 2014
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Elections 2014
Political Perspectives
> Increase energy efficiency;
> Realignment of energy policy to
focus on renewable and sustainable
sources, with particular emphasis on
modern renewable sources (solar,
wind, biomass, geothermal, tidal,
biofuels generation);
> Reduction of fossil fuels
consumption;
> Expansion of grid out generation.
> Continue the expansion of the
generation park and transmission
lines, to ensure the security of supply
and reasonable tariffs.
> Solidification of a energy matrix that
includes multiple sources, with the
largest share of solar and wind
power plants.
> Increase the contribution of
alternative sources for the integrated
system, such as biomass, wind and
solar.
> Implementation of efficiency
programs and conservation.
> Reduce the energy cost via early
renewal of concessions for old plants
which are already amortized.
> Priority investments in the expansion
and modernization of the installed
power transmission park.
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> Professionalization of state, via
management contracts tied to
operational and financial goals.
> Search for more transparency and
predictability in pricing, with a focus
on low tariffs.
Brazil Group –
Unsere
Expertise
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Unsere Expertise – Brazil Group
Taylor Wessing’s Brazil Group
Your key benefits from working with us:
> Market understanding
Profound industry know-how through longstanding relations to
leading industrial companies.
> Interface to Brazil
Professional assistance by extensive knowledge in culture and
business.
> Full Service
Comprehensive and practical advice on all Brazil-related issues.
> Relationships
Strong ties to local lawyers, accountants, investment banks and
advisory houses.
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Your Taylor Wessing Contacts – Brazil Group
German
Office Details
Dr. Jan Curschmann
Head of Brazil Group
Partner, Hamburg
Hamburg
Hanseatic Trade Center
Am Sandtorkai 41
20457 Hamburg
T. +49 (0)4 0 36 80 30
Berlin
Ebertstraße 15
10117 Berlin
T. +49 (0)30 88 56 36 0
Jan Curschmann has longstanding experience in advising his
clients in matters of competition law and distribution. His
areas of legal practice focus on international contracts and
corporate law as well as arbitration and mediation, with
particular knowledge and experience in Latin American affairs
and special focus on Brazil. Since 1982 he has been
admitted to the Hamburg bar and joined Taylor Wessing as
partner in 1985.
Jan Curschmann, a native German speaker, is fluent in
Portuguese and English. In 2010 he became Honorary
Consul of Brazil in Germany. Between 1999 and 2012 he was
the Chairman of the German-Brazilian Lawyers Association.
He serves as a Board member of the German Lawyers
Association, International Section.
Contact Details
T: 49 (0)40 368 03 234
E: j.curschmann@taylorwessing.com
© 2013 Taylor Wessing
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