The paradox of energy abundance in Brazil

For decades, the Brazilian energy debate was marked by the risk of shortages. Water crises, rationing and insecurity in supply guided public policies and investment decisions. Today, the country faces a challenge of the opposite nature and potentially as complex as: excess energy at certain times of the day.

The accelerated expansion of renewable sources, especially solar and wind, which were added to hydraulics, ensured Brazil's positioning as a powerhouse in clean energy. However, this advance brought a relevant side effect. At times of low demand or high simultaneous generation, the system cannot absorb all the energy produced. As a result, curtailment occurs, a phenomenon known as the forced reduction of generation, which already appears recurrently in operational data from the electricity sector.

This phenomenon is not marginal. It directly affects project revenue, changes price dynamics and begins to influence investment decisions in new ventures.

When abundance becomes distortion
Excess energy in certain periods generates relevant distortions. The main one is the distortion between the Difference Settlement Price (PLD) and the physical reality of the system. In mature international markets, excess renewable supply drives the price to zero or even negative values, a clear economic signal for consumption to shift to other times.

In Brazil, the opposite has occurred: even in moments of curtailment, the PLD remains high, around R$200 to R$300/MWh, due to the conservative calibration of price formation models. This decoupling penalizes the renewable generator doubly: it loses revenue with the forced cut and still needs to buy energy in the short-term market, at high prices, to honor its energy sales contracts.

This distortion compromises the business environment. Investors begin to face greater uncertainty about the return on projects, which may lead to the postponement or resizing of new investments in renewable generation. The combination of reduced revenue due to curtailment and high costs in the short-term market directly affects the bankability of new ventures.

There is also an indirect impact on the consumer. Systemic inefficiencies, such as energy generated and not used, tend to be absorbed by the sector through charges and costs that, ultimately, put pressure on the tariff structure. MP 1,304/2025 converted into Law 15,269/2025 established reimbursement only for cuts due to external unavailability and electrical reliability requirements, including with retroactive effects, from September 2023 until the entry into force of the Law, through a commitment term.

Oversupply cuts, precisely those that grew the most in 2024 and 2025, were expressly excluded from the reimbursement mechanism, which keeps the debate open on how to address the regulatory risk assumed by renewable generators. The law also established the opening schedule of the Free Energy Market for low voltage consumers, with the entry of commercial and industrial units from November 2027 and residential consumers from November 2028.

Ways to rebalance the system
Overcoming the misalignment between generation and transmission, which occurs due to the time needed to build each asset, requires a coordinated modernization agenda.

The strengthening of several solutions together, including demand response, tends to gain relevance. Consumers, especially industrial ones, can adjust their consumption profile depending on prices, contributing to the balance of the system with less need for expansion of supply.

Energy storage is also one of these solutions as it allows surplus energy to be moved to times of greatest demand, reducing losses and increasing operational efficiency.

In the longer horizon, green hydrogen and data centers emerge as strategic alternatives to absorb surpluses at scale and connect the electricity sector to new industrial and export chains.

However, it is important to highlight: the expansion and modernization of transmission infrastructure continue to be essential to integrate regions with different generation and consumption profiles.

A new cycle of decisions
The energy transition has advanced rapidly in the expansion of generation, but the evolution of the regulatory model and infrastructure has not kept pace.

The result is an imbalance that begins to generate economic losses, market distortions and uncertainty for investors.

Managing scarcity requires discipline. Managing abundance requires coordination, efficient economic signals and institutional updating. The way the country responds to this challenge will define not only the efficiency of the electrical system, but also its ability to sustain the expansion of a clean and competitive matrix in the long term.

* Moisés Cona is managing director of the GRI Institute Infrastructure.

The articles published by CNN Infra seek to stimulate debate, reflection and shed light on views on the main challenges, problems and solutions faced by Brazil and other countries in the world. The texts published in this space do not necessarily reflect the opinion of CNN Brasil.

Source: CNN