MP 1304 threatens Distributed Generation in Brazil: Energy Freedom at Risk Once Again

Distributed generation (DG), responsible for democratizing access to clean energy and putting the consumer at the center of the energy transition, faces serious threats once again. Provisional Measure (MP) 1304, proposed by the Federal Government, raises an alarm across the entire solar energy sector, especially for small producers and prosumers.

What is MP 1304 and why is it a concern for generators

MP 1304 proposes (and, in practice, already establishes, as it has the force of law while in effect) a spending cap for the Energy Development Account (CDE), which is one of the main charges embedded in the electricity bill of all Brazilians. Apparently harmless, the measure opens the door to the creation of a new charge: the Resource Complement Charge (ECR).

In practice, if the CDE cap is exceeded, agents benefiting from subsidies funded by the account – such as generators, distributors, and other agents who receive incentives – will bear a specific charge, proportional to the benefit received. Although the charge formally affects sector agents, there is a risk of passing these costs on to the final consumer, including those who have invested in distributed generation.

This means that distributed generation consumers (especially DG2 and DG3, connected to more complex business models) can be indirectly impacted, either by a reduction in benefits over time or by new costs passed on via tariffs, directly affecting the forecast for savings and return on investment.

The charge on compensated energy: what changed for Congress

During the processing of MP 1304, one of the most serious points for the sector was the inclusion, in the mixed committee report, of a charge of R$ 20 for every 100 kWh compensated for new mini-distributed generation and remote self-consumption ventures. This proposal would, in practice, create a “new tax” on the energy injected by DG, directly impacting the payback of new projects.

This provision was approved in the mixed committee, following the proposal of the rapporteur, Senator Eduardo Braga. However, in the next phase, the mobilisation of sectoral entities, parliamentarians, and civil society took effect:

1. The Chamber of Deputies approved, by 233 votes to 148, the withdrawal of the article that created the charge on compensated energy in DG;
2. Next, the Senate confirmed the text without modifications, ending the processing of the MP in Congress.
3. The measure now goes for presidential sanction, without a direct charge on distributed generation.
4. The result was considered a victory by the main DG sector associations, which managed to block the creation of an immediate charge on the energy injected by solar systems.

In other words, the charge on distributed generation, of the type “R$ 20 for every 100 kWh compensated,” will not be applied in the text that left Congress.

This does not eliminate all regulatory risks, but it does, for the time being, remove the most aggressive scenario of direct taxation of compensated energy.

A legal and social setback

Law 14.300/2022, known as the legal framework for distributed generation, resulted from years of discussion, with broad participation from society, sectoral entities, and regulatory bodies. Approved with a large majority in the National Congress (474 favorable votes against only 3 opposing votes), it brought legal certainty to more than 20 million Brazilians who invested in their own energy generation systems.

The attempt to review rights already guaranteed through provisional measures (either through new charges or indirect mechanisms for passing on costs) constitutes a disrespect for the democratic process and an attack on consumer freedom.

Even without the direct charge on compensated energy, the logic of “reviewing benefits” through changes in charges and subsidies remains under debate. Therefore, the sector needs to remain vigilant.

The Risk of Curtailment: penalising those who save

Another critical point of the discussion is the risk of "curtailment" (cutting energy generation). In theory, it aims to balance the electrical system when excess energy is present. In practice, it can mean that solar energy producers will be forced to interrupt energy injection into the grid or have their compensatory credits reduced – even if they are not responsible for the overload.

It’s like blaming someone who replaced the house's light bulbs with LEDs for the excess energy in the system. The proposal for accounting cuts, for example, results in discounts on energy credits as a way of “paying” for the cuts. In other words, a punishment for those who invested in sustainability.

Smart Meters: A Path to Control?

Concern is growing with the recent public consultation by the Ministry of Mines and Energy on the mandatory installation of smart meters. One of the requirements is that these devices can perform remote generation cuts. Coincidence? For many, it seems part of a broader control strategy.

In the wrong hands, this type of technology can be used not only to make the system more efficient but also to facilitate recurrent and silent curtailment, without transparency for the consumer.

Energy Freedom in Check

Distributed generation has always represented consumer freedom. Freedom to generate, to save, and to contribute to a cleaner matrix.

The new MP, added to the possibilities of cuts and the restructuring of charges via CDE, puts this autonomy at risk in the medium and long term, even without the direct charge of R$ 20 for every 100 kWh compensated.

The discussion goes far beyond subsidies. We are talking about a model that:

• Moves the local economy;
• Employs thousands of people in installation, maintenance, and distribution;
• Boosts the energy transition;
• Reduces dependence on expensive fossil and thermal sources.

Storage: the solution the system (gradually) stops ignoring

Energy storage has always been pointed out as a quick and effective solution to many of the system's problems: it helps smooth peaks, reduces the need for generation cuts, and increases operational predictability.

Until recently, there was a lack of adequate regulation and clear incentives, and consumers who tried to install a battery faced bureaucracy, uncertainties, and were often discouraged.

MP 1304 brings, for the first time, an important advance on this point: the text approved in Congress establishes guidelines for the regulation of electricity storage activity and creates a specific incentive for battery storage systems.

This means that:

• Storage starts to have a regulatory framework under construction, with a basis defined in law;
• Space is opened for more favorable tax and financial mechanisms for batteries and hybrid systems;
• DG gains a strategic ally to reduce the risks of curtailment and mitigate tariff volatility.

On the other hand, everything will depend on how the regulation will be carried out by ANEEL, MME, and other bodies. Without clear and stable rules, the potential for storage remains underutilized. A distributed network with storage can:

• Avoid generation cuts;
• Reduce pressure on infrastructure;
• Ensure clean energy during peak times;
• Increase consumer independence from regulatory uncertainties.

But for this to happen, political will, consistent regulation, and a vision for the future are still needed.

A Call to Mobilization

MP 1304 has already been approved in the National Congress and now goes for presidential sanction. This shifts the focus of the mobilization: the debate is no longer just "approve or not approve the MP" and becomes how the text will be sanctioned and regulated.

It is time to:

• Closely monitor presidential vetoes that may mitigate or reinforce risks for DG;
• Influence the regulation of energy storage, ensuring that batteries and hybrid systems are truly economically and technically viable;
• Monitor how the Resource Complement Charge and the CDE cap will be operationalized in practice so as not to disproportionately penalize distributed generation.

Entities such as the Free Solar Movement, ABGD, ABSOLAR, and INEL continue to articulate with deputies, senators, and political leaders, now also focused on the sanction and regulation phase.

Mobilization remains essential: pressure the Executive, contribute to public consultations, share quality information, combat false narratives, and demand that acquired rights be respected.

The Battle for Energy Democracy

Distributed generation is a silent revolution. It is Mrs. Maria who invested in her roof. It is the rural producer who replaced diesel with the sun. It is the merchant who reduced costs and became more competitive.

Defending DG is defending a cleaner, fairer, and freer future. The battle against MP 1304 shows two things at the same time:

1. The strength of the sector's mobilization, which managed to remove the direct charge on energy injected by DG from the approved text;
2. The fragility of regulatory security, since, with any new MP or bill, subsidies, charges, and rules can be reviewed.

Provisional Measure 1304 reinforces what the energy market already knew: the stability of the sector depends on intelligence, preparation, and active participation in regulatory discussions.How Delfos helps navigate this new scenario

Delfos offers an AI-based monitoring and optimization platform that allows DG integrators, investors, and operators to:

• Anticipate technical failures and reduce unexpected downtime
• Optimize the performance of photovoltaic systems (including remote and shared DG)
• Monitor indicators clearly and accurately
• Have strategic data for quick decisions amidst regulatory changes, regardless of SCADA use

Don't leave your plant vulnerable to uncertainties. Click here, fill in your details and talk to an expert. Let us show you how to protect your investment and increase your return with cutting-edge technology!

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