Brazil reached 26 GW of distributed solar photovoltaic generation (DG) at the start of 2024, which represents around 12% of total installed capacity, in addition to 5 GW of utility-scale solar PV. Around 90% of current DG capacity was installed after 2020, showing an average annual growth rate of 80% p.a. The country has high incentives for distributed generation supported by its net energy metering policy (NEM), which has been in place for more than ten years.
The NM was initially instituted in 2012 in Brazil by a resolution of the Regulatory Agency (ANEEL), including a full retail tariff credit for the balance of electricity generated in excess of prosumers' monthly consumption, valid for 60 months. In 2015, a new resolution expanded the possibility of adopting NM for remote generation units within the distributor's area (virtual-NM), as well as shared generation and compensation schemes. A new law focusing on distributed generation was enacted in 2022, establishing a gradual transition rule for investments to remove costs related to the distribution activity from net metering compensation.
The NM policy was first implemented in California in the 1990s, spreading to several countries since then. In the first version (NEM 1.0), prosumers received a full credit on their retail tariff bill for the electricity produced by their on-site systems and injected into the grid. The monetary credits offset future monthly bills, valid for one year. In NEM 2.0, which came into force in 2016, prosumers continued to receive full retail rate credit for the net surplus compensation of the energy exported to the grid during a 12-month billing cycle. However, NEM 2.0 prosumers must be subject to a time-of-use tariff (TOU) and must pay additional charges to align their costs closely with those of non-prosumers.
NEM 2.0 was revised from 2019, resulting in NEM 3.0 in 2023, which determined the migration for new entrants to a net billing scheme that considers different values for the import and export of energy on the grid. The value of energy imported from the grid is determined by a TOU. In turn, the value of the exported energy is aligned with the value of the DG, based on an avoided cost that values the energy according to the needs of the grid at each time of day.
The aim of the paper is to investigate the impact on the return on distributed generation if improvements similar to those applied in California were adopted in Brazil. The paper will analyze the impact of the mandatory incidence of a TOU tariff for new prosumers. The impact will be estimated on the internal rate of return and payback time. In addition, the impact on these metrics will also be presented if different tariffs were considered for the value of imported energy (aligned with a TOU tariff) and for the value of exported energy, considering an avoided cost. For this parameter, the value factor of solar energy (Hirth, 2013) in the country will be estimated as a proxy for the avoided cost.
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