INTERVIEW: Brazil self-generation PPAs adapt to tighter rules, growing curtailment risks

Brazilian self-production purchase power agreements (PPAs) have had to adapt to sweeping regulatory changes that have effectively limited new deals to large consumers, creating uncertainty after years of rapid growth. But even so, these arrangements -- which already account for over one-fifth of the country's electricity generation -- are expected to continue expanding, according to Mario Menel, president of the Brazilian Association of Investors in Self-Production of Energy, or Abiape.

"Self-generation has been the main driver of the expansion of the power system," Menel told Platts in an interview Oct. 5.

Energy generation under self-production plants increased by 12.4% year-over-year in 2025, reaching 176 TWh -- equivalent to 22.7% of the total electricity generated in the country -- according to data from the Brazilian Energy Research Bureau, or EPE.

"These arrangements are made in a horizon of 15-20 years, so they are long-term commitments involving a continued investment in generation," Menel said.

A law approved in November 2025 requires that each partner in new self-generation projects hold at least 30% of the project's shares and that the project contract for a minimum of 30 MW in power demand.

The law virtually limits this type of PPA to large consumers that can afford to invest and acquire a large stake in energy projects. However, the emergence of data centers in Brazil is supporting a new round of investments on these arrangements.

"Every single new data center is hiring self-production, and already two large data center companies have joined our association," Menel said.

Before the law, many small consumers were turning to self-generation projects because these are exempt from costs associated with the wholesale market, such as the CDE, a tax used to subsidize several energy programs.

Curtailments

Besides the new regulations, widespread curtailments of solar and wind power have made it more costly to comply with self-generation contracts.

Curtailments in Brazil have reached 21.3% of the potential generation in the year through Sept. 16, according to figures from the National System Operator, or ONS. Solar curtailments amounted to 25.3%, with wind curtailments at 19.8% in the same period.

Abiape estimates that curtailment-related costs will result in losses of 6 billion reais ($1.2 billion) for wind and solar generators in 2025. Considering only self-production companies, losses reached 1.5 billion reais ($300 million).

The latest Abiape figures show that its associates have an installed capacity of 35 GW, of which 63% is hydro, 20% solar, 6% wind and 11% thermal.

Throughout 2026, small hydro companies have also been affected by occasional generation cuts by the ONS and distribution companies, especially during periods of low energy demand. When a self-generation unit is subject to curtailments, the cost of acquiring energy in the spot market is split between the two parties under the most recent PPA contracts.

"In new contractual arrangements, curtailment costs are split between the two parties," Menel said.

However, a constant increase in costs associated with the spot market, including the CDE, is expected to continue stimulating large buyers to seek self-generation PPAs, according to Menel.

"Without self-production, it would be impossible to produce steel, aluminum, green hydrogen or to operate datacenters," he added.