Impact of regulatory changes on economic feasibility of distributed generation solar units in Brazil

Abstract

In 2019, the Brazilian National Electric Energy Agency proposed that the cost of accessing the electrical grid should be shared among all consumers. This would do away with cross-subsidies, where normal consumers without installed solar distributed generation (DG) units effectively cover the costs of access to the grid for consumers with DG units. The economic viability of the two scenarios were compared, one before and the other after the proposed changes, to understand how this legislature will affect the viability of DG projects. This was achieved by studying all five geographic regions covering the entire Brazilian territory by analyzing data on average solar radiation, demand, and energy prices. After the proposed rule changes, in the general Brazilian scenario, the net present value (NPV) had a reduction of 39.74% and internal rate of return of 26.85%, while the worst happened with Discounted Payback, which rose 52.89%. Stochastic analysis was conducted by varying the investment costs, demand, and energy prices for the solar DG units. The probability of NPV greater than zero was reduced by 2.41% on average after rule changes. Lastly, a stochastic analysis for the national scenario by varying the discount rate was conducted, and a positive NPV probability of 79.60% was found. The study indicates that there is a statistically significant reduction in economic viability for solar DG units when the new regulation proposed is enacted, while the payback period is increased, and other financial indicators are reduced in all analyzed regions. It was confirmed that solar radiation is not the decisive factor in determining the economic viability of solar DG production.