Self-production: a sustainable solution for energy consumers
Rio de Janeiro, August 21th, 2024 – The concept of self-production of energy has been gaining prominence in the Brazilian energy market, drawing the attention of companies and industries that seek not only cost reduction, but also stability and alternatives that contribute to the sustainability of their businesses and less dependence on the national electricity matrix. The modality, aimed at large consumers who are in the free energy market, is a smart way to lighten the load on the electricity system and bring cost predictability to the consumer.
Despite being in evidence, self-production is not new. According to the Energy Cogeneration Industry Association, the first cogeneration systems in the world appeared in the first decade of the twentieth century, a period in which centralized electricity production was rare. In Brazil, cogeneration gained strength in the 1980s, when mills began to use sugarcane bagasse to generate their own energy. It was in the 1990s, however, with the electro-intensive industries investing in the construction of hydroelectric plants and with the regulation of self-production through Law 9.074/1995, Decree 2.003/1996, that the modality established itself as a new resource for the electric industry.
Self-production can occur in two ways: the first and best known is when generation and consumption are in the same place, being quite common in isolated systems and/or by the use of by-products of the industrial process for energy purposes. Remote self-production, the second form of the modality, is when generation and consumption take place in different places. In this case, the use of transmission and distribution networks is necessary.
In addition to these possibilities, the consumer can also choose different business models. In traditional energy self-production, large industries invest 100% in the generation asset, having full control of the management and operation of the project, in addition to bearing all the risks involved in the asset. The lease model, which can be done directly or through a consortium, is an option for consumers who do not fit the necessary requirements for the equivalence model or who do not have the ability and/or interest to invest in the construction of their own energy system.
The last and most widespread in the market today is the model by equivalence, which allows the consumer to be part of a Special Purpose Company (SPE) – a legal entity with the sole purpose of executing a certain project or developing a specific project – and acquire shares with voting rights. The energy generated for consumption must be sold based on an energy purchase and sale agreement, the so-called Power Purchase Agreement (PPA), which specifies the portion of energy allocated to each partner.
As of 2023, new regulations came into force to further facilitate access to self-production, including tax incentives and specific credit lines for renewable energy projects, according to resolution 1,000/2021, which was amended by 1,059/2023 of the National Electric Energy Agency (ANEEL). This new regulatory landscape has driven the adoption of hybrid systems that combine solar energy and battery storage, allowing for greater autonomy and efficiency in self-production. Additionally, falling lithium-ion battery prices and innovation in thermal storage technologies have contributed significantly to this trend.
In recent years, the cost of electricity in the Brazilian regulated market has increased greatly due to a number of factors, including the increase in the share of sectoral charges. It was from this context, added to the easy access to renewable sources – mainly solar and wind energy – that self-production became an attractive alternative for many companies.
In addition, with the increase in ESG initiatives, new partnerships between technology and energy companies are being formed to develop integrated solutions that optimize the management and efficiency of self-production systems, especially green PPAs that certify the use of renewable energy.
In a world where there is more and more talk about the energy transition and with renewable energies being the protagonists of this change, it is worth paying attention to this model that adds cost predictability and alignment with corporate ESG goals.
About EDF Renewables:
EDF Renewables is a global energy company that develops, constructs, and operates renewable energy generation plants. A key player in the energy transition worldwide, EDF Renewables implements competitive, responsible projects within the EDF Group, generating value. In all the countries where it operates, our teams are committed daily to local stakeholders, combining their expertise and innovation capacity to combat climate change. By the end of 2023, EDF Renewables operated a net installed capacity of wind and solar projects equivalent to 12.8 GW worldwide. Primarily present in Europe and North America, EDF Renewables continues to grow and position itself in promising markets such as Brazil, China, India, South Africa, and the Middle East. Despite its strong involvement in onshore wind and photovoltaic solar, the company also operates in offshore and floating wind, as well as in new technologies such as energy storage, floating solar, and agrivoltaics. In Brazil since 2015, EDF Renewables Brazil is an important player in the renewable energy sector, totaling over 1.8 GW in viable solar and wind energy projects in Bahia, Minas Gerais, and Paraíba.
