Coordination can bring value to Brazil

Distributed generation assets in Brazil could do more to smooth supply and demand curves, but regulations need to catch up with deployment.

Roughly 67 GW of cumulative installed solar capacity was connected to Brazil’s grids as of early 2026, of which about 47 GW is distributed generation capacity, connected to distribution networks. The impacts of adding all this solar are now visible at system level.

Midday net-load valleys have deepened and evening ramps have steepened, with system ramping requirements approaching 38 GW on peak days in 2026. Curtailment of variable renewable output reached 30.4% in October 2025, principally driven by transmission bottlenecks in the northeast.

The introduction of hourly settlement pricing has converted those imbalances into price signals, and intraday spreads exceeded BRL 4,500 ($864)/MWh during peak events in early 2026. The market has answered so far by adding firm and flexible capacity. Brazil’s 2026 capacity reserve auction (LRCAP) contracted approximately 19 GW – consisting of 8.86 GW of new thermal, 7.61 GW of existing thermal, and 2.5 GW of hydro. The average price for gas plants was about BRL 2.48 million per megawatt, per year. This represented a thin discount on baseline auction prices. The desired flexibility was procured, but at a high cost.

Leveraging existing resources through VPPs could substantially reduce the need for costly thermal capacity. VPPs aggregate distributed assets – rooftop PV, residential batteries, commercial and industrial (C&I) flexible load, EV charging, small backup gensets – into a single dispatchable resource, coordinated by software and increasingly optimized by machine learning across forecasting, dispatch, bidding, and battery-degradation management. There is a strong case for VPPs in Brazil, due to rapid distributed energy resource growth, localized grid constraints, structural intraday volatility and – through the free contracting environment that covers 42% of national consumption – a growing pool of price-exposed consumers who need portfolio management.

Cash flow

What Brazil does not have is a way to remunerate VPPs. Under current rules, prosumers only have two ways to secure revenues: net-metering credits and energy arbitrage under the Tarifa Branca variable tariff. Capacity payments, ancillary services and aggregated participation of behind-the-meter assets are not yet permitted. Ancillary service remuneration remains cost based and, in practice, limited to transmission-connected assets of 30 MW or more.

Structural day-ahead demand response does work for industrial users. Two sandbox trials run by the national system operator (NSO) and energy regulator Aneel contracted 93 MW in the first cycle and 229 MW in the second, with a third trial expanding to all four of Brazil’s regional submarkets – but aggregator participation will not be allowed.

The problem is that Brazilian regulation does not yet recognize aggregators, and is not expected to until the third and final cycle of Aneel’s Public Consultation 39/2023 – with no set date. Battery energy storage systems (BESS) have moved faster despite several delays since a law formally recognizing storage as a distinct activity. Law 15.269/2025 sets BESS import duties to zero through 2030 and opens eligibility for REIDI infrastructure incentives, which can suppress the application of certain taxes for qualifying products. The first BESS capacity auction in Brazil was confirmed for December 2026 and is highly oversubscribed. Despite the progress, storage’s role in aggregated solutions is blocked due to lack of regulation.

System lessons

Every market that has made progress with VPP regulations was driven to do so by a system event, rather than an industrial strategy.

Australia crossed a line in 2021 when rooftop PV reached 18% of generation, as coal plant retirements compounded system reliability risk. The Australian Energy Market Commission responded that year with rules enabling distributed energy resources to participate in frequency control ancillary services (FCAS) and wholesale markets. California’s progress on VPPs has been driven by wildfire reliability risk and summer peak stress.

In early 2026, Spain allowed pooled load generation and storage to bid into wholesale and balancing markets without consumers terminating their retail supply contracts. Then Ukraine adopted an integration plan whose measures explicitly cover aggregation, flexibility services and demand management. Ukraine’s distributed base is a fraction of Brazil’s – prosumer households roughly doubled to above 100,000 during 2025 – yet its aggregation framework is being defined as part of the energy resilience plans during wartime.

Brazil already has the market fundamentals – hourly settlement, capacity auctions, retail competition, and demand-response mechanisms. But aggregated distributed resources do not have market access, despite steep ramping requirements and curtailment.

Next steps

Progress is also slowed by low smart meter penetration among low-voltage consumers, which is a constraint on settlement and dynamic load shifting. Brazil’s market remains structured around centralized, asset-level participation, while supply is decentralizing. International experience suggests that technology and operational capability are mature, but the regulations lag. Brazil’s pace will be determined by three milestones: completion of Aneel’s storage rules following Law 15.269, the aggregator definition in Cycle 3 of CP 39/2023 battery regulation, and the decision on the demand-response sandbox beyond December 2026. There is a lot at stake.

If Brazil committed 10% of its projected 2030 solar fleet to aggregated dispatch, that would exceed 10 GW – comparable to Australia’s aggregate base and set against a capacity contracted at BRL 2.48 million per megawatt, per year

About the author

Henrique Ribeiro is a principal analyst on the batteries and energy storage team at S&P Global Commodity Insights, focusing on Latin America and the Iberian Peninsula. Ribeiro spent 11 years on the metals pricing team, helping to establish benchmarks for global battery metals and for steel and aluminum prices in Brazil, Chile and Mexico. He has spoken at several conferences on battery metals market trends and was a host of the Platts Future Energy Podcast.

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