Brazil's curtailment compensation rule excludes the curtailment that's about to dominate
Brazil curtailed 20.6% of the wind and solar output the grid could have taken in 2025, up from 9.3% the year before, a share that more than doubled in twelve months, per ONS-sourced reporting carried by pv magazine. Fifty-four percent of that lost energy came from plain oversupply, more generation available at midday than the system needed, not from a congested wire, per ONS's own mapping. In July the Ministry of Mines and Energy finally set compensation rules for curtailed generators, covering events back to September 2023. Oversupply curtailment, already the majority cause, was written out of the rule entirely.
For years the curtailment story in Brazil was a transmission story. The Northeast builds the wind and solar, the interconnection to load centers lags behind it, and the fix was assumed to be more transmission capacity, eventually. That story is only half true now, and the half that used to be small is the half that is growing.
Where the exposure actually sits
ONS splits curtailment into causes. External unavailability covers a line that is not built yet or a substation that trips. Electrical covers voltage and reliability constraints the operator manages moment to moment. Energy, ONS's term for oversupply, covers something structurally different: more solar and wind physically available at 1pm than the whole interconnected system can absorb, regardless of whether the specific wire serving that plant has any spare capacity at all. It is not a bottleneck problem. It is a coincidence-of-timing problem, and it worsens exactly as more capacity of the same technology connects behind the same sunlight hours.
The Northeast remains the region most affected, which is what kept the transmission narrative alive this long. The cause underneath it has already shifted.
The compensation rule protects against the wrong half
The rule the Ministry published in July compensates external-unavailability and electrical-reliability curtailment. For energy sold under regulated auction contracts, compensation runs off the contract price, where the contract carries a curtailment provision at all; older PPAs may not. For energy sold into the free market, compensation runs off PLD, the spot settlement price, applied to the uncontracted volume. Energy-cause curtailment, the oversupply bucket, qualifies for neither. It was excluded on the reasoning that oversupply is a market signal rather than an operator failure, and that compensating it would blunt the incentive to hedge, store or curtail voluntarily instead of building into a saturated hour.
A compensation rule that excludes the fastest-growing cause of the loss it was written to address is not protection. It is a rule for the curtailment Brazil used to have.
Why oversupply doesn't pay, even where it counts
Even the categories that do qualify carry a wrinkle worth pricing. Free-market compensation is pegged to PLD, and the hours when Brazil curtails hardest, clear-sky midday across an oversupplied Northeast, sit close to the same hours PLD tends to fall toward its floor. A generator paid the spot price for curtailed energy is being paid a price that the same oversupply already pushed down. That is not a flaw in the drafting. It is what happens when compensation is indexed to a price set by the imbalance it is meant to offset.
What we think follows
ONS itself projects that by 2029 up to 96% of curtailment will come from this structural oversupply rather than from lines that eventually get built, per ONS. That is the number lenders underwriting Northeast wind and solar should sit with, not the twenty-page compensation decree. A mechanism that today reaches a shrinking minority of the problem, and pays weakly even where it applies, should not be modeled as a backstop. It belongs in the model as a partial, price-linked offset, and the remaining exposure has to sit explicitly in the PPA and the debt sizing, the same conversation Chile is only now forcing on its own curtailment.
Our own pipeline sits in Peru, not Brazil, and the two systems price curtailment differently. The discipline still transfers. Only Olmos Wind, at roughly 135 MW in Lambayeque, carries battery storage built into the project design rather than added later; the rest of the 870+ MW pipeline prices its own interconnection and dispatch exposure into the contract instead of assuming a regulator writes it away after the fact.
The open question
Brazil could still close this gap, either by extending compensation to energy-cause curtailment once storage economics in the Northeast catch up, or by leaving it to the market to solve through merchant storage sited specifically to arbitrage the oversupply hours. There is a fair case for leaving it to the market: subsidizing oversupply curtailment risks paying generators to keep building into an hour that is already full. Which path Brasília actually takes, and how fast, is not decided yet, and it is the number that determines what a Northeast wind or solar contract is worth over its life, not the compensation decree that made headlines in July.
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