Brazil Passes Power‑Sector Overhaul as Lula Weighs Vetoes

Overview

• Congress approved MP 1.304/2025 and sent it to President Lula, opening the free energy market to all consumers on a 24‑month timeline for industry and commerce and 36 months for others, while capping CDE growth from 2027.
• The law gives Aneel explicit authority to regulate energy storage and includes storage projects in REIDI tax incentives to accelerate battery deployment.
• An amended rule to calculate the oil reference price is expected to lift royalty bases; Petrobras and the IBP warn of investment risks to projects such as Sergipe Águas Profundas, refiners back the change, and ministers signal possible vetoes.
• Lawmakers expanded compensation for wind and solar curtailed by system constraints with potential costs estimated at up to R$7 billion for consumers and removed a proposed R$20 per 100 kWh charge on new distributed generation.
• Aneel’s Oct. 31 transmission auction awarded roughly 1,081 km in new lines with about R$5.5 billion in investment to ease renewable bottlenecks, and the EPE outlined additional auctions in 2026–2027.