Brazil Solar Curtailment 2026: What EPCs Must Know

What Happened on June 7, 2026

On Sunday June 7, a Brazilian public holiday, ONS (Operador Nacional do Sistema Elétrico) activated what public reporting described as the first use of its "Emergency Plan for Managing Energy Surpluses in Distribution Networks" affecting distributed solar generators. The trigger was the combination of peak midday solar generation and unusually low holiday demand , the same conditions that have been pushing Brazil's grid toward instability on low-demand days throughout 2025.

What is new about June 7 is not the curtailment itself. ONS has been ordering cuts to large wind and solar farms for years when the grid cannot absorb their output. What changed is the reach. By activating the emergency plan, ONS extended curtailment to micro and small distributed generators , the rooftop solar systems on homes and businesses that ONS does not directly dispatch. This is the category that has driven the most dramatic solar growth in Brazil since 2012 and the category that has, until now, been largely shielded from curtailment orders.

ANEEL approved the emergency mechanism in November 2025, following two specific near-instability events: one on May 4, 2025 and one on August 10, 2025, when high shares of distributed generation strained the system's frequency and voltage control. The August 10 episode, coinciding with Father's Day, is industry shorthand for what pushed the regulator to accelerate the mechanism's creation. June 7, 2026 is the first time the finished tool has been used.

The significance for EPCs: Until November 2025, distributed solar in Brazil operated under the implicit assumption that it was too small and too fragmented for the grid operator to curtail. That assumption is now officially wrong. The ANEEL mechanism gives ONS the legal authority to cut distributed generation. June 7 is the proof that the authority will be exercised.

The Scale of Brazil's Curtailment Problem

Curtailment in Brazil is not a new phenomenon but it has accelerated dramatically. In 2025, curtailment affected 20.6% of solar and wind generation , more than double the 9.3% rate recorded in 2024. By late 2025, approximately 28% of all curtailed energy in the system came from photovoltaic plants specifically. The cumulative toll, per reporting by Canal Solar citing ONS data, is 48.7 TWh of energy wasted since curtailment began intensifying.

The financial consequences are now restructuring the market. S&P Global reported in May 2026 that average curtailment had reached 3 GW through May 10 , equivalent to 17.8% of potential generation from wind and solar. More significantly, ONS has publicly stated it expects curtailment to remain intense through 2029 at minimum, with no near-term structural resolution. Rodrigo Sauaia, executive president of ABSolar, stated directly that "development of new projects tends to be paralyzed until a definitive solution for the curtailments is achieved, giving predictability and security."

The financial impact on existing projects is material. Generation that is curtailed is generation that is not sold. Producers bear the cost of producing power they are then instructed not to deliver. ANEEL met with major banks , including BNDES, Bradesco, Itaú, Santander, and BTG , in 2025 to discuss compensation mechanisms under Public Consultation 45/2019. The discussions have not yet produced a definitive compensation framework. Some energy companies have begun re-evaluating projects as generation restrictions reduce their financial returns.

Why Brazil's Grid Cannot Absorb Its Own Solar

Brazil's distributed solar growth has been among the fastest of any major economy. According to the U.S. Energy Information Administration, citing ANEEL data, distributed solar capacity grew from less than 1 GW in 2018 to 40 GW by mid-2025, accounting for 43% of all electricity capacity additions over that period. More than 3.7 million distributed generation systems had been installed in Brazil as of mid-2025. Solar PV represents 99% of all distributed generation in the country.

The problem is structural: transmission infrastructure has not kept pace with generation capacity. Brazil's grid must carry power over very long distances, from generation-rich regions in the north and northeast to demand centres in the southeast. At midday on low-demand days , public holidays, mild weekends, periods of reduced industrial activity , solar generation in distribution networks exceeds the grid's capacity to absorb or re-route it. The result is curtailment.

Two additional structural factors compound the problem. Brazil currently has virtually no utility-scale battery storage. The country held its first grid-scale battery auction in April 2026 , the initial step toward building flexibility capacity , but that infrastructure will take years to reach meaningful scale. Until it does, the grid's primary response to midday solar surpluses is curtailment, hydropower backup, or system risk.

The geography of risk: Curtailment is not evenly distributed across Brazil. The northeast, where solar irradiation is highest and transmission congestion is most acute, bears the greatest curtailment burden. A project sited in high-irradiation northeastern Brazil faces structurally higher curtailment risk than an equivalent project in the southeast, regardless of technical specifications. EPCs must model location-specific curtailment risk, not national averages.

The Government Response and What It Means for EPCs

Provisional Measure 1304 (2025)

The Brazilian government responded to the escalating curtailment crisis with Provisional Measure 1304 in 2025, directing the development of compensation mechanisms and instructing ONS to implement clearer curtailment protocols for solar and wind producers. The measure represents a formal acknowledgment that curtailment has become a systemic risk to Brazil's renewable energy investment environment. However, no definitive compensation framework was in place as of June 2026. Producers continued to bear curtailment losses without guaranteed reimbursement.

April 2026 BESS auction

Brazil has announced its first grid-scale Battery Energy Storage System (BESS) auction as part of the government's structural response to curtailment. Battery storage placed at strategic grid nodes can absorb midday solar surpluses and discharge them during evening demand peaks, reducing curtailment at the source rather than managing it after the fact. Any storage capacity procured through this auction needs to be built, connected, and commissioned before providing structural curtailment relief.

ANEEL's curtailment protocols and compensation review

Following the May and August 2025 near-instability events, ANEEL and industry group Abradee began drafting new protocols to integrate smaller distributed plants into grid operations. The November 2025 emergency mechanism is one output of that process. Compensation under Public Consultation 45/2019 remains unresolved, meaning producers currently bear curtailment losses without guaranteed reimbursement. This is the most significant financial risk for EPCs advising investors on Brazilian distributed solar projects in 2026.

What EPCs Must Change in Brazilian Project Proposals

Model curtailment explicitly, by location

Any Brazilian solar financial model that uses uncurtailed generation as its baseline is presenting a materially inaccurate return projection. ONS projects 17.8% average curtailment nationally for 2026. A project in a high-curtailment northeastern corridor may face significantly higher rates. Before presenting an IRR calculation to any investor or client, the curtailment risk for the specific grid node and state must be modelled explicitly, using ONS's published curtailment data by region. A financial model that shows projected IRR based on full generation without a curtailment sensitivity analysis is not a credible document in Brazil in 2026.

Understand the compensation position before committing

Until ANEEL's compensation framework under Public Consultation 45/2019 is finalised, curtailed generation in Brazil is effectively uncompensated for distributed generators. Large centralised producers have some contractual pathways; distributed generators below the direct dispatch threshold did not , until the June 7 emergency mechanism extended curtailment to their category. EPCs advising clients on distributed solar projects should confirm with legal counsel what compensation rights, if any, apply to the specific project configuration before financial commitments are made.

Re-evaluate the northeast specifically

The northeast of Brazil has the best solar irradiation in the country and has historically attracted the highest solar investment. It also has the worst transmission infrastructure relative to its renewable generation capacity. The combination produces the highest curtailment rates in the national system. A project in the northeast that would pencil at 8% IRR with uncurtailed generation may produce materially different returns when transmission congestion, curtailment hours, and compensation uncertainty are factored in. The irradiation advantage does not automatically outweigh the curtailment disadvantage in current conditions.

BESS co-location is moving from option to design requirement

For any new distributed or utility-scale solar project in Brazil, battery storage co-location should be modelled as a base case rather than an optional upgrade. Brazil's announced grid-scale BESS auction signals that the government and grid operator have accepted battery storage as the primary structural response to the curtailment crisis. Projects that include storage will be better positioned for future compensation frameworks and auction eligibility than those that do not. Reslink's solar design and proposal tools allow EPCs to model battery co-location scenarios alongside the core solar generation case, so the comparison is built into every client proposal from the start.

Frequently Asked Questions

Q1. What happened in Brazil on June 7, 2026?

On June 7, 2026 , a Sunday public holiday , Brazil's grid operator ONS activated its Emergency Plan for Managing Energy Surpluses in Distribution Networks for the first time. The trigger was peak midday solar generation combined with low holiday demand. ONS first reduced output from the large centralised plants it dispatches directly. When that was insufficient, it activated the emergency plan, which for the first time reached micro and small distributed generators , rooftop solar on homes and businesses , connected to distribution networks. This mechanism was created by ANEEL in November 2025 after two near-instability events on May 4 and August 10, 2025. Public reporting described June 7, 2026 as the first time the completed mechanism had been used in practice, though this has not been confirmed by an ONS or ANEEL primary publication as of the date of this article.

Q2. How bad is solar curtailment in Brazil in 2026?

Through May 10, 2026, curtailment averaged 3 GW, equivalent to 17.8% of Brazil's total potential solar and wind generation, according to ONS data cited by S&P Global. In 2025, curtailment affected 20.6% of total solar and wind output , more than double the 9.3% rate in 2024. ONS projects curtailment to remain at elevated levels for years: an average of 3.11 GW in 2026, 3.5 GW in 2027, and 3.65 GW in 2029. The cumulative energy wasted since curtailment began intensifying exceeds 48.7 TWh according to Canal Solar citing ONS data. In 2025, the financial losses from curtailed renewable generation were estimated at $1.23 billion.

Q3. Will curtailed solar generation in Brazil be compensated?

A definitive compensation framework does not currently exist for distributed solar generators in Brazil. ANEEL has been reviewing compensation under Public Consultation 45/2019 and met with major financial institutions , BNDES, Bradesco, Itaú, Santander, and BTG , in 2025 to discuss the issue. ANEEL stated it would develop short-term alternatives to reduce financial difficulties, but a confirmed mechanism was not in place as of June 9, 2026. The Brazilian government's Provisional Measure 1304 (2025) establishes the direction toward compensation but has not yet produced a finalised framework. Until it does, curtailed distributed generation is effectively uncompensated. EPCs advising clients on Brazilian distributed solar should confirm the current status of the compensation framework with legal counsel before committing to project financial projections.

Q4. How did Brazil's distributed solar grow so fast without the grid keeping up?

Brazil implemented net metering policies in 2012, allowing distributed solar owners to sell surplus generation back to the grid for billing credits. The policy drove extraordinary growth: distributed solar capacity grew from less than 1 GW in 2018 to 40 GW by mid-2025, accounting for 43% of all electricity capacity additions over that period, according to the U.S. Energy Information Administration citing ANEEL data. More than 3.7 million distributed generation systems had been installed by mid-2025, with solar PV representing 99% of all distributed generation. Transmission infrastructure investment did not match this pace, particularly in the northeast where solar irradiation is highest but grid connectivity to demand centres is weakest. The result is a structurally congested grid that cannot absorb its own renewable output at peak production periods.

Q5. Is solar still a viable investment in Brazil given curtailment?

Yes, but the financial model must be built correctly. Projects that model uncurtailed generation as their baseline are overstating projected returns. Projects that include realistic curtailment estimates by location, model battery co-location as a base case, and account for the current absence of a guaranteed compensation mechanism can still produce viable returns depending on specific location, project type, and contractual structure. ANEEL forecasts 4.95 GW of centralized solar additions in 2026 alone, and ABSolar projects $5.8 billion in solar investment for 2026. The market is not abandoning solar , it is repricing risk. EPCs and developers who build curtailment into their proposals rather than omitting it are the ones who will close credible transactions in the current environment. Those who continue to present uncurtailed projections are the ones whose clients will face unwelcome surprises.

Q6. What is the ANEEL emergency mechanism and how does it work?

The Emergency Plan for Managing Energy Surpluses in Distribution Networks was approved by ANEEL in November 2025. It gives ONS the legal authority to curtail distributed generators , micro and small solar systems connected to distribution networks that ONS does not directly dispatch , when grid stability requires it. The operational process: ONS monitors grid conditions up to seven days ahead and can issue preliminary alerts to utilities if surpluses are forecast. On the day before a potential activation, ONS confirms whether the restriction is needed and sets the volume of generation to be cut. On June 7, 2026, this sequence was completed and the mechanism activated for the first time. EPCs should understand that this mechanism gives ONS permanent and ongoing authority to curtail distributed generation. June 7 is not an anomaly. Any Brazilian public holiday, mild weekend, or low-demand day with peak solar output is a potential activation scenario going forward.

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Sources

• S&P Global Commodity Insights, May 11, 2026 — spglobal.com — Average curtailment 3 GW through May 10 = 17.8% of potential generation; ONS projections: 3.11 GW (2026), 3.5 GW (2027), 3.65 GW (2029); 509 project authorizations withdrawn in 2025; developer project re-evaluations confirmed
• ONS (Operador Nacional do Sistema Elétrico), Primary — ons.org.br — Grid operation data; curtailment statistics; May 4 and August 10, 2025 near-instability events; emergency plan operational protocol (monitoring 7 days ahead; confirmation day before; volume setting)
• ANEEL (Agência Nacional de Energia Elétrica), Primary — aneel.gov.br — Emergency mechanism approved November 2025; Public Consultation 45/2019 compensation discussions; meeting with major financial institutions on curtailment compensation; Provisional Measure 1304 oversight
• U.S. Energy Information Administration, September 2025 — eia.gov — Distributed solar capacity: less than 1 GW (2018) to 40 GW (mid-2025); 43% of all electricity capacity additions; 3.7 million distributed generation systems; solar PV = 99% of all distributed generation. Citing ANEEL primary data.
• PV Magazine, September 12, 2025 — pv-magazine.com — Curtailment reaching 20% of solar output in August 2025; ANEEL and Abradee drafting new protocols; compensation discussions with banks
• ABSolar (Associação Brasileira de Energia Solar Fotovoltaica) — absolar.org.br — $5.8 billion solar investment projected for 2026; executive president quote on development paralysis; compensation advocacy position
• Rio Times Online, June 7-8, 2026 — riotimesonline.com — First use of ONS emergency plan June 7, 2026; mechanism explanation; August 2025 Father's Day near-instability scare context; first-use confirmation