MP 1,304 reignites debate over tariffs, subsidies, and the future of distributed generation in Brazil

Brazil’s Provisional Measure 1,304 reopens discussions on energy tariffs and subsidies, placing distributed generation in Brazil at the center of a debate over regulatory uncertainty, market liberalization, and new opportunities for energy storage.

MP 1,304 reignites debate over tariffs, subsidies, and the future of distributed generation in Brazil

New measure brings both uncertainty and opportunity to the energy sector

The Provisional Measure (MP) 1,304, recently enacted by the Brazilian federal government, has reignited a national discussion on the financial sustainability of the Energy Development Account (CDE) and the direction of distributed generation (DG) in the country.

The measure creates a new sectoral charge, potentially reshaping how costs and incentives are distributed across Brazil’s electricity system a long-standing and sensitive issue for industry players, investors, and consumers alike.

Experts consulted by EnergyChannel highlight that the MP could redefine the balance between promoting solar energy and maintaining tariff fairness. However, the lack of clarity regarding its practical impact could also reopen key debates around Brazil’s Distributed Generation Legal Framework, approved in 2022.

What changes under Provisional Measure 1,304

The new regulation aims to introduce an additional funding mechanism for the CDE a fund that currently supports social tariff programs, universal access, and regional energy compensation.By redistributing financial contributions, the government seeks to spread system costs more evenly across free-market consumers, distribution utilities, and self-producers.

In practice, these changes could affect the regulatory predictability that has underpinned Brazil’s booming distributed generation sector particularly the solar rooftop market, which has become one of the most dynamic in the world thanks to strong policy incentives and rapid technological progress.

Distributed generation in Brazil: progress meets new challenges

As of 2025, distributed generation in Brazil surpassed 29 GW of installed capacity, with over 3 million systems connected to the national grid, according to the Brazilian Electricity Regulatory Agency (ANEEL). This milestone has positioned the country among global leaders in small-scale renewable generation.

Yet, this fast-paced growth has also placed pressure on Brazil’s net metering compensation system, which regulators are now reviewing to ensure greater cost balance between self-generating and traditional consumers.

MP 1,304 brings this topic back to the forefront by reassessing cross-subsidization policies, questioning who should bear the financial burden of the energy transition.

“The sector is at a turning point. We need to find the right balance between fostering clean energy growth and ensuring economic sustainability and regulatory stability,” said an executive from one of Brazil’s major distribution companies.

Energy storage and the free market gain momentum

Among the opportunities created by the new measure is the expansion of energy storage technologies and the opening of Brazil’s Free Energy Market to smaller consumers.As battery prices continue to fall and regulatory frameworks evolve, companies and households are increasingly investing in hybrid solar-plus-storage systems to reduce peak demand and optimize their energy management.

At the same time, the ongoing liberalization of the electricity market is paving the way for new business models such as energy communities and microgrids, offering consumers greater autonomy and flexibility.

A stable regulatory path is key for Brazil’s distributed generation

Although MP 1,304 still needs congressional approval, its introduction already signals a shift in the country’s energy financing structure.For the solar and distributed generation industries, the main challenge will be maintaining investor and consumer confidence to ensure Brazil’s clean energy transition continues at full speed.

The future of distributed generation in Brazil will depend on clear regulations, long-term stability, and support for innovation essential pillars for consolidating the country’s position as a global reference in renewable and decentralized energy.

MP 1,304 reignites debate over tariffs, subsidies, and the future of distributed generation in Brazil