Lula’s vetoes on offshore wind bill face backlash in Congress

At the heart of the dispute are Articles 22, 23, and 24, vetoed by Mr. Lula for addressing issues unrelated to the bill’s original intent—so-called riders. Initially designed to unlock Brazil’s offshore wind potential, the bill was altered during its passage through the Lower House and took on provisions far beyond its initial scope.

These included mandates for the compulsory contracting of gas-fired thermal plants that must operate at least 70% of the time, extensions of contracts for coal-fired plants, mandatory purchases of energy from small hydroelectric plants (PCHs) regardless of market demand, and the postponement of benefits for distributed generation projects, among others.

A study by consultancy PSR estimates that keeping the vetoed articles in place could cost Brazilian consumers R$545 billion in electricity bills by 2050—equivalent to an average 9% increase in rates.

“Beyond the direct impact on electricity bills, these riders throw the sector into disarray,” said PSR CEO Luiz Barroso. “They distort future auctions, increase power curtailments, affect free-market prices, damage institutional credibility, and hinder long-term energy planning. Worst of all, they consume the already narrow room in tariffs to fund needed investments, such as those related to climate adaptation.”

Luiz Eduardo Barata, president of the National Front of Energy Consumers, echoed the concerns, saying the unrelated provisions undermine current proposals aimed at reducing electricity costs.

“If Congress overturns the vetoes, consumers will see immediate rate hikes, and the legal framework for offshore wind, which should promote the energy transition, will instead subsidize dirty, expensive generation,” he said.

Aware of the growing pressure, the president’s office has launched a political effort to preserve the vetoes. The assessment is that giving in to economic interest groups would damage the government’s environmental credibility and raise energy costs for the public.

Should Congress reverse the vetoes, Brazil could end up with an offshore wind framework that paradoxically favors coal and gas, drives up rates, and undermines the country’s clean energy future.

ABEGÁS, the association representing gas distribution companies, supports keeping the gas-fired thermal plants in the bill, arguing that it would enable the expansion of infrastructure and the use of natural gas inland. The group claims these plants would provide predictability and ultimately reduce electricity costs for all consumers—both residential and industrial.

The wind sector, which originally proposed the bill, is pushing back. “Since when does the legislature decide what source of energy consumers will use, where it will be produced, and how much it will cost?” asked Marcello Cabral, head of new business at ABEEÓLICA, the sector’s association. “That should be the job of energy planners—the Energy Research Company (EPE) and the Ministry of Mines and Energy (MME), as the granting authority.”

While the wind power segment stands to benefit most from a regulatory framework, it sees other sectors taking advantage of the bill without accounting for the societal costs.

The Brazilian Small Hydropower Association (ABRAPCH) is also lobbying lawmakers to overturn the vetoes. Its president, Alessandra Torres, called the effort a “positive lobby,” arguing that there’s misinformation surrounding the issue and that studies support the provisions advocated by the segment she represents.

“Just because it’s an offshore wind bill doesn’t mean we can’t address other issues,” Mr. Torres said. “That’s always been normal over the years. Replacing 8 GW from the Eletrobras privatization law with 4.5 GW of small hydro is actually advantageous for consumers.”

Despite its green façade, the vetoed articles could increase Brazil’s greenhouse gas emissions by up to 25%, according to experts. In the case of coal, the bill calls for contract extensions for plants in southern Brazil through 2025. The controversy highlights an ESG dilemma: lawmakers argue that maintaining coal plants is necessary to preserve 36,000 jobs in Santa Catarina and Rio Grande do Sul.

On the other hand, experts point out that the proposal runs counter to Brazil’s environmental commitments just ahead of COP30. Luiz Fernando Zancan, president of ABCS—which represents companies in the coal supply chain—said keeping the plants online is essential for system reliability.