liberalization of the chilean electricity system and its effects on environmental performance hugh...

LIBERALIZATION OF THE CHILEAN ELECTRICITY SYSTEM AND ITS EFFECTS ON

ENVIRONMENTAL PERFORMANCE

Hugh Rudnick, P.Universidad Católica de Chile, Departamento de Ingeniería Eléctrica.Raúl O’Ryan, Universidad de Chile, Departamento de Ingeniería Industrial.

Rodrigo Bravo, Universidad de Chile, Departamento de Ingeniería Industrial.

GRENELEM PROJECT

Santiago, Chile, September 2001

Universidad de Chile Pontificia Universidad Católica de Chile

SING(800 km)

SIC(2200 km)

AISEN

MAGALLANES


Main Characteristics (2000):

• Continental surface : 756626 km²• Population : 15 millions

• National Consumption : 39142 GWh

• Peak Demand : 5800 MW

• Installed Capacity : 10080 MW

• Frequency : 50 Hz• Transmission Systems : 66 kV, 110 kV, 154 kV, 220 kV y 500 kV• Interconnected Systems: (SING, SIC, AISEN, MAGALLANES)

CHILE’S ELECTRICAL MARKET

CHILE’S ELECTRICAL SYSTEMS

• SIC (Sistema Interconectado Central)• Maximum demand 2000: 4.576 MW• Installed generation capacity: 6.646 MW• Percentage of thermal generation: 36%• 93% population, industrial and domestic consumption

SING (Sistema Interconectado Norte Grande)• Maximum demand 2000: 1.211 MW• Installed generation capacity : 3.352 MW• Percentage of thermal generation : 99,6%• Large consumers (10 correspond to 75% of demand, largest client 25% total demand)


COLOMBIA

1994

PERU

1993

BOLIVIA

1994

CHILE

1982

ARGENTINA

1992

BRAZIL

1998

CENTRAL AMERICA & PANAMA

1997-9

Pioneering regulatory changes in the electrical sector


1992

1994

1993

1991

1991

1999

>1992

1987

1996

1995

1994

1994

1995

1995

EU

19951989

1996

1995

1998

1982

Sistemas competitivos

Procesos de reestructuraciónavanzadosPrimeras etapas deprocesos de reestructuración

Fuente: R. Palma, U.Ch.


Fuelco Gasco

Genco Genco

Sellco Sellco

Gridco

Waterco Fuelco

Genco Genco

Sellco Sellco

Gridco

Brokeco Brokeco

Buyco Buyco

Lineco Lineco

Brokeco Brokeco

Buyco Buyco

Lineco Lineco

Disco Disco

Cons Cons Cons Cons Cons Cons

Disco Disco

SEGMENTATION OF THE INDUSTRY competitive and regulated (William Hogan, Harvard)

DIS

TR

IBU

TIO

N

Poolco/Marketco

GE

NE

RA

TIO

NT

RA

NS

MIS

SIO

N


*wholesale market deregulation (unregulated prices for large consumers)

*competition at generation level with centralized generation dispatch (Poolco model)

-Chile, Bolivia, Peru, Brazil, Central America - audited costs

-Argentina- bids with caps-Colombia- unrestricted bids

*short term marginal cost based schemes

ELECTRICITY MARKET REFORMS


*two part price scheme

-short term energy marginal cost-capacity pricing (adequacy signal)

*nodal pricing (generation-transmission interaction)

*financial bilateral contracts (non physical)



*regulation in transmission and distribution

*transmission open access regulation, global allocation of network costs, use of system approach, concession required

*incentive based regulation in distribution (yard stick competition, price cap), concession required, obligation to serve, quality of service regulated



GovernanceGovernance

CDECGenerators

Transmiters

DistribuitorsLarge users

Ministry Economy

Environmental body

Local governmentsSmall users

Antitrust body

SEC

CNE


0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

[Lo

ad y

ear

ly g

row

th]

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Chile- yearly growth of energy demand

High load growthHigh load growth


Investment in the SICInvestment in the SIC

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000

9.000

1.997 1.998 1.999 2.000 2.001 2.002 2.003 2.004 2.005 2.006

YEAR

DE

MA

ND

(M

W)

DEMAND SUPPLY

PANGUE

LOMA ALTASES

PETROPOWERNEHUENCO

PEUCHENMAMPIL

SAN ISIDRORUCUE

CORTADERAL

RALCOTHERM.

332,4

THERM. 332,42 X THERM.

332,4

Source: CNE Chile


19,818,8

16,113,6 13,3

12,010,6

9,3

%

26,0

21,9

19,016,2

9,3

17,4

12,5

1987 1988 1989 1990 1991 1992 1993 1994 19950

5

10

15

20

25

30

1987 1988 1989 1990 1991 1992 1993 1994

Chilectra(Santiago)

Edesur(Buenos Aires)

EdelnorEdelnor(Lima)(Lima)

Losses (technical and non technical)


Energy prices Chile SIC - SING(Oct.1999 values)

0.0010.0020.0030.0040.0050.0060.0070.0080.0090.00

AB

RIL

1983

AB

RIL

1984

AB

RIL

1985

AB

RIL

1986

AB

RIL

1987

AB

RIL

1988

AB

RIL

1989

AB

RIL

1990

AB

RIL

1991

AB

RIL

1992

AB

RIL

1993

AB

RIL

1994

AB

RIL

1995

AB

RIL

1996

AB

RIL

1997

AB

RIL

1998

AB

RIL

1999$

/kW

h

SIC (Alto Jahuel) SING(Antofagasta)

Prices decreasingPrices decreasing



WEAKNESSES

-High horizontal integration (generation)

-Vertical integration (generation-transmission-distribution)

-Efficiency increases not transfered to consumers

-Governance problems in pool

-Transmission regulation faces difficulties

Installed Capacity by Interconnected System

0

2000

4000

6000

8000

10000

12000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Year

MW

SING SIC EDELAYSEN EDELMAG AUTOPRODUCTORES


Evolution of Installed Capacity and Energy Production

Gross Generation by Interconnected System

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Year

GW

h

SING SIC EDELAYSEN EDELMAG AUTOPRODUCTORES


Evolution of Installed Capacity and Energy Production (cont.)

Energy Produced in the Electrical System by Fuel Type

0

5000000

10000000

15000000

20000000

25000000

30000000

35000000

1996 1997 1998 1999 2000

Year

MW

h

Hydro Coal Byomass Natural gas Fuels Pet coke


Evolution of Energy Use and Emissions

Año 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

HYDRO 49% 66% 75% 72% 67% 66% 55% 57% 45% 35% 29%

TERMO 51% 34% 25% 28% 33% 34% 45% 43% 55% 65% 71%

Percentage of gross hydroelectric and thermoelectric generation



Emissions from large combustion Plants

0

20

40

60

80

100

120

140

160

180

200

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

Year

NO

x a

nd

SO

x in

Gg

/Ye

ar

CO

2 in

10

2 G

g/Y

ea

r

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

GW

h

CO2 por 100 SO2 NOx Generación Bruta



REGULATORY FRAMEWORKS THAT AFFECT THE ENVIRONMENTAL IMPACT OF THE ELECTRICAL

SECTOR

Electrical Law

•Indicative planning: not a guide

•Power plant dispatch: favors polluting sources

Environmental Legislation and the EIA

•Law 19300: Environmental Framework Law

•Law 3.133

•EIA



EIA Projects

Electrical Projects included in the SEIA.

Category 1995 1996 1997 1998 1999 2000 2001 Total

b.- High voltage transmissionlines and substations 0 0 1 1 0 3 7 12

b.1.- Transmission lines 4 4 8 23 11 10 5 65b.2.- Substations 0 0 0 0 5 14 3 22c.- Power Plants greater than 3MW 5 9 4 6 16 8 4 52

TOTAL 9 13 13 30 32 35 19 151

ESSENTIAL ISSUES THAT LINK THE ENVIRONMENT AND THE DEREGULATED ELECTRICAL SECTOR

Development of the generation infrastructure

• Plant technology

• Thermal plant location

• Hydro plant development

• Thermal plant fuels

• System operation


PLANT LOCATION: THE BIO BIO BASIN


ESSENTIAL ISSUES THAT LINK THE ENVIRONMENT AND THE DEREGULATED

ELECTRICAL SECTOR

Efficient Energy Use and the Electric Sector

New Trends in Generation

• Nuclear Energy

• Clean Energy

• Embedded Generation or Distributed Generation


IN CONCLUSION


•CHILE’S ELECTRICAL SYSTEM HAS EXPANDED VERY STRONGLY IN RESPONSE TO THE HIGH ECONOMIC GROWTH RATES OF THE DECADE

•EMISSIONS OF ALL GASES IS INCREASING SIGNIFICANTLY, DESPITE SWITCH TO NATURAL GAS.

•TREND IN GROWTH AND EMISSIONS IS EXPECTED TO CONTINUE.

•TO REDUCE EMISSIONS THERMAL PLANTS MUST BE REPLACED BY LESS POLLUTING SOURCES SUCH AS HYDROELECTRIC POWER PLANTS, OR MORE RADICAL NUCLEAR SOURCES.

IN CONCLUSION


•A STRONG PUSH IN ENERGY EFFICIENCY MAY HELP, HOWEVER THE POLICIES APPLIED IN THIS LINE OF ACTION HAVE BEEN WEAK.

•CLEAN ENERGIES AND DISTRIBUTED SOURCES CAN HELP TO REDUCE EMISSIONS BUT WILLNOT BE SIGNIFICANT.

•MOREOVER, THE TREND IN THIS DEREGULATED SECTOR SEEMS TO BE GOING IN A DIFFERENT DIRECTION: NATURAL GAS COMBINED CYCLE PLANTS HAVE ACTUALLY DISPLACED SOME HYDROELECTRIC PLANTS.

•DECISIONS ARE BEING TAKEN ON GENERATING TECHNOLOGY,

WITHOUT DUE CONSIDERATION OF SOCIAL COSTS.

IN CONCLUSION


•THE ENVIRONMENTAL STAKES ARE STILL OUT:•NEW GAS PIPELINES ALSO FEED THE INDUSTRIAL AND DOMESTIC SECTORS. •NATURAL GAS PLANTS HAVE REPLACED COAL PLANTS.

•DISPATCH BY MARGINAL COSTING DOES NOT HELP MUCH, IT IS DIFFICULT TO INCORPORATE ALL SOCIAL COSTS

•COMPANIES SEEKING COMPETITIVE ADVANTAGES ARE EXPLORING THE USE OF CHEAPER MORE POLLUTING FUELS SUCH AS PET-COKE.

•THE AUTHORITY MUST BALANCE EXTRA ENVIRONMENTAL REQUIREMENTS WITH THE ENSUING INCREASE IN ENERGY PRICES. THIS IS NOT AN EASY EQUATION.

liberalization of the chilean electricity system and its effects on environmental performance hugh...

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