Water Management Practices

1. Hydropower, Drought and Society

2. Management in a Nutshell

3. Opportunities for Climate Forecast Use

4. Complicating Factors

The Costs of Drought in Ecuador

• 1995: > $7 Million losses

• 1996: > $63 Million losses

• Daily losses as much as $4M/day

• Small Businesses close doors

• Large Industry can generate power

• Small Industry hard hit (accounts for 54% of labor)

Drought (continued)...

Measures to fight shortages:

• Rationing street lighting

• Cut out TV programs 9 hours/day

• Business signs to be used only at night

• Close entertainment places after 11 pm

• Reduce deliveries by 20%

• Users buy independent generation equipment

If the power runs out...

• Disruptions are expensive to society

• Thermo more expensive than hydro

• Building large projects to generate more power very costly. ($500 M)

• Drought causes inflation because costs transferred to consumer through price

• Basically es muy importante!

Power Management

• Objective: Provide consistent, dependable power at a low price.

• Utilize water as much (and as effectively) as possible. If water runs out, you need to use thermal power (more expensive, and limited supply… Paute provides >50% of Nation’s power).

Power Generation DecisionModel Time Scales

• Daily (1 hour-2 weeks) based on demands and seasonal plan

• Seasonal (1 month-1 year) planning total releases to avert drought using hydrologic forecasts

• Long-Term (>1 year) Infrastructure Development and Planning (Supply & Demand projections)

Role of Climate Information

Forecasting drought using climate info

Rainfall Forecast

StreamflowHydrologic Model

Reservoir Levels

Power Demands

Thermal Power

Hydro Power

Complicating Factors• Finding points of entry: Meshing climate

forecasts with existing guidance (hydrologic forecasts)

• Operations influenced by price of water/power

• Climate is not the only issue

Weather fcst

Power Demand Fcst

Power generation decisions

% Hydro to be generated and

what plant

% thermoto be generated and

what plant

Seasonalmanagement plan

Daily to weekly operations

“Climate is Not the Only Issue…”

• Planning issues: 1975 plan not followed, turbines added at drought-prone Paute instead of upstream project (no funds)

• Daule Peripa (230 Mw) will start generating in October 1999, no others being started

• Pricing Issues: Paute is paid off…real cost of power not reflected in price

“Climate is Not the Only Issue…” 2• Privatization: Shifts risk from govt to private sector

• Inefficiency (~30% losses vs 15% typical in other countries), due to grid losses, bootlegging (theft)

• Solution?: change rates for consumers

• Industry, business & some residential customers can pay actual rates.

• Other sectors as poor families and some small industries should pay according to their payment capacity

• May also help address inefficiency (~30% losses vs 15% typical in other countries), due to grid losses, bootlegging (theft)

5.2 Institutional aspects related to shortage management

• Electric energy wasting in Ecuador reaches 30% (in 1993). Wasting due to smuggling, bad connections, network bad conditions, etc. Max allowed waste elsewhere: 15%

• Solution?: increase consumer rates

• Industry, business & some residential customers can pay actual rates.

• Other sectors as poor families and some small industries should pay according to their payment capacity

5.2 Institutional aspects related to shortage management

• Total savings to Ecuador economy after Paute: 750x106 US$ in oil. Paute is already paid off (640x106 US$)

• Actual rates should account only for financing & OM costs

• Real cost per Kwh: unknown

• Rate applied to the user: selling costs of US$ 0.03 / Kwh

5.2 Institutional aspects relatated to shortage management, cont.

• [Inecel] deficit too high: cost of Kwh of electricity has not been adjusted

• No new projects have been started (demand increase, service declined). However, Daule Peripa (230 Mw) just was put in operation. Production will start in October 1999

5.2 Institutional aspects relatated to shortage management, cont.

• [Inecel] failed to follow the electric master plan (1975) in hydroelectric production. It did not build Mazar, [Daule Peripa-1999 testing period].

• Instead, it built 5 more turbines in a region where discharges are low (Paute Phase C)

• Water shortage in Paute may cause up to 10 h/day of electricity cuts

5.2 Institutional aspects related to shortage management, cont.

• To increase precipitation over the Paute area, cloud seeding programs are implemented. However there is not a research project in place.

• To increase reservoir levels, public officials asked the public to save energy by as much as 10%

5.3 Decision making process and public response capability to crisis, cont.

• Ask users to use electricity moderately, mainly during peak hours (17h - 21h)

• Production chambers: criticize inefficiency of electric industry

• Public ask to take measures before low discharges happen to occur in Paute.

• Public ask for private investment into the electricity industry

5.3 Decision making process and public response capability to crisis, cont.

• National and international investors ask the government to open up the Ecuadorian market to them

• Public asks for a new Energy Law to guarantee good service and fair prices

• Due to the crisis, the public decides to buy small generating units to guarantee continuity in their activities

New Legal Scheme for the Electric Sector in Ecuador• Ley de Régimen del Sector Eléctrico, Octubre 10/96.

• Reglamento Sustitutivo del Reglamento General de la LRSE, Octubre 28/97.

• Reglamento de Concesiones.

• Reglamento de Suministro de Servicio.

• Reglamento de Tarifas.

• Reglamento de Despacho y Operación del S.N.I.

• Reglamento del Mercado Eléctrico Mayorista.

• Manuales de Despacho y de Mercado

Basic Principles of the Model

• Split normative and regulatory functions from operative and trade.

• Allow the private sector to participate in operative stages of electric trade.

• Split different states of electric functioning (generation; transmission and distribution) as specific business units.

• Free access to all facilities.

Basic Principles of the ModelSPLIT INTO SEVERAL FUNCTION AS STAGES AS BUSINESS UNITS

• GENERATION:• Economical activity at risk, free competition.• Functioning based on electricity costs (auditing).

• TRANSMISSION AND DISTRIBUTION:• Public services, natural monopolies.• Distribution: not allow energy production.• All Government facilities will be transfered to new

electric companies.

ELECTRIC SECTOR STRUCTURE

• Consejo Nacional de Electrificación - CONELEC.

• Centro Nacional de Control de Energía - CENACE.

• Generating Electric Companies (Privatized)• Transmission Electric Companies (Public)• Trade and Distribution Companies

The National Electricity Council - CONELEC

• Fix distribution and trade costs.

• Pass regulation, rules and procedures: Verify their fulfilment.

• Manage and Control the Concesion process.

• Solve conflicts on services offering.

• Prepare the National Electric Plan (mandatory for the public sector, referencial for the private sector).

National Center for Energy Control• In charge of technical and financial

transactions of the Energy Marginal Market. Keep safety of the operation of the National Interconnected System. Responsible to supply the energy to the national market at the cheapest cost possible.

• Technical coorporation (non profit organization) formed by all generating, transmission and distribution companies and large users.

VALUE OF WATER• The time to use and store water must be determined, based on randomness of water inputs,

• To set up a decision criteria, each water resource is assigned a VALUE OF WATER, which is the expected value of future savings during normal operation and in its failure due to a cubic meter of stored marginal water.

• The value of water is applied to all regulation reservoirs, that is to all reservoirs that have storage capacity from one period to the other.

• The regulation reservoirs are: PAUTE, PUCARA, EL DESCANSO

HYDROTHERMAL RESOURCES OPTIMIZATIONHYDROTHERMAL RESOURCES OPTIMIZATION

RESPONSABILITIES OF THE SUPPLY COMPANIES• GENERATION COMPANIES:

• DEVELOPMENT ASSUMING COMMERCIAL RISKS.• NOT ALLOW FREE ASSOCIATION BETWEEN COMPANIES TO

NEGOTIATE.• CANNOT CONTROL MORE THAN 25% OF TOTAL POWER

INSTALLED.• OPERATION BASED ON COSTS AUDITABLE.

• TRANSMISSION COMPANIES:• OBLIGATION TO EXPAND THE SYSTEM.• MUST ALLOW FREE ACCESS TO FACILITIES.• CANNOT COMMERCIALIZE ELECTRIC ENERGY.

• DISTRIBUTION COMPANIES:• ONLY ONE DEALER FOR EACH GEOGRAPHICAL LOCATION.• CANNOT GENERATE ELECTRICITY.

Acknowledgments

• Hydrometeorological data were provided by the National Institute of Meteorology and Hydrology of Ecuador (INAMHI).

• Information related to the Electric Sector was kindly provided by the National Center For Energy Control of Ecuador (CENACE).

• Some data on socio-economical impacts of droughts in Ecuador were taken from several newspapers: El Comercio, Hoy, El Universo, Expreso