1 the power market in chile ¿what is going on? content

COMITÉ EMPRESARIAL CHILE-JAPON
THE POWER MARKET IN CHILE
¿WHAT IS GOING ON?
SANTIAGO-CHILE
APRIL 2009
CONTENT
¾ Overview of the Energy Sector
9Energy matrix
9Energy policy
¾The Electricity Sector: regulatory framework
¾Recent evolution of the power market
9 The gas crisis
9 Lessons learned
¾The present
¾The future
1
ENERGY MATRIX
…reliance on imported fuels…
2004
Biomass
13%
Hydroelectricity
18%
Oil
38%
Coal and Coke
10%
Natural Gas
21%
Hydroelectricity 1 kWh = 2500 kcal
- 95% of crude oil imported
- 90% of coal imported
- 70% of natural gas imported
=> 65% of the primary energy is
imported
3
ELECTRICITY MATRIX
…importance of hydroelectricity and natural gas…
…importance of industry and mining…
Chile Generation 2004
Coal
18%
Oil
0%
Others
3%
Hydroelectric
43%
Electricity Consumption - 2007
Natural Gas
36%
Residential
Transport
17%
1%
Commercial
14%
Industry
31%
Mining
37%
4
2
ENERGY POLICY
…few basic pillars…
Q
Economic efficiency
¾ Competitive markets for oil, coal, natural gas, biomass
¾ Competition in electric generation and supply
¾ Regulation of natural monopolies
Q
Subsidiary role of the State
¾ State sets the rules of the game
¾ State promote access to energy of low income households
¾ Private ownership
Q
Security of service and sustainability
¾ Security: emphasis since the recent gas crisis
¾ Foster renewable energies
¾ Concern on CO2 emissions
5
ELECTRIC SYSTEMS
Installed capacity: 2008
System
SING
SIC
Aysén (*)
Magallanes (*)
Autoproducers
Chile
(*) estimated
Installed Capacity
MW
%
3596
0%
9460
51%
33
47%
65
0%
1110
8%
14264
35%
Generation
GWh
14502
41874
156
252
3786
60570
6
3
NORTH SYSTEM (SING)
7
CENTRAL SYSTEM (SIC)
8
4
AGENTS OF THE POWER MARKET
…few agents… but competition works…
Q
Q
Q
Gencos, Transcos and Discos privatized in 80’s and early 90’s
North Grid:
– 4 Gencos (Suez - Southern Cross/Endesa- Endesa - AES)
– 3 Discos controlled by CGE
– 1 Transco (Transelec) , several Tx lines owned by consumers
– 90% of demand: large mining consumers
Central Grid:
– 4 large Gencos (Endesa- AES- Colbún- Copec/Von Appen/AES)
• + new entrants: Pacific Hydro - SN Power - Suez
– 4 small Gencos (100-200 MW) + several very small (<20 MW)
– 4 large Discos, 10 small Discos
– 1 large Transco, 3 small Transco, 2 large transmission lines owned by Gencos
– 40% of demand: large industrial + mining consumers
9
REGULATORY FRAMEWORK
…basic concepts...
Q
Separated G-T-D Companies
– Competition in generation and supply. No central planning
– Open access to transmission system
– Regulated transmission charges
– Regulated distribution charges
– Regulated tariffs for small end-user
Q
Wholesale Market Operator: the Economic Load Dispatch Center: CDEC
– Central dispatch based on “merit order” of variable costs
– Computes spot prices and performs settlements
– Calculates firm capacities and transmission charges of the trunk system
10
5
REGULATORY FRAMEWORK: GENERATION
…drivers for competition…
Q
Driver for competition: long term contracts
¾Unregulated prices to supply large end-consumers ( > 2 MW)
¾Price to supply Discos
– Existing contracts: Node Prices
– Future contracts (Jan 1, 2010): competitive tender prices
Q
Spot market: only for trading differences between actual dispatch
and contract commitments
11
REGULATORY FRAMEWORK: GENERATION
…volatility of spot prices…
SIC - Daily Energy Spot Price
Nominal US$/MWh
400
350
300
250
200
150
100
50
0
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
12
6
REGULATORY FRAMEWORK: GENERATION
Contract and spot markets
Spot Price
Spot
Spot Market
Market
G1
Spot Price
G3
G2
Long Term
contracts
Long Term
contracts
Transmission System
C1
C2
Large consumers
Unregulated prices
D1
D2
Distribution
Node Prices(1980-2009)
Bid prices (2010 onward)
13
EVOLUTION IN THE LAST 15 YEARS
… 1995: agreements to import Argentinean gas …
Q
Until 1997:
– SIC: basically hidroelectricity and coal + GT diesel for dry years
– SING: coal + GT diesel for back-up
Q
1997 Æ 2006: Gas from Argentina
– Private initiative
– Very low argentinean gas price: 1.5 US$/MMBtu (1/3 of international prices)
– Unlimited confidence in gas supply
– Competition of private companies to develop gaslines
– 4 gaslines constructed in 1995-1997 + 1 electric interconnection
– Electricity prices drop from 65 US$/MWh to 34 US$/MWh
14
7
EVOLUTION IN THE LAST 15 YEARS
… several gaslines developed + one electric interconnection…
Tocopilla
Mejillones
Paposo
Pichamal
Asunción
Coronel Cornejo
Santiago
Montevideo
La Mora Buenos Aires
Concepción
Loma de la Lata
(Neuquén)
Export gasline
TGN’s gasline
TGS’s gasline
Cabo Negro
Punta Arenas
Posesión
San Sebastián
15
EVOLUTION IN THE LAST 15 YEARS
…drop of wholesale prices in the Central Grid…
SIC-Chile: Precios Monómicos Libre y de Nudo (US$ oct-07)
(Quillota 220 kV, factor de carga 0.75)
70
P.Libre
60
40
P.Nudo
30
20
10
abr-03
abr-02
abr-01
abr-00
abr-99
abr-98
abr-97
abr-96
0
abr-95
US$ / M W h
50
16
8
EVOLUTION IN THE LAST 15 YEARS
…drop of wholesale prices in the North Grid…
SING - Precios Monómicos Crucero 220 (fc=65%, US$ oct-07)
90
80
Precios Libres
70
U S$/ M W h
60
50
40
Precios Nudo
30
20
10
0
Oct-96
Oct-97
Oct-98
Oct-99
Oct-00
Oct-01
Oct-02
Oct-03
Fijación
17
EVOLUTION IN THE LAST 15 YEARS
…impact on the system´s expansion…
Q
Hydroelectric and coal projects not competitive
– Hydro: only one large project developed (Ralco -700 MW)
– 9 combined cycles (CCGT) installed: Æ 3500 MW (total
capacity = 10000 MW)
– Several OCGT based on NG installed Æ 500 MW
– Several other CCGT under construction by 2004-2005
18
9
EVOLUTION IN THE LAST 15 YEARS
…the Argentinean gas crisis…
Q
Triggered by:
– Devaluation and no adjustment of gas price in Argentina
– Prices controlled: presently around 1 US$/MBTu (1/6 of
international prices)
Q
Effect in Argentina
– Investments in exploration stopped
– Huge increase of internal consumption
– Æ production insufficient to meet internal demand + exports
19
EVOLUTION IN THE LAST 15 YEARS
…impact in Chile…
Q
The “Perfect Storm” in 2007-2008
– Gas completely curtailed in mid 2007
– Oil price rises from 30 to 150 US$/barrel
– Drought in 2007
– One CCGT (370 MW) out of service for 1 year
20
10
EVOLUTION IN THE LAST 15 YEARS
…significant gas curtailments….
Total Chile Natural Gas Import
25
20
Mm3/d
15
10
5
0
mar-04 jul-04 oct-04 mar-05 jul-05 nov-05 mar-06 jul-06 nov-06 mar-07 jul-07 nov-07 mar-08 jul-08 nov-08
21
EVOLUTION IN THE LAST 15 YEARS
…gas replaced by diesel oil…
Curva de carga diaria SIC
Martes 12 de febrero 2008 (fuente: operación real del sistema - CDEC SIC)
Curva de carga diaria SIC
Martes 10 de febrero 2004 (fuente: operación real del sistema - CDEC SIC)
7,000
6,000
6,000
5,000
5,000
Embalse
3,000
Cogeneración
Eólicas
Carbón
4,000
P o t e n c ia M W
Carbón
P o t e n c ia M W
P. Diesel - Fuel Oil
P. Diesel - Fuel Oil
4,000
Embalse
Cogeneración
Eólicas
3,000
Gas Natural
Gas Natural
2,000
Pasada
1,000
Pasada
2,000
1,000
0
0
1
2
3
4
5
6
7
8
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Horas
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Horas
22
11
EVOLUTION IN THE LAST 15 YEARS
…significant impact on spot prices (Central Grid)…
SIC Chile - Costo Marginal Diario
US$/MWh
400
350
300
250
200
150
100
50
0
ene-03 jul-03 ene-04 jul-04 ene-05 jul-05 ene-06 jul-06 ene-07 jul-07 ene-08 jul-08
23
EVOLUTION IN THE LAST 15 YEARS
…significant impact on spot prices (North Grid)…
SING - Daily Energu Marginal Cost
500
450
400
US$ / MWh
350
300
250
200
150
100
50
0
ene-04
jul-04
ene-05
jul-05
ene-06
jul-06
ene-07
jul-07
ene-08
jul-08
September 2008: information not available
24
12
EVOLUTION IN THE LAST 15 YEARS
Market reaction : contract prices increase (Central Grid)
140
120
Node Prices
U S$ / M W h
100
80
60
40
Non-regulated Prices
20
Abr-08
Abr-07
Abr-06
Abr-05
Abr-04
Abr-03
Abr-02
Abr-01
Abr-00
Abr-99
Abr-98
Abr-97
0
25
EVOLUTION IN THE LAST 15 YEARS
Market reaction to curtailments
Q
Q
Q
Q
Q
Development of LNG terminal to replace argentinean NG
Amendments to the Law
• in order to replace Node Prices by competitive tenders to
supply distributors
– stable prices
– contracts up to 15 years
Significant amount of diesel oil projects in 2007-2009
10 coal projects start construction
Several large hydro project under study
• but delayed for problems with environmental permits
26
13
EVOLUTION IN THE LAST 15 YEARS
Quinteros LNG Terminal
–
–
–
–
Start-up date: June 2009 (fast-track)
1100 Million US$
Owners: BG, ENAP, Metrogas, Endesa
Off-takers LNG: ENAP, Metrogas, Endesa (1/3
each)
– Capacity :10 Mm3/d Æ 15 Mm3/d
– Initial consumption: 6 Mm3/d
27
EVOLUTION IN THE LAST 15 YEARS
Quinteros LNG Terminal
–
–
–
–
June 2009 (fast-track)
1100 Million US$
Owners: BG, ENAP, Metrogas, Endesa
Off-takers: ENAP, Metrogas, Endesa
(1/3 each)
– Capacity :10 Mm3/d Æ 15 Mm3/d
– Initial consumption: 6 Mm3/d
28
14
EVOLUTION IN THE LAST 15 YEARS
Quinteros LNG Terminal
29
EVOLUTION IN THE LAST 15 YEARS
Mejillones LNG Terminal
Q
Main objective: improve security of service until the connection of
the coal units under construction
– Investment: 500 MMUS$
– Owners: Suez, CODELCO
– Off-takers: mining companies
– Start-up date: first quarter 2010
– No storage tanks
– Initial capacity: 2 Mm3/d (450 MW)
30
15
EVOLUTION IN THE LAST 15 YEARS
Mejillones LNG Terminal
Q
Main objective: improve security of
service until new coal units
Investment: 500 MMUS$
– Owners: Suez, CODELCO
– Off-takers: mining companies
– Start-up date: first quarter 2010
– No storage tanks
– Initial capacity: 2 Mm3/d (450
MW)
31
EVOLUTION IN THE LAST 15 YEARS
Mejillones LNG Terminal
32
16
EVOLUTION IN THE LAST 15 YEARS
…significant investments in the Central Grid…
CAPACITY (MW)
2007
2008-2010
HYDRO
COAL
GAS (DIESEL)
COGENERATION
WIND
TOTAL
4815
390
838
1164
3213
1788
140
26
20
280
9026
3648
33
EVOLUTION IN THE LAST 15 YEARS
.. significant investment in the North Grid….
CAPACITY (MW)
2007
HYDRO
2009-2012
10
COAL
1200
CCGT (GAS-DIESEL)
2070
OIL
TOTAL
1090
310
100
3600
1190
34
17
EVOLUTION IN THE LAST 15 YEARS
Market reaction : demand side (Central Grid)
Q
Q
Reduction in demand growth rate
– Reaction to high prices
Demand growth rate
–
–
–
–
–
1990-1998: 8.2%
1998-2006: 5.8%
2006-2007: 4.5%
2008: -0.5%
2009: 0%
35
LESSONS LEARNED
Q
Q
Q
Q
Excessive confidence in a key single supplier
The market works
– Offer and demand side
Foster security of supply
– Emphasis on risk analysis, diversification of supply, back-up
systems, dual burners
System has shown extraordinary flexibility
– In spite that 30% of the energy matrix was based on gas
– No curtailments of electricity/fuel supply
36
18
LONG TERM PROJECTIONS
Demand projections
Q
SIC (42000 GWh)
– 1990-1998: 8.2%
– 1998-2006: 5.8%
– 2006-2007: 4.5%
– 2008:
-0.5%
– 2009:
0%
– 2010-2020: 5 - 5.5%
Q
SING (14500 GWh)
– 1990-1998: 8.2%
– 1998-2006: 5.8%
– 2006-2007: 4.5%
– 2008:
4.2%
– 2009:
8.0%
– 2010-2020: 4.0%
37
LONG TERM PROJECTIONS
Technologies for expansion: hydro resources
(economic?)
Hydroelectric Potential (MW)
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
I
II
III
IV
V
RM
VI
MW potential
VII
VIII
IX
X
XI
XII
MW installed
38
19
LONG TERM PROJECTIONS
…Role of renewable energies …
Q
Q
Renewables are important as source of clean energy, diversification of supply
and decentralization
– But not all forms of renewables are economic
– Some may have negative environmental impact
The Government has applied a “prudent” promotion of renewables:
• Supply contracts must contain a minimum 5% of renewables Æ 10% in
2024. Penalties otherwise
– Significant development of small hydro and wind.
– Exploration of geothermal underway 500 MW by 2011, 2500-3000 MW by
2024
39
LONG TERM PROJECTIONS
…Role of energy efficiency…
Q
Significant potential
– But cannot replace the need to use more energy
– Electricity consumption per capita in Chile is 1/3 of Australia and New
Zeland Nueva Zelanda, 1/4 of USA
• To reach the status of developed country, we need to multiply by 3 our
electricity production/consumption
• 2/3 of consumption in Chile is used by industry and mining
40
20
LONG TERM PROJECTIONS
…advanced studies on coal and hydro projects…
Hydro= 6000 MW
Coal = 7000 MW
Project
Owner
Type
Capacity
Coronel-2
ERA
Farellones
Barrancones
Río Corrientes
Los Robles
Castilla
Castilla
Cruz Grande
Energía Minera
Guacolda-5
Colbún
Enap Refinerías
Codelco
Suez
Southern Cross
AES Gener
MPX
MPX
CAP
Codelco
Guacolda
Coal
GNL
Coal
Coal
Coal
Coal
Coal
Diesel
Coal
Coal
Coal
1*350
414
2*400
3*180
2*350
2*375
4*350
2*120
2*350
3*350
1*152
Location
Coronel
Concón
La Higuera
Totoralillo
Quinteros
Constitución
Caldera
Caldera
Cruz Grande
Quinteros
Huasco
Rucatayo
Las Lajas
Nueva Maitenes
Los Cóndores
San Pedro
Ñuble
Pellaifa
Liquiñe
Maqueo
Neltume
Choshuenco
Aysén (5)
Río Cuervo
Angostura
Las Leñas
Pilmaiquén
AES Gener
AES Gener
Endesa
Colbún
CGE
SNPower
SNPower
SNPower
Endesa
Endesa
Endesa-Colbún
Xtrata
Colbún
Pacific Hydro
Hydro
Hydro
Hydro
Hydro
Hydro
Hydro
Hydro
Hydro
Hydro
Hydro
Hydro
Hydro
Hydro
Hydro
Hydro
55
275
256
150
144
136
108
94
294
473
139
2750
600
316
282
Osorno
Maipo
Maipo
Maule
Valdivia
Ñuble
Valdivia
Valdivia
Valdivia
Valdivia
Valdivia
Aysén
Aysén
Bío Bío
Cachapoal
Environ.Study
Nearest Date
Approved
Approved
Under study
Under study
Under study
Under study
Under study
Under study
Under study
Under study
Under study
2013
NO
NO
2012
2012
2012
2014
2014
NO
2013
2012
Approved
Under study
Under study
Under study
Approved
Approved
Not Submitted
Not Submitted
Not Submitted
Not Submitted
Not Submitted
Under study
Rejected
Not Submitted
Not Submitted
2011
2013
2013
2012
2012
2013
2013
2013
2014
2014
2013
2016
2016
2014
2014
41
LONG TERM PROJECTIONS
…technologies for expanding the systems up to 2021
Q
Q
SIC: installed capacity Dec 2009: 11200 MW
Required 2010-2021: 8400 MW
– 2400 MW under construction (until 2012)
• 1700 MW coal
• 600 MW hydro
• 100 MW renewables
– 6000 MW news
• 2200 MW hydro without Aysen
• 350 MW coal
• 2500 MW hydro in Aysen? or Coal?
• 1000 MW renewables
42
21
LONG TERM PROJECTIONS
…technologies for expanding the system…
Q
Q
SING : installed capacity Dec 2009: 3750 MW
Required 2010-2021: 2150 MW
– 1050 MW under construction (until 2012)
• 850 MW coal
• 100 MW diesel
• 100 MW renewables
– 1100 MW news
• 900 MW coal
• 200 MW renewables
43
A NEW CHALLENGE: CO2 EMISSIONS
…can we afford to not develop the hydro resources of
Aysen?...
Q
Q
Q
Q
Coal (existing)
Coal (under construction):
New coal after 2012:
Additional coal if Hydro in
Aysen is not developed:
Total :
C02/GDP CO2/Cápita
OECD
China
EEUU
Chile
0,41
0,63
0,51
0,33
10,9
4,3
19,0
3,6
2040 MW
2550 MW
1250 MW
2500 MW
8340 MW
(2006)
44
22
CONCLUSIONS
Q
Q
Q
Q
Chile was successful in tackling the gas crisis
– Appropriate management of the crisis by the Government and market
agents
– Market works
– We have learned some important lessons on energy security and
diversificaction
Chile presents opportunities for private investments in the energy sector,
under a market environment
– Prudent treatment of renewable energies. significant subsidies not allowed
– Energy efficiency cannot replace the need to growth
Potential for developing our resources: hydro, sub-bituminous coal,
renewables
Challenge: appropriate negotiation on CO2 emissions
45
23