ENERGY TRANSFORMATION DIALOGUE

Transcription

1 ENERGY TRANSFORMATION DIALOGUE National Energy Commission José Carrasco B. Head of Electricity Markets NEC NEC August 2015

2 TABLE OF CONTENTS Context: Chile and its electricity market Electricity generation emissions Green initiatives: current regulation 1. Non Conventional Renewable Energy* Obligation 2. Electricity Supply Tenders 3. Net Billing and PMGD (Small means of distributed generation) Green initiatives: ongoing regulation 1. Emission Taxes Future Renewable energy potential *Non-conventional renewable energy is used in Chile to exclude large hydro (over 20 MW) from the category. NEC 2

3 1. CONTEXT Chile NEC

4 REPUBLIC OF CHILE FLAG COAT OF ARMS SANTIAGO DE CHILE ECONOMY Population (2014) 17,819,54 (Central Bank of Chile) TOTAL GDP (2014) USD 264 billion (IMF) GDP per capita (PPP, 2014) USD 23,165 (IMF) Exports (2014) Imports (2014) USD 73,364.5 million USD 78,720.7 million (Central Bank of Chile) (Central Bank of Chile) Interest Rate (Monetary Policy in April 2015) 3.0% (Central Bank of Chile) ENERGY Electricity Installed Capacity (2014) 18,863 MW (National Energy Commission) Electricity Consumption (2013) TWh (National Energy Balance) Electricity Consumption Per Capita (2013) 3,905 kwh (NEB & Central Bank of Chile) Rural Coverage Electrification 96.9% (Ministry of Energy) «Chile is the best evaluated economy in Latin America, and one of the most highly regarded among emerging countries around the world. Chile s sustained economic growth and social progress have been highlighted by various international organizations. In 2010, it became the first South American country to join the Organization for Economic Cooperation and Development (OECD)» NEC 4

5 MINISTRY OF ENERGY Responsible for developing and coordinating the agenda, policies and standards for the proper operation and development of the energy sector, ensuring its compliance and advising the Chilean government on related matters. It was created following the enactment of Law No. 20,402, The current Energy Minister is Máximo Pacheco Matte, appointed on March 11, 2014 NATIONAL ENERGY COMMISSION Technical organization responsible for defining the tariffs and technical standards to which companies must adhere to produce, generate, transmit and distribute energy. It was set up through Decree Law No. 2,224 of 1978 The National Energy Commission is responsible for regulating Chile s energy sector. ELECTRICITY AND FUELS Its mission is to monitor the proper operation of electricity, gas and fuels, in terms of safety, quality and price. Set up as a result of Act No. 18,410 of 1985 Responsible for overseeing the energy sector in Chile. NEC 5

6 KEY INDUSTRY PLAYERS Ministry of Energy National Energy Commission Electricity Superintendence CDECs Generation Transmission Distribution Clients Private, Free Energy Prices Private, Regulated Prices Private, Regulated Prices Free Regulated (<2 MW) NEC 6

7 Installed Electricity Capacity (2014) TOTAL INSTALLED IN ,863 MW SING Others SIC SING 3,875 MW SIC 14,826 MW Wind Diesel Coal Biomass Natural Gas Solar photovoltaic SEA SEA 50 MW SEM 102 MW Hydroelectric (run of river) Hydroelectric (reservoir) Mini hydroelectric SEM Source: NEC Total capacity is 18,863 MW. However, it is important to consider 2 extra systems: IPC (6 MW) and Los Lagos (3 MW) NEC 7

8 ELECTRICITY GENERATION AREA The generation segment consists of a group of electricity companies which own electricity generation plants. It includes three types of business: Sales between generators (Spot Market) Free sales to customers (Large Consumers) Regulated sales to customers (Electrical Tenders) CNE 8

9 2. EMISSIONS Chile NEC

10 Emissions of energy sector 68 MM tco2 until Greenhouse gas emissions 15.10% 0.30% 6.10% 74.60% 3.90% Energy Industrial Processes UDOP Agriculture Waste 75% of the total GGE are due to energy sector Of the energy sector, 38% of the GGE are due to electricity generation, being the most relevant. NEC 10

11 INDC Options INDC Draft (Intended Nationally determined contributions) The INDC draft considers two components: an emissions intensity target (including all sectors except forestry); and a specific target for the forestry sector. OPTION A Chile commits to reduce its emissions of CO2 per unit of GDP by 40 to 45% below 2007 levels, by the year 2030 Additionally, Chile commits to reduce its emissions of CO2 per unit of GDP by 30 to 35% below 2007 levels, by the year 2025 OPTION B Chile commits to reduce its emissions of CO2 per unit of GDP by 35% to 40% below 2007 levels, by the year 2030 Additionally, Chile commits to reduce its emissions of CO2 per unit of GDP by 25% to 30% below 2007 levels, by the year 2025 NEC 11

12 3. Green initiatives: current regulation NCRE OBLIGATION Chile NEC

13 NCRE OBLIGATION Suppliers (Gx) of distribution companies or free clients must demonstrate that the equivalent of a percentage of its energy withdrawals in each calendar year has been injected to the respective System by means of NCRE, either their own or contracted. NCRE Obligation Main Features To whom: Law for contracts signed between August 31/2007 and prior July 1/ Law for contracts signed after July 1/2013 Penalties: + Monetary penalties in the event of noncompliance. In the first place, there is a penalty proportionate to the company s obligation equivalent to 0.4 UTM for each MWh of NCRE s deficit (about 30 USD/MWh) + The penalty is increased to 0.6 UTM for each MWh of NCRE s deficit if the company, within 3 years, is again in a noncompliance situation NCRE % Law Law % 6,0% % 7,0% % 8,0% % 9,0% % 10,0% % 11,0% % 12,0% % 13,5% % 15,0% % 16,5% % 18,0% % 20,0% NEC 13

14 NCRE OBLIGATION Suppliers (Gx) of distribution companies or free clients must demonstrate that the equivalent of a percentage of its energy withdrawals in each calendar year has been injected to the respective System by means of NCRE, either their own or contracted. Tender Mechanism The Ministry of Energy must ensure that the percentage of renewables is met each year. Three years in advance, the Ministry of Energy has to evaluate the percentage of NCRE that will be met for the year, considering existing and under-construction projects. In case that the forecast indicates that the NCRE obligation will not be met, the Ministry must issue a public, competitive and technology-neutral tender. Price cap: Average development cost for a nefficient generator in the system. This price could be increased by up to 10% This price applies for 10 years. Marginal cost?: - If marginal cost goes over Price plus ~ 30 [USD/MWh], the NCRE generator receives the difference over this limit. - If marginal cost goes below Price minus ~ 30 [USD/MWh], the NCRE generator loses the difference below this limit NEC 14

15 3. Green initiatives: current regulation NetBilling and PMGD Chile NEC

16 Net Billing regulated customers can have, for their own use, electricity generation equipment, and to inject the excess of energy to the distribution company grid. Main features It is oriented to regulated costumers (end users). Only for Non conventional renewable energy. Maximum of 100 kw of capacity. Additional equipment necessary for connection must be paid for by the client. The price is the distribution company node price *less losses factor. The amount of energy injected to the grid is discounted each month in the bill. If after more than 6 months there is positive balance for the client, the distribution company must pay for it. NEC 16

17 PMGD (or SMDG Small means of distributed generation) Generators with a surplus capacity of lower than or equal to 9 MW, that are connected to distribution networks. Main features SMDG were given the right to connect to distribution networks Generators with a surplus capacity of lower or equal than 9 MW. The regulation defines a compulsory open access scheme, allowing connection. SMDG only pay the estimated network losses and the extra investment costs necessary to accommodate the introduction of the distributed generator. If the SMGD is also NCRE, it doesn t pay for using the trunk system. SMGD can choose Marginal Cost or Stabilized price, fixed by NEC. NEC 17

18 3. Current regulation ELECTRICITY SUPPLY TENDERS Time block distribution Chile NEC

19 ELECTRICITY SUPPLY TENDERS Supply for distribution companies regulated customers must be contracted from generators Such contracts must be awarded as a result of public and open tenders, which favor competition and the achievement of lower prices Long-term contracts make the installation of new generation projects viable NEC 19

20 GWh Tenders Next Steps: How much energy will be tendered? 15,000 14,000 13,000 How is this time block distributed? 1,000 GWh + 10% 13, GWh 1,100 (31%) (45%) (24%) 12,000 11,000 10,000 9,000 6,500 2A (23:00-08:00) 2B (08:00-18:00) 2C (18:00-23:00) ,000 7,000 7,091 6,000 5,000 4,000 5, ,000 2,000 1, , ,000 1, Long Term Tender, 6,500 GWh/year, without time block Long Term Tender, 5,000 GWh/year, without time block Long Term Tender, 1,000 GWh/year, with time block Short Term Tender, 1,091 GWh/year, with time block NEC 20

21 2015 TENDER MAIN FEATURES Private 20-year contract between distributors and generator Supply starting in January 2021 Maximum price is hidden Bids are assessed according to their indexing formula Technology neutral Time block distribution facilitates NCRE participation in the tender. NEC 21

22 4. Green initiatives: ongoing regulation GREEN TAXES Chile NEC

23 GREEN TAXES An annual tax on emissions from boilers and turbines with a thermal input greater than or equal to 50 MWt (thermal megawatts). Two environmental externalities to be addressed Global damage regarding climate change: tax on carbon dioxide (CO2) emissions. Tax : 5 [USD/Ton] Local damage to health: tax on emissions of Particulate Matter (PM), nitrogen oxides (NOx) and sulphur dioxide (SO2). Tax : Amount will be established in accordance with the valuation of such damage, on the basis of a floor value set in the law (e.g., 0.1$ USD per ton of local pollutant) NEC 23

24 GREEN TAXES An annual tax on emissions from boilers and turbines with a thermal input greater than or equal to 50 MWt (thermal megawatts). Expected results Projection period Around 50% of total energy taxed Annual average revenues ~ 250 MMUSD Highest revenue component CO2, averaging 83% of total revenues in Impact on clients: - Residential consumers could experience a slight increase in rates gradually. - Larger consumers will probably have a more immediate effect, depending on their contracts NEC 24

25 5. FUTURE Chile NEC

26 INICIATIVES Two main initiatives Energy Agenda Energy Efficiency Law: - Legal framework to convert [energy efficiency] into a long term state policy - Establishes the goal of reducing national energy consumption by 20% by 2025 compared to BAU projections. Development poles - Proposal: The Ministry of Energy will determine zones with a high generation potential and, considering the public interest, could mandate the development of a transmission line in order to facilitate the development of several generation projects, and to take advantage of the development potential. (This regulation is currently at the discussion stage) NEC 26