THE POWER MARKET IN CHILE WHAT IS GOING ON?

Transcription

1 COMITÉ EMPRESARIAL CHILE-JAPON THE POWER MARKET IN CHILE WHAT IS GOING ON? SANTIAGO-CHILE APRIL 2009 CONTENT Overview of the Energy Sector Energy matrix Energy policy The Electricity Sector: regulatory framework Recent evolution of the power market The gas crisis Lessons learned The present The future 1

2 ENERGY MATRIX reliance on imported fuels 2004 Hydroelectricity 18% Biomass 13% Oil 38% Coal and Coke 10% Natural Gas 21% - 95% of crude oil imported - 90% of coal imported - 70% of natural gas imported => 65% of the primary energy is imported Hydroelectricity 1 kwh = 2500 kcal 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 Natural Gas 36% Residential 17% Commercial 14% Transport 1% Industry 31% Mining 37% 4 2

3 ENERGY POLICY few basic pillars Economic efficiency Competitive markets for oil, coal, natural gas, biomass Competition in electric generation and supply Regulation of natural monopolies Subsidiary role of the State State sets the rules of the game State promote access to energy of low income households Private ownership Security of service and sustainability Security: emphasis since the recent gas crisis Foster renewable energies Concern on CO2 emissions 5 ELECTRIC SYSTEMS Installed capacity: 2008 System Installed Capacity Generation MW % GWh SING % SIC % Aysén (*) 33 47% 156 Magallanes (*) 65 0% 252 Autoproducers % 3786 Chile % (*) estimated 6 3

4 NORTH SYSTEM (SING) 7 CENTRAL SYSTEM (SIC) 8 4

5 AGENTS OF THE POWER MARKET few agents but competition works 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 ( 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... 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 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

6 REGULATORY FRAMEWORK: GENERATION drivers for competition Driver for competition: long term contracts Unregulated prices to supply large end-consumers ( > 2 MW) Price to supply Discos Existing contracts: Node Prices Future contracts (Jan 1, 2010): competitive tender prices Spot market: only for trading differences between actual dispatch and contract commitments 11 REGULATORY FRAMEWORK: GENERATION volatility of spot prices Nominal US$/MWh SIC - Daily Energy Spot Price Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan

7 REGULATORY FRAMEWORK: GENERATION Contract and spot markets Spot Price Spot Market Spot Price G1 G2 G3 Long Term contracts Long Term Transmission System contracts C1 C2 Large consumers Unregulated prices D1 D2 Distribution Node Prices( ) Bid prices (2010 onward) 13 EVOLUTION IN THE LAST 15 YEARS 1995: agreements to import Argentinean gas Until 1997: SIC: basically hidroelectricity and coal + GT diesel for dry years SING: coal + GT diesel for back-up : Gas from Argentina Private initiative Very low argentinean gas price: 1.5 US$/MMBtu (1/3 of international prices) Unlimited confidence in gas supply Competition of private companies to develop gaslines 4 gaslines constructed in electric interconnection Electricity prices drop from 65 US$/MWh to 34 US$/MWh 14 7

8 EVOLUTION IN THE LAST 15 YEARS several gaslines developed + one electric interconnection Tocopilla Mejillones Paposo Pichamal Asunción Coronel Cornejo Santiago Concepción La Mora Montevideo Buenos Aires Cabo Negro Punta Arenas Loma de la Lata (Neuquén) Posesión San Sebastián Export gasline TGN s gasline TGS s gasline 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) P.Libre 50 US$ / M W h abr-95 abr-96 abr-97 abr-98 abr-99 abr-00 abr-01 abr-02 abr-03 P.Nudo 16 8

9 EVOLUTION IN THE LAST 15 YEARS drop of wholesale prices in the North Grid SING - Precios Monómicos Crucero 220 (fc=65%, US$ oct-07) Precios Libres 60 US$ / M W h Precios Nudo 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 Hydroelectric and coal projects not competitive Hydro: only one large project developed (Ralco -700 MW) 9 combined cycles (CCGT) installed: 3500 MW (total capacity = MW) Several OCGT based on NG installed 500 MW Several other CCGT under construction by

10 EVOLUTION IN THE LAST 15 YEARS the Argentinean gas crisis Triggered by: Devaluation and no adjustment of gas price in Argentina Prices controlled: presently around 1 US$/MBTu (1/6 of international prices) Effect in Argentina Investments in exploration stopped Huge increase of internal consumption production insufficient to meet internal demand + exports 19 EVOLUTION IN THE LAST 15 YEARS impact in Chile The Perfect Storm in Gas completely curtailed in mid 2007 Oil price rises from 30 to 150 US$/barrel Drought in 2007 One CCGT (370 MW) out of service for 1 year 20 10

11 EVOLUTION IN THE LAST 15 YEARS significant gas curtailments. Total Chile Natural Gas Import Mm3/d 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 EVOLUTION IN THE LAST 15 YEARS gas replaced by diesel oil Curva de carga diaria SIC Martes 10 de febrero 2004 (fuente: operación real del sistema - CDEC SIC) Curva de carga diaria SIC Martes 12 de febrero 2008 (fuente: operación real del sistema - CDEC SIC) 6,000 7,000 6,000 5,000 5,000 Potencia MW 4,000 3,000 2,000 P. Diesel - Fuel Oil Carbón Embalse Cogeneración Eólicas Gas Natural Pasada Potencia M W 4,000 3,000 2,000 P. Diesel - Fuel Oil Carbón Embals e Cogeneración Eólic as Gas Natural Pasada 1,000 1, Horas Horas 22 11

12 EVOLUTION IN THE LAST 15 YEARS significant impact on spot prices (Central Grid) US$/MWh SIC Chile - Costo Marginal Diario ene-03 jul-03 ene-04 jul-04 ene-05 jul-05 ene-06 jul-06 ene-07 jul-07 ene-08 jul EVOLUTION IN THE LAST 15 YEARS significant impact on spot prices (North Grid) SING - Daily Energu Marginal Cost US$ / MWh 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

13 EVOLUTION IN THE LAST 15 YEARS Market reaction : contract prices increase (Central Grid) Node Prices US$ / MWh Non-regulated Prices 0 Abr-97 Abr-98 Abr-99 Abr-00 Abr-01 Abr-02 Abr-03 Abr-04 Abr-05 Abr-06 Abr-07 Abr EVOLUTION IN THE LAST 15 YEARS Market reaction to curtailments 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 coal projects start construction Several large hydro project under study but delayed for problems with environmental permits 26 13

14 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 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 15 Mm3/d Initial consumption: 6 Mm3/d 28 14

15 EVOLUTION IN THE LAST 15 YEARS Quinteros LNG Terminal 29 EVOLUTION IN THE LAST 15 YEARS Mejillones LNG Terminal 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

16 EVOLUTION IN THE LAST 15 YEARS Mejillones LNG Terminal 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

17 EVOLUTION IN THE LAST 15 YEARS significant investments in the Central Grid HYDRO COAL GAS (DIESEL) COGENERATION WIND CAPACITY (MW) TOTAL EVOLUTION IN THE LAST 15 YEARS.. significant investment in the North Grid. HYDRO COAL CCGT (GAS-DIESEL) OIL CAPACITY (MW) TOTAL

18 EVOLUTION IN THE LAST 15 YEARS Market reaction : demand side (Central Grid) Reduction in demand growth rate Reactiontohighprices Demand growth rate : 8.2% : 5.8% : 4.5% 2008: -0.5% 2009: 0% 35 LESSONS LEARNED 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

19 LONG TERM PROJECTIONS Demand projections SIC (42000 GWh) : 8.2% : 5.8% : 4.5% 2008: -0.5% 2009: 0% : 5-5.5% SING (14500 GWh) : 8.2% : 5.8% : 4.5% 2008: 4.2% 2009: 8.0% : 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 VII VIII IX X XI XII MW potential MW installed 38 19

20 LONG TERM PROJECTIONS Role of renewable energies 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 10% in Penalties otherwise Significant development of small hydro and wind. Exploration of geothermal underway 500 MW by 2011, MW by LONG TERM PROJECTIONS Role of energy efficiency 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

21 LONG TERM PROJECTIONS advanced studies on coal and hydro projects Hydro= 6000 MW Coal = 7000 MW Project Owner Type Capacity Location Environ.Study Nearest Date Coronel-2 Colbún Coal 1*350 Coronel Approved 2013 ERA Enap Refinerías GNL 414 Concón Approved NO Farellones Codelco Coal 2*400 La Higuera Under study NO Barrancones Suez Coal 3*180 Totoralillo Under study 2012 Río Corrientes Southern Cross Coal 2*350 Quinteros Under study 2012 Los Robles AES Gener Coal 2*375 Constitución Under study 2012 Castilla MPX Coal 4*350 Caldera Under study 2014 Castilla MPX Diesel 2*120 Caldera Under study 2014 Cruz Grande CAP Coal 2*350 Cruz Grande Under study NO Energía Minera Codelco Coal 3*350 Quinteros Under study 2013 Guacolda-5 Guacolda Coal 1*152 Huasco Under study 2012 Rucatayo Pilmaiquén Hydro 55 Osorno Approved 2011 Las Lajas AES Gener Hydro 275 Maipo Under study 2013 Nueva Maitenes AES Gener Hydro 256 Maipo Under study 2013 Los Cóndores Endesa Hydro 150 Maule Under study 2012 San Pedro Colbún Hydro 144 Valdivia Approved 2012 Ñuble CGE Hydro 136 Ñuble Approved 2013 Pellaifa SNPower Hydro 108 Valdivia Not Submitted 2013 Liquiñe SNPower Hydro 94 Valdivia Not Submitted 2013 Maqueo SNPower Hydro 294 Valdivia Not Submitted 2014 Neltume Endesa Hydro 473 Valdivia Not Submitted 2014 Choshuenco Endesa Hydro 139 Valdivia Not Submitted 2013 Aysén (5) Endesa-Colbún Hydro 2750 Aysén Under study 2016 Río Cuervo Xtrata Hydro 600 Aysén Rejected 2016 Angostura Colbún Hydro 316 Bío Bío Not Submitted 2014 Las Leñas Pacific Hydro Hydro 282 Cachapoal Not Submitted LONG TERM PROJECTIONS technologies for expanding the systems up to 2021 SIC: installed capacity Dec 2009: MW Required : 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

22 LONG TERM PROJECTIONS technologies for expanding the system SING : installed capacity Dec 2009: 3750 MW Required : 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?... Coal (existing) Coal (under construction): New coal after 2012: Additional coal if Hydro in Aysen is not developed: Total : 2040 MW 2550 MW 1250 MW 2500 MW 8340 MW C02/GDP CO2/Cápita (2006) OECD 0,41 10,9 China 0,63 4,3 EEUU 0,51 19,0 Chile 0,33 3,

23 CONCLUSIONS 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