It also considers coordinated LNG purchases to obtain better prices and a fast track for projects that are realizable in the short term.

Government refines energy agenda and considers offsetting savings or entry of new players

(El Mercurio) The last two years of President Michelle Bachelet’s government, 2017 and 2018, will be the most complex in terms of electricity in recent decades. Not only because electricity prices will remain high, but also because the country will face a situation that it has already seen in 1998: the possibility of blackouts due to system fragility and lack of generation. For this reason, the National Energy Agenda prepared by Minister Máximo Pacheco contains urgent measures to overcome this emergency, which is also expected to occur in the middle of the electoral process.

The vehicle to prevent collapse is the National Energy Agenda, which the Executive will present this month and on which it is working with extreme secrecy. Although the internal deadline is to have it ready in the first 15 days of May, the Ministry of Energy prefers not to commit to a more specific date. From Arica to Punta Arenas, Pacheco and his team have traveled the country socializing some ideas and gathering others to incorporate them into the national energy policy, which will be launched in 2015.

“This agenda cannot be just another technical text that will be forgotten on the shelf,” commented the portfolio, regarding the need for “social dialogue”.

What measures will be included in the announcement? They range from measures to accelerate the entry into operation of new plants or expand existing ones, compensated savings mechanisms, to measures to encourage solar panels on homes.

More renewable energy

The Executive’s plan includes measures to reduce the energy shortage in residential sectors, such as extending the incentive for the installation of solar thermal panels in housing -it was reported that this will last until at least 2020-, and including this technology in the housing subsidy, so that these panels can be used to heat water or generate electricity inside the house. This is an aid that is channeled through the construction companies and that, if implemented, would help those companies that build social housing. The subsidy started in 2010 and lasted until December 2013. The first version consisted of total financing of solar panels on homes up to 2,000 UF, a 40% benefit on properties up to 3,000 UF and 20% on properties between 3,000 and 4,500 UF.

In terms of electricity production, there are provisions to have more electricity generation, such as making a cadastre of which projects can be carried out and expanded in the short term, with a sort of electricity fast track. Today in the Central Interconnected System (SIC), the projects in environmental qualification total 4,502 megawatts (MW), with an investment of US$ 9,486 million, while in the Norte Grande Interconnected System (SING), the plants currently under evaluation could generate 2,513 MW, with an investment of US$ 4,347 million.

This aspect of increasing supply also includes, they say in the ministry, in “making a system of coordinated purchases of liquefied natural gas (LNG) in attractive volumes to find better price offers, to reduce potential energy shortages in the period 2016-2018″.

Today the country’s largest gas terminal – Quintero – buys only for its partners, Endesa, Metrogas and Enap, although these companies can sell to third parties. But if all potential customers were added together, an internationally coordinated purchase could achieve a cheaper gas price, say Energia.

The agenda would also consider provisions to increase energy efficiency and savings. The idea here is to lower the level of consumption so that it implies savings in the short term. In the Norte Grande, demand will grow by over 10% in 2014, while in the center-south it will grow by around 4%, according to the consulting firm Systep. The government wants to implement consumption compensation systems -that is, that savings are returned in money-, in addition to making technological changes in homes and companies to use less electricity.

New actors?

A longer-term issue, but one that concerns Minister Máximo Pacheco, is the high concentration in the generation market. “It’s an oligopoly,” he has claimed. “Three companies (Endesa, AES Gener and Colbún) generate 90% of the energy of the SIC”, say Energía.

A key strategy for the entry of new players into the generation segment of the electricity market is for them to access long-term contracts for the supply of energy to regulated customers through energy distribution companies. Today the government is reviewing how to encourage the entry of new companies with new projects with changes in the deadlines, the division into blocks and other measures.

Minister Pacheco and his technicians also have two industry reforms in mind. One is a project to facilitate interconnection between the two large grids, the SIC and the SING, and the other is a reform of the dispatch centers (CDEC), which are the entities that indicate which plants operate and for how long, and which are integrated by the companies themselves.

All these measures will try to avoid the collapse of the coming years, because, as Bernardo Larraín Matte, president of Colbún, says, “there are not enough generation projects to supply the demand for the next ten years if it continues to grow at current rates.

There are also changes, such as participatory planning in energy policy, which the government points out is a standard applied in several countries of the Organization for Economic Cooperation and Development (OECD).

Other aspects that are in the government’s plan -either in the agenda or the energy policy- are to improve the regulation of electricity transmission, increase the use of non-conventional renewable energies (NCRE) and strengthen energy efficiency programs, setting minimum standards for lighting, motors, refrigerators, public construction, among others.
In the case of renewables, the government’s idea is that territorial planning should include the promotion of certain types of energy, such as solar in the north, hydro in the south and wind in all areas with potential.

“This model does not meet its objective.”

“With the current energy deficit, it is even more urgent for the State to play a relevant role in the planning, regulation and management of the system,” says the Ministry of Energy. “When this model was created, three objectives were set: economic operation, security of supply and use of clean energy. Today none of these are being met: energy is expensive, we do not know if in the short term the system will be able to cope with the increase in demand and the matrix is not sustainable,” say the portfolio.

Pacheco himself pointed out this week, in a multitudinous workshop to prepare the energy policy, that “the complex situation that the country is going through in energy matters requires the cooperation of everyone and the State has the mission to channel, direct and channel the different and legitimate positions”.

It is already known that the Agenda will incorporate a more active role for the State, both in planning and regulation and in generating incentives for greater competition and the development of a more sustainable and diversified energy matrix, according to the ministry headed by Máximo Pacheco.

Does this turnaround bother companies? At least not to the Matte group. “I believe that the State should be more active, particularly in the articulation of the different visions,” says Bernardo Larraín.

Inspiration: Switzerland, New Zealand and Canada

Minister Pacheco and his energy team have been inspired by countries such as Switzerland, New Zealand and Canada to define a new energy model for Chile.

“After going through dilemmas comparable to our current situation, these are countries that have established a public planning model that has social legitimacy,” they explain in their portfolio.

In the case of Switzerland, its strategy has been defined since 1990 in its Political Constitution, which specifies that energy must be generated in a safe, economic, efficient and ecologically responsible manner. More than half of its electricity is hydroelectric and 40% is nuclear, but in 2011, in the wake of the Fukushima disaster, a program was established to end this type of energy by 2050.

Nelson Muñoz, country manager of the Australian company Origin Energy, says that in New Zealand, where three geothermal power plants operate, Maori communities own the rights to use the land and that, for example, they exploit the country’s geothermal potential by selecting the companies that operate on their land.

Canada is the world’s fifth largest producer of electricity, much of which is exported to the United States. 54% of its generation is hydroelectric and 31% is thermoelectric. Although it is a federal government, it is the provinces that define how and which energy source to exploit.