Changes and Trends in Chilean Power Market Prepared for: April 3 rd 2019
The Chilean NES: National Electricity System 2
Rapid Integration of Renewable Energy ✓ 20% daily generation can come from wind and solar – less than 10 countries Wind Gas have exceeded Solar ✓ Bloomberg ranked Chile as the #1 place CO 2 intensity to invest in renewable energy out of 103 developing countries Coal ✓ Important PPA opportunities with mid and large consumers between 2021 and 2028 North of Chile - Nov 2018 Hou Hour of of Day ✓ Electricity system is constrained & very In the north of Chile up to isolated 40% generation is now coming from wind and solar . 3
Decarbonization Policy • Chile currently has a carbon tax set to 5 $USD per ton of CO 2 emitted imposed on generation facilities with a capacity of 50 or more MWt • In the National Determined Contributions (NDC) published by Chile in 2015, Chile committed to reduce it’s CO 2 emissions per GDP unit to 30% below the 2007 levels by 2030. • In third BUR states, a shadow prices of carbon between 20 and 43 $USD per ton of CO 2 are presented as sufficient to meet Chile’s current greenhouse emission goals. • Decarbonization working group under way 4
Coal retirements: international benchmark Countries with coal-intensive (as % of total generation in 2016 or 2017) energy mix 42 GW Coal-based power generation 27 GW 40 GW 4.8 GW Countries committed not to generate with coal after a certain date. 4.3 GW years Average age of coal units Netherlands : In 2015, German companies built 2 plants with 2.6 GW capacity. 2030 Canadá: CO 2 emission standard was defined as the last year coal can be used for power generation. Source: Inodú. (2018). Estudio de variables ambientales y sociales que deben abordarse para el cierre o reconversión programada y gradual de generación eléctrica a carbón . Prepared for the Ministry of Energy of Chile. 5
Hydrological conditions remain below average GWh Scarcity Hydrological Year GWh Hydrological Year 6
Changing Flexibility Policy The 2018-2022 energy policy roadmap establishes the need to: 1. Make regulatory changes which will allow the Chilean electricity system to meet its future flexibility requirements and continue to incentivize the integration of renewable energy. 2. Make changes to capacity payments regulation in order to recognize the contribution of new technologies, such renewable energy generation. 7
Rise of the Middle Market Trends: Changes in Net Load Dynamics The need for intermediate generation capacity doubles or triples. Rise of a market segment where parameters other than variable costs are key. 8
Two types of flexibility needs: balancing & variability Net Load Balancing Variability 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 Hour of day 9
Increased Ramp Requirements and Regionalization Trends: Changes in Net Load Dynamics Current peak demand metering period Integration of VRE sources increases capacity at peak load hours and net load ramps. Peak net load hours occur earlier in the day and last longer with VRE integration. 10
3-hour ramp growth to 5500 MW by 2026 Up to 5500 MW 3 hour ramp in 2026 A 7000 MW 3 hour ramp in 2035 estimated in ISO Study 11
Deviations from Forecasted Net Load Trends: Deviations in Real-Time Operations from Day-Ahead Plans 2017 Need for balancing services and fast startup units to absorb deviations. But , greater VRE capacity does not necessarily translate into higher forecast errors: Depends on the location of new investments. Depends on the incentives for accurate forecasting. 12
Changes and Trends in Chilean Power Market Prepared for: April 3 rd 2019
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