The Southern Cone of South
AmericaExperiences and Recent evolution
Juan Luchilo – CAMMESAAPEx Conference
October 2004Leipzig - Germany
South America - Experiences and Recent evolution
Global Information – Markets and Systems
Energy integration – gas & electricity
Argentina Crisis – Impact
Expectations - Concerns
Deregulation of the Electric Sector
BRAZIL 1998
ARGENTINA 1992
PARAGUAY ?
CHILE 1982URUGUAY 200?
BOLIVIA 1996
Regional Market - Basic Data
Regional Market, 6 countries:
(Argentina, Bolivia, Brazil, Chile, Paraguay, Uruguay)
Population: about 250 M
Installed Capacity: 125 TW
Annual Energy Consumption: 500 TWh
Energy Consumption
Bolivia0.7%
Argentina18.5%
Brazil73%
Chile8.4%
Paraguay0.5%
Uruguay1.4%
Different resources in each country (Brazil, Uruguay, Paraguay mostly hydro; Argentina, Chile, Bolivia, hydrothermal) and level of deregulationLong distances between main loads and from resources to load; Barriers between countries
natural (mountains, rivers) political => openness to integrate marketstechnical and economical viability=> distances, electrical issues
Opportunities => complementarity of demand and hydro availability, gas and electricity integration
Integration - Situation
Energy Integration - Evolution
Before 1997 => Integration related with binational hydro power plants; agreement between countriesArgentina – Uruguay - Salto Grande (1890 MW)Brazil – Paraguay – Itaipú (12600 MW)Argentina – Paraguay - Yacyreta (1800 MW)
Only small gas pipelines linking countries
Energy Integration - EvolutionAfter 1997=> Integration related with market opportunities=>
competitive market, gas availability and new capacity in Argentinageneration needs at northern Chile complementarity with Brazil and Uruguay (firm capacity for dry hydro years)Bolivia as a major gas player
Electricity or/and Gas?As well as electricity, gas has also become a product exchange in the south cone:
Brazil imports from Argentina and Bolivia, and transform part locally in electricityChile imports from Argentina, to fuel its new generation plantsUruguay is on the same way soonArgentina began to import from Bolivia in 2004
There’s a competition whether to transport gas and transform it afterwards in electricity or to produce electricity and then transport it through wires; economic viability is related with volume requirement and scale
High Loads
Hydro Resources
Gas Resources
Energy Links – Gas & Electricity
Electroducto Argentina Chile
Electricity link Argentina-Brazil
Electricity link Argentina-Uruguay
GasoductoAtacama y Norandino
Gasoducto Gasandes 7-8
Gasoducto del Pacífico 1.5-9
Gasoducto Bolivia-Brasil 30
Electricity link Argentina-Paraguay
Resources Optimization
Share reserves (seasonal,
hourly)
Increase reliability,
quality
Impacts (Argentina – Brazil)
Some Benefits
It requires adequate technical coordination between the interconnected systems
Austral summer 2002 => devaluation and political crisis
Since July 2002 => conditions begin to stabilize; relative normalization of the behaviour of economy
2003/4 => strong economy recovery
Macroeconomic Changes
0
0.5
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1.5
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u$s
/MW
h
$/u$s
Evolution of exchange rate=>Increase of industrial demand due to greater competitiveness to export and import substitutionJan02-oct04 Exchange rate => 200%Inflation => about 50%
Tariffs to end consumers => social impossibility to increase tariffs due to economic crisis and people impoverishment
Pesification of natural gas, energy and capacity prices on the WEM
Increase of imported fuel and maintenance costs
Uncertainty related with exchange rate evolution and expected performance of the generation units
After 2003 =>increase in demand (+8%)
Electricity Sector Scenario
Variación % PBI anual vs. Demanda
-15%
-10%
-5%
0%
5%
10%
15%
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
PBI Demanda
% GDP vs Demand
Variation - Annual Demand vs. GDP
-15%
-10%
-5%
0%
5%
10%
15%
-15% -10% -5% 0% 5% 10%
% GDP annual
% A
nn
ual
Dem
and
2002 vs 2001 => -2% var Dem para
-11 % var GDP
2003 vs 2002
Estimated 2004 vs 2003
% GDP vs Demand
Ev de la potencia máxima registrada anual
9035 93251010410213
112431177612269127301375414061
134811435914732
10501050 2200
22002200
7000
8000
9000
10000
11000
12000
13000
14000
15000
16000
17000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
MW
Local = 5700 MW
Annual Peak Demand
EXP = 2200 MW
Installed Generation Capacity
Potencia Instalada MEM
0
5,000
10,000
15,000
20,000
25,000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
MW
HI
CC
TG
TV
NU
WEM capacity: 1992 = 13267 MW
2004 = 23284 MW ~70% Increase – Gen => 9700 MW
This scenario led to severe difficulties, as regards:
Lack of gas availability for power plants
Unusual alternative fuels requirement => increase of operative costs
Inability to cover the energy costs with the defined tariffs
Risk of energy crisis in 2004 => due mainly to fuel availability combined with a hydro dry year
Electricity Sector Scenario
Some decisions Additional payments for generators that
commit their availability with natural gas Agreement with Brazil to import energy
during winter Agreement with Venezuela to import a large
amount of Fuel Oil to replace the lack of natural gas
Cuts on gas exports (Chile) if needed in order to avoid restrictions to the local demand
Gas imports from Bolivia Gradual increases in gas prices (from 0.4 to 1.0
u$s/MBtu (may 04-jul05))
Slight increase in WEM tariffs only to industrial consumers; no increases to residential consumers
Crisis - Decisions
Exchanges Brazil - Argentina - MW avg
-600
-400
-200
-
200
400
600
800
1,000
1,200
Ene-0
0
May
-00
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Ene-0
3
May
-03
Sep-0
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Ene-0
4
May
-04
EXPIMP
Results -Argentina – Brazil link
Brazil crisis
Argentina crisis
ENERGY PRICE EVOLUTIONENERGY PRICE EVOLUTION
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u$s
/MW
h
0
0.5
1
1.5
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2.5
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3.5
4
Monomial $
Monomial u$s
rate $ / u$s
Energy Price EvolutionEnergy Price Evolution
Wem Average Monomial Prices
48.8
35.731.8
29.7 28.625.3 24.4 26.1 27.6
23.4
28.9
38.7
54.0
63.0
12.918.0 21.0
10.8
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
$/M
Wh
Competitiveness of the market and efficiency of generation units provoked a fall in spot prices of about 50% 48.8 $/MWh1992 to 23.3$/MWh2002; increase in M&O costs and use of liquid fuel and gas costs => 54.0 $/MWh2004
Winter was managed, operating the system in fairly good supply conditions ….. but winter was mild and hydrology wasn’t so bad
Operation costs soared due to increase of natural gas price and usage of liquid fuel and imports
Stabilization fund exhausted since jul-03; debt of the fund with generators of about 1200 M$ (6 months of payment).
Operative inefficiency due to unavailability of natural gas
Due to Argentina’s role in the region, the situation affected the operation in Chile and Uruguay generating stress between governments in the peak of the crisis (march-
may)
Results
Macroeconomic issues (like devaluation) affect parties => requires dynamic adaptation to maintain in the short term operability and in long term commercial viability
Increase of tariffs required to gradually normalize situation. The whole situation seems very difficult to handle politically
Demand increase along with default of the stabilization fund may lead to a significant increase of the deficit of supply risk
Medium and long term viability and the lack of new investments in generation is then one of the major concerns, until the regulatory framework may be adapted and political solutions adopted.
Expectations - Concerns
From CAMMESA’s point of view
Be flexible enough to implement changes on rules and keep on running the system and the Market, in a delicate environment.
Study and analyse scenarios to identify and anticipate risks, in order to help in the search of solutions.
Next steps
Quality, Technology & TransparencyFor an Electrical Market without frontiers
¡Thanks for your attention!
Leipzig, October 2004
Doubts => [email protected] More info => www.cammesa.com.ar