International Experience in Market Testing of Power Supply Agreements Ruperto P. Alonzo.
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Transcript of International Experience in Market Testing of Power Supply Agreements Ruperto P. Alonzo.
![Page 1: International Experience in Market Testing of Power Supply Agreements Ruperto P. Alonzo.](https://reader035.fdocuments.us/reader035/viewer/2022062413/5a4d1b587f8b9ab0599aa227/html5/thumbnails/1.jpg)
International Experience in Market Testing
of Power Supply Agreements
Ruperto P. Alonzo
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Competitive Selection Process• Early pronouncements deal with opening of
NPC-SPUG areas to private sector• DC-2004-01-001
• NPC-SPUG areas declared open for private sector participation
• Competitive process to be used to select one or more New Private Providers (NPPs) to supply power to area
• DU options in managing competitive process—– Use a Transactions Advisor– Let NPC-SPUG assign its PSA to NPP through a competitive
process– Let DU manage competitive selection process by itself
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Competitive Selection Process• ERC Resolution No. 11, Series of 2005
– DU/EC’s proposed PSA must specify expected output the NPP shall provide
– Aggregation – a group of ECs may conduct a joint CSP to select a single NPP to supply electricity in their designated areas
– After two failed biddings, EC may enter into negotiations with any interested party
• ERC’s Draft Rules Governing PSAs (2013) also stress CSP– No mention of aggregation, though– Still going through public hearings and consultations?
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Country Experiences in CSP in PSAs• Available literature relevant to PHL is mostly
about Latin America• Main objectives:
– Secure lowest long-term cost of power for consumers
– Attract new generation capacity• Countries adopting auctions may differ
widely in terms of:– power industry structure– regulatory regime
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Key Attributes
hydro thermalBrazil 1998 75% 25% mandated 31Colombia 1996 67% 33% mandated 1Chile 1982 40% 60% mandated 3Peru 1992 60% 40% mandated 3Spain 1998 15% 55% mandated 11PJM 1997 0% 100% voluntary 7New England 1996 0% 100% voluntary 4Mexico 1992 80% 20% mandated 8Panama 1997 45% 55% mandated 2
Year of 1st reform
Jurisdiction Capacity mix Auction is: Total Auctions
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Brazil – Industry Profile• Largest consumer of energy in South America.• Large GOCCs dominate the electricity sector.• ~ 27% of generation assets with private investors. • Two large grids and many smaller systems in isolated
regions, most transmission lines controlled by federal and state governments.
• As of 2007, 64% of Brazilian distribution assets are with private sector companies.
• Hydropower is the main source of electricity.o Accounts for 90% of the national power generation.o Accounts for about 70% of installed capacity.
• Total installed electricity capacity in 2012 was 116,835 MW• In 2011, Brazil produced enough energy to cover 90% of
its demand.
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Brazil – Aggregation and Auction• Mandatory aggregation for those participating in auction
– DUs aggregate their demand• Mandatory auctioning only for captive market
– Designed by government (MME ~ DOE)– Regulated by government (Aneel ~ ERC)– Private not-for-profit auction facilitator (CCEE ~ PEMC)
• 3 kinds of auctions – Auctions for contracts for energy from existing plants
• Delivery in the following year• Duration is 3 to 15 years
– Auctions for contracts for energy from new plants• Delivery in three or five years• Duration is between 15 to 35 years• 2 public auctions every year
– Adjustment contract auctions• 4 times a year• Delivery 4 months ahead
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Chile – Industry Profile• Total installed electricity capacity = 15.94 GW (2010)
– Thermal 65%, hydro 24%, other renewables 1% to 4%.• Four regional power systems
o SIC with 11,600 MW serves the populous central region including main consumption centers
o SING with 3,700 MW serves the major mining and minerals processing operations
o Aysén and Magallanes systems with joint 150 MW serve small and isolated remote area power systems
• There is no integrated transmission system spanning the entire country due to geography and the distribution of electricity generation.
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Chile – Aggregation and Auction• Aggregation is optional• No aggregation facilitator• Auction is mandatory• Auction regulator is government – CNE (~ ERC)• Distributors can auction contracts up to 15 years
at a fixed price• Auction is conducted at the discretion of the
distributors provided they be 100% contracted at all times, at least for the next 3 years
• The regulator sets a price cap for the auction
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Colombia – Industry Profile• Total installed electricity capacity in 2010 was 13,531
MW with hydro at 68% and fossil fuels at 32%.• The electricity sector is unbundled into generation,
transmission, distribution, and commercialization since sector reforms were carried out in 1994.
• About half of the generation capacity is now privately owned although private participation in electricity distribution is lower.
• There are 36 active generation companies but the largest one controls 1/5 of generating capacity.
• The transmission grid is owned by different corporations as well but 70% is controlled by one company – ISA, 59% of which is government-owned.
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Colombia – Aggregation and Auctioning• No aggregation• Auctioning is optional• Auctions are conducted only at discretion of the
regulator and facilitator – CREG. • Primary auction is for Firm Energy Obligations• Firm Energy Obligations:
o Option contracts that commit generating companies to supply contracted amounts of energy at pre-determined scarcity price whenever the spot price in the electricity market exceeds the scarcity price The product being auctioned is the option contract backed by
a physical resource certified as being able to generate energy when the scarcity conditions are present.
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Panama – Industry Profile• As of 2009, total installed electricity capacity was
1,789 MW: thermal at 51% and hydro at 49%• Electricity demand is dominated by commercial
sector. • It is a net exporter of electricity• Before 1998, there was one vertically integrated
electricity utility, the IRHE• In 1998, IRHE was restructured into 4 generation
companies, 3 distribution companies, and 1 transmission company
• Only the transmission company remained in the state’s hands (ETESA)
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Panama – Aggregation and Auctioning• No aggregation• Auction is mandatory
o The government obligates distributors to buy 100% of their demand, and generators to offer all available power in the contract market.
• No aggregation facilitator• Use of government-owned auction regulator
(ETESA) is optional; DUs may contract energy through public bidding directly with the generators
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Assessment• Chile
– Due to much decentralization, contracts not standardized
– Objectives of low prices, high auctioned demand coverage not achieved
• Brazil – New capacity auctions have attracted interest of
national and foreign investors– Problems in obtaining environmental clearance
licenses have led to fewer hydro projects joining auctions
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Assessment • Colombia
– Auction system allows bidders to see when their capacity becomes pivotal (largest genco owns 25% of total capacity)
– Sealed-bid auction recommended • Panama
– Structure of market is similar to PHL – experience with auction of renewables may be
worth looking into
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Conclusions (from 2011 World Bank Study)
• Risks with auctions– In markets that are not fully functional– Where institutions are not strong enough to support any
formal procurement schemes– Where contract sanctity is often challenged
• Auctions help to – Increase transparency in procurement process that reduces
risks– Promote competition – Provide efficient outcomes that deter future challenges even
as political scenarios change– Establish objective, market-driven criterion for regulatory
issue of pass-through of generation costs to utility-franchised market
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Some Useful References • Maurer, L.T.A. and L.A. Barroso, Electricity
Auctions: An Overview of Efficient Practices. World Bank, 2011
• Moreno, R., et al., “Lessons from Five Years of Experience in Energy Contract Auctions in South America.” Presented at the 33rd IAEE International Conference, Rio de Janeiro, Brazil, June 6 - 9, 2010.
• http://www.reegle.info/policy-and-regulatory-overviews
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Thank you!
Tel. Nos. +63 (2) 9279686 loc. 239Telefax Nos. +63 (2) 9205465
Website: www.upecon.org.ph/epdp Email: [email protected]