Market IntegrationThe Southern Cone of

South AmericaExperiences

Juan Luchilo – CAMMESAAPEx 2003 ConferenceCartagena, Colombia

Regional Market - Basic Data

Mercosur Market, 5 countries:(Argentina, Brazil, Chile, Paraguay, Uruguay)

Population: about 240 M

Installed Capacity: 120 TW

Annual Energy Consumption: 450 TWh

Regional Market - Basic Data

Different resources in each country (Brazil, Uruguay, Paraguay mostly hydro; Argentina, Chile, 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 issuesOpportunities => complementarity of demand and hydro availability, gas and electricity integration

Energy Conssumption

Argentina16%

Brazil73%

Chile9%

Paraguay0%

Uruguay1%

Deregulation of the Electric Sector

BRAZIL 1998

ARGENTINA 1992

PARAGUAY ?

CHILE 1982URUGUAY 200?

Links - 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)

Links - Evolution

After 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)

Argentina – Chile => new 345 kV link from Salta to Northern Chile; thermal generation built specifically for that purpose; isolatedArgentina - Brazil (2000 MW); 2 back to back DC converters (50/60 HZ) built – firm capacity contractsArgentina – Uruguay – firm capacity contracts (400 MW) using existing link

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 soon

There’s a competition wether 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

GasoductoAtacama y Norandino

Gasoducto Gasandes 7-8

Gasoducto del Pacífico 1.5-9

Gasoducto Bolivia-Brasil 30

Electricity link Argentina-Brazil

Electricity link Argentina-Uruguay

Electricity link Argentina-Paraguay

Resources Optimizatión

Share reserves (seasonal,

hourly)

Increase reliability, quality

Impacts (Argentina – Brazil link)

Some Benefits

It requires adequate technical coordination between the interconnected systems

Results -Argentina – Brazil link

Exports to Brazil from Argentina - MW - % Local Demand

0

500

1000

1500

2000

2500

Ene

-00

Mar

-00

May

-00

Jul-0

0

Sep

-00

Nov

-00

Ene

-01

Mar

-01

May

-01

Jul-0

1

Sep

-01

Nov

-01

Ene

-02

Mar

-02

May

-02

Jul-0

2

Sep

-02

Nov

-02

Ene

-03

Mar

-03

May

-03

Jul-0

3

Sep

-03

Nov

-03

0%

5%

10%

15%

20%

25%

Exp Brasil MAX % Local Demand

Increase volatility in Argentine spot price (2000 MW firm capacity delivered if Brazil needs it; Argentina is a 10000 MW system)

Impacts

Precios Medios Argentina

0

5

10

15

20

25

30

35

40

Ene Feb Mar Abr May Jun Jul Ago Sep Oct Nov Dic

Meses

$/M

Wh

ZONA DE VOLATILIDAD

PRECIOS PARA INTERCAMBIO NULO

PRECIOS PARA INTERCAMBIO MAXIMO

PRECIO PARA INTERCAMBIO VARIABLE

Macroeconomic issues (like devaluation) affect

parties => requires dynamic adaptation to mantain

in the short term operativity, and long term

commercial viability

Lack of regulatory compatibility

Technical and economical complexity to

interconnect countries

Concerns

Quality, Technology & TransparencyFor an Electrical Market without frontiers

¡Thanks for your attention!

Colombia, October 2003

Doubts => jluchilo@cammesa.com.ar More info => www.cammesa.com.ar