ELECTRICITY HIGHWAY: WHAT WILL HAPPEN BETWEEN 2014 AND 2019?

Jorge Rosenblut, President of Endesa Chile.

“The current transmission infrastructure supports the 2012 electricity demand with virtually the same “steel” as in 2007, given that the system’s demand has grown nearly 14% in the same period”.

Last Thursday, the President of the Republic, Sebastián Piñera, signed the Electricity Highway Bill, which is about to be submitted to Congress. This is a necessary initiative to help solve the current problems affecting the Chilean electricity sector, especially in transmission.

It is important that this project be able to help us get a more secure, clean, independent and cost effective electricity grid in order to sustain the country's progress towards development, as the President has indicated.

It is expected that adjustments will be made in Parliament to achieve the best possible project and where it will be essential to make substantial progress in areas such as: environmental processing that incorporates greater certainty at the time of bidding for the transmission works; and a modification of the remuneration mechanism of the transmission system in which the electricity transport toll will be paid by those who benefit from having a more secure system (the demand).

All these adjustments will make this initiative serve as a catalyst for generation projects of greater quality and quantity. As stated by the Minister of Energy, Jorge Bunster, the Electricity Highway and other transmission solutions will require a great effort to render physical and operational solutions for the system by 2018 or 2019, in the best case.

But what will we do between 2014 and 2019?

According to the recent report on the node prices of the National Energy Commission, in 2021 the demand of the Central Interconnected System (SIC) will grow by 70%, consistent with the development of Chile. And more than half of that growth will come from regulated customers. The same report reveals that this growth will be more explosive in the northern part of the system, which will nearly double its demand in just six years. This will not happen if there is no power in the area, which lacks at least 1,000 MW.

We are facing a double challenge. On the one hand, the necessary investments in new generation projects would be arriving late to meet the growth in demand, as they not only have to comply with environmental and administrative processing, but their delay could be greater due to the profuse litigation. In addition, the system has already begun to experience the effects of a problem just as serious and urgent, as indicated by the authority of the sector: the electricity transmission restrictions in the SIC.

The current transmission infrastructure supports the electricity demand of 2012 with virtually the same "steel", as in 2007, under circumstances that the system’s demand has grown nearly 14% in the same period.

Today we see that the transmission in the SIC is not an "interconnected" system, but a "semi-connected" system, which is decoupled in three zones: north from the Pan de Azúcar substation (La Serena) to the Diego de Almagro substation (Chañaral), from the Ancoa substation (Talca) to the south, and the third between these two areas. The bottlenecks are located in the first two which are stressing the system and disrupting the efficient flow of energy throughout the SIC.

According to our analyses, which have been sent to the Authority and to the CDEC-SIC, this situation will worsen in 2014-2015, when growth in demand will take this lack of power to critical levels, with saturations of up to 80% in the lines going north. This will mean, for example, that the hydroelectric park in the central and southern zones, which total 5,291 MW of installed power and represent 77% of the system’s maximum demand, may not be able to contribute to lowering prices in the northern zone of the SIC.

Will we be left in the dark? Probably, not. But the fact is that the delayed entry of new technologically efficient projects, such as hydroelectric or coal, coupled with the generation of "islands" of transmission, will increase the use of more expensive and more contaminating technologies, such as diesel, and will lead to an increase in the operating costs of the system, an increase in the probability of outages, and a weakening of the system to withstand drought or other problems such as long-term outages in major plants.

In other words, the cost of energy will continue increasing, and the electrical system weakening and becoming more insecure, which does not seem reasonable in view of the current values of electricity in the country. By 2017 the cost to supply the needs of the area north of Nogales alone (substation near La Calera) will exceed $500 million annually due to greater diesel generation.

These are facts, not opinions. The scenario is complex and the task is not easy. How can we improve it progress?

The country has two powerful sources of renewable energy: the Non-Conventional: wind, solar, and geothermal, as well as the conventional: hydropower. Both complement each other, but only the latter meets both objectives: to be renewable and economically efficient, that is water, Chile’s renewable, abundant, competitive, and clean “oil”.

It is imperative that we move forward in the development of these alternatives and we unblock the development of projects that help to have a safer and cleaner energy matrix.

Chile has a strong business sector with companies capable of undertaking this task. But there are challenges. Parliament faces a structural discussion for the country’s energy development, so it is essential that the healthy debate begin to take place without losing sight of the fact that we have little time.

The energy issue is a national subject. We have to be able to progress decisively to meet the presidential aspirations that most of us share: a clean, competitive, abundant, and secure energy matrix. These are my thoughts.