alternatives to include non-conventional sources of ... · page 2 contents 01 objective and scope...

Alternatives to Include Non-conventional Sources

of Renewable Energy in the Colombian Energy

Matrix

First International Conference on Renewable Energy

March 2017

Contents

01 Objective and Scope of the Study

02 Complementarity Analysis

03Proposal to Include Non-conventional Sources of Renewable Energy in the Colombian

Energy Matrix

04 Analysis of Proposal's Impact

05 Possible Questions about the Proposal

Alternatives to Include Non-conventional Sources of Renewable Energy in the Colombian Energy Matrix

Objective and Scope of the Study

1



Scope▪ To propose an alternative mechanism to promote the inclusion of FNCER that is sustainable and feasible, taking into account

the way the wholesale energy market operates, as well as existing barriers.

▪ Assessment of the impact of the inclusion of FNCER in the Colombian energy matrix.

Objective▪ To assess viable expansion mechanisms to include Non-conventional Sources of Renewable Energy (FNCER, for the Spanish

original) in the Colombian energy matrix by reviewing technical, economic and financial aspects as well as quantitative

balances of the cost/benefit relations.

Complementarity Analysis

2.1 Complementarity with resources and energy

2.2 Complementarity with demand

2.3 Complementarity with spot market price

2

Base Information


1 Measuring the resource

Information on real measurements of natural resources for the 2000-2015 period.

Solar photovoltaic (NREL):

Hourly measurements of:

• Direct irradiance

• Diffuse irradiance

Wind (Vestas):

Hourly measurements of:

• Wind speed at 80 m/s

• Atmospheric pressure

• Air temperature

• Wind direction

In addition, other resource measurements provided by SER Colombia member companies were taken as reference.

2Location

Guajira: 2 Solar and 1 wind power plants

Santander: 2 Solar and 1 wind power plants

✓ Land availability

✓ Location in latitude and longitude

3Penetration scenarios

Solar photovoltaic (MW) Wind (MW)

Best 300 2,000

Regular 170 800

Worst 50 300

Complementarity AnalysisMethodology


Definition of scenarios

• Records of UPME generation projects: • Best scenario • Regular scenario • Worst scenario

• Technical restrictions• Resource penetration in LATAM

Definition of hourly generation

• Solar: NREL SAM and generation data for SER Colombia member companies

• Wind: Approximation of Rayleigh capacity factor and generation data for SER Colombia member companies

Base information identification

Measuring the resource

• Solar (NREL): Direct and diffuse irradiance• Wind* (Vestas and NASA): Temperature, speed,

pressure and direction

Plant location• Land availability

• Latitude and longitude

• Water resource: Contribution in flow rates XM

• Solar resource: Direct irradiance NREL• Wind resource: Wind speed Vestas

Complementarity by resource

• Hydraulic power generation (XM)

• Solar and wind power generation

• Generation behavior (2000-2016)

Complementarity of generation

• Regulated and non-regulated market demand (XM)



Complementarity with demand

• Weighted monthly spot market price



Complementarity with spot market price

* Average wind speed at a heightof 80 m covering the area of interest. The analysis of the wind resource was conducted using “mesoscale atmospheric modeling”

Complementarity AnalysisWind and Hydraulic Energy


• Correlation between contributions in flow rates and wind speed:

-0.15

• Correlation between hydraulic and wind power generation:

-0.13

Contribution in flow rates vs. Wind speedWind power generation vs. Hydraulic power

generation

Behavior of wind power generation

Source: Data from XM, NREL, VESTAS; In-house preparation

Complementarity AnalysisWind and Hydraulic Energy


Contribution in flow rates vs. Wind speed - 2007Wind power generation vs. Hydraulic power generation -

2007

Contribution in flow rates vs. Wind speed - El NiñoWind power generation vs. Hydraulic power generation - El

Niño

Correlation 2009 – 2010

-0.48


-0.43


-0.53


-0.51


Correlation 2007

-0.39

Correlation 2007

-0.32

Complementarity AnalysisSolar and Hydraulic Energy


Contribution in flow rates vs. IrradianceSolar power generation vs. Hydraulic power

generation

Behavior of solar power generation

• Correlation between contributions in flow rates and irradiance:

-0.51

• Correlation between hydraulic and solar power generation:

-0.25Source: Data from XM, NREL, VESTAS; In-house preparation

Complementarity AnalysisSolar and Hydraulic Energy


Contribution in flow rates vs. Irradiance – 2007Solar power generation vs. Hydraulic power generation -

2007

Contribution in flow rates vs. Irradiance - El NiñoSolar power generation vs. Hydraulic power generation - El

Niño


-0.41


-0.79


-0.71


0.001


Correlation 2007

-0.29

Correlation 2007

-0.63

Complementarity AnalysisNon-Conventional Renewable Energy and Hydraulic Energy


Hydraulic power generation vs. Renewable energy Solar power generation vs. Hydraulic power generation (2007)

Renewable power generation vs. Hydraulic power generation - El Niño

• Correlation between renewable and hydraulic energy(2000-2015):

-0.16


Correlation 2007

-0.40


-0.50


-0.43

Complementarity AnalysisRenewable and Hydraulic Energy


Hydraulic power generation vs. Renewable energy Solar power generation vs. Hydraulic power generation (2007)

Renewable power generation vs. Hydraulic power generation - El Niño

• Correlation between renewable and hydraulic energy(2000-2015):

-0.16


Correlation 2007

-0.40


-0.50


-0.43





2

Complementarity AnalysisRenewable Energy and Demand


Demand and wind

energy

Demand and solar

energy

Wednesday, August 21, 2013 Sunday, August 24, 2013


METER CORRELACIONES

Correlation

0.42

Correlation

0.53

Correlation

0.07

Correlation

0.03

Complementarity AnalysisRenewable Energy and Demand


Demand and non-conventional

renewable energy


METER CORRELACIONES

Wednesday, August 21, 2013

Correlation

0.1

Sunday, August 24, 2013

Correlation

0.06





2

Complementarity AnalysisRenewable Energy and Spot Market Price


Hydraulic power generation vs. Spot market price Total generation (H+S+E) vs. Spot market price


Proposal to Include Non-conventional Sources of Renewable Energy in the Colombian Energy Matrix

3

ProposalObjectives


2. Maintain the reliability of the national electricity system

4. Have more efficient dispatch reflected in market prices.

3. Increase market competition with the introduction of new agents.

5. Promote competitive centralized, anonymous energy supply contract processes that reveal efficient prices.

6. Reduce the deficit in the contract market (those that provide coverage in price and quantity).

7. Make it possible for sellers to sign long-term contracts.

1. Provide a proposal that is sustainable and harmonious with the current market

ProposalGeneral Aspects


Centralized anonymous mechanism

Product - Medium EnergyEnergy supply contracts at

a fixed price(20 years)

Pass-through to regulated users

Completely transfer the contract price

(α factor does not apply)

Energy sales auction In addition to the reliability charge

Generators • All technologies • New power plants

Supply• Medium energy (MWh/year) • Fixed price (USD/MWh)

Firm Energy Obligations• Price takers• 20 years

Energy purchase auction

Sellers

Phase 1: Regulated and non-regulated users participate voluntarily

Phase 2: The supply surplus is allocated to the regulated demand at pro rata

Supply• Amount of energy (MWh/year) • Fixed price (USD/MWh)

Other aspects• Currency:

• Indexation:

• Dispatch:

ProposalSales Auction – Mechanism to Set Prices and Allocate Amounts


Marginal price Pay - As - Bid

Blind auction

Price formation mechanism Amounts allocation mechanism

Who should pay the demand? Weighted average for the amount of energy of the prices of projects awarded at the auction.

Source: In-house preparation Source: In-house preparation

ProposalPurchase Auction – Mechanism to Set Prices and Allocate Amounts


English auction

Closing price of the energy sales auction

Price resulting from an English auction

Source: In-house preparation

ProposalLiquidation Mechanism


Source: In-house preparation

¿PContract i <= PSpot i ?

ProposalLiquidation Mechanism


Generator

With average annual energy commitment

When GReal >= GCommitted

When GReal < GCommitted

Probability of occurrence

Generator Trust >0

When ~PC>=~PB

Generator Trust <0

When ~PC<~PB

56.2%

0.0%

18.7%

25.1%

Plant MW USD/MW

S1 75 49.5

S2 75 45.7

S3 75 41.0

S4 75 43.9

E1 500 56.5

E2 1,500 43.5

Generator Trust >0

When ~PC>=~PB

Generator Trust <0

When ~PC<~PB

Results

Surplus for the generator

Deficit to be covered by the demand

Surplus for the demand

Deficit to be covered by the generator

Analysis of Proposal's Impact

4.1 El Niño phenomenon and the Apagar Paga program

4.2 4.2 Contributions to the system's reliability

4.3 Coverage of demand

4



4.2 Contributions to the system's reliability


4

Analysis of Proposal's impactEl Niño Phenomenon


Exhibition AreaGeneration

GWhGoal

Real without renewable energy

6,940 5%

Worst scenario 7,082 2.05%

Regular scenario 7,418 Not needed

Best scenario 7,820 Not needed

1 Generation

July 2015-June 2016 July 2015-June 2016

Without renewable energy With renewable energy

9,327 GWh 5,424 GWh

2,209 1,272

Million USD Million USD

938Million USD*

2 System

Impact on the Apagar Paga program

Energy purchases

Energy purchases $$

Savings$$

Source: Data from Mining Ministry, XM, NREL. VESTAS, In-house preparation

*Does not include the FNCER generation cost (USD 204 million)

Net savings: USD 734 million





4

Analysis of Proposal's ImpactContribution to the System's Firm Energy


36.07 (GWh)Jan 1, 2010

0.51 (GWh)May 27, 2008

YearAnnual savings

(in USD millions)

2008 USD 37.6

2009 USD 37.6

2010 USD 37.7

2011 USD 38.5

2012 USD 39.2

2013 USD 39.5

2014 USD 40.0

2015 USD 40.4

Savings (2008 – 2015): USD 311 million


4.21 (GWh)Aug 3, 2010

Analysis of Proposal's ImpactContribution to the System's Firm Energy

48.13 (GWh)Jan 1, 2010


Source: Data from XM, our own preparation

Firm energy increase 33.4%

YearAnnual savings

(in USD millions)

2008 USD 37.6

2009 USD 37.6

2010 USD 37.7

2011 USD 38.5

2012 USD 39.2

2013 USD 39.5

2014 USD 40.0

2015 USD 40.4

Savings (2008 – 2015): USD 311 million





4

Analysis of Proposal's impactCoverage of Demand


Hydraulic power generation vs. Spot market price

~22%

Balance 2010 - 2015

Exhibition Area (Millions of USD)

Best 567.9

Regular 240.6

Worst 93.9

Exposed demand





~22%~20%

Exposed demand

Balance 2010 - 2015


Best 567.9

Regular 240.6

Worst 93.9





~22%~20%

~17%

Exposed demand

Balance 2010 - 2015


Best 567.9

Regular 240.6

Worst 93.9





~22%~20%

~17%

~10%

Exposed demand

Balance 2010 - 2015


Best 567.9

Regular 240.6

Worst 93.9


Possible questions about the proposal

5

Possible Questions about the ProposalDoes dispatch of medium energy contract power plants on the base affect the revenue of other generators?


Operation start-up of new installed capacity

Start-up of power plants whose daily price supply are usually lower than those they marginalize (which is equal to being dispatched on the base) do not show a spot price reduction, therefore generator revenue has not been affected


Possible Questions about the ProposalWhy Physical Dispatch?


Physical dispatch

It ensures that dispatch power plants are the most competitive ones

These power plants have the lowest levelized cost of energy (LCOE)

It avoids distortions in price formation

International experience suggests physical dispatch

Financial dispatchIt is possible that contracts are awarded to those that have a more depreciated portfolio

Possible Questions about the ProposalIs There a Need for an Additional or More Explicit Policy Signal to Implement This Mechanism?


Whereby the basis for electric power public service provision and a competitive market in the Colombian electricity sector are provided

Law 142 and 143 of 1994

Whereby a general system was created to promote the Rational and Efficient Use of Energy and inclusion of alternative energies (URE)

Law 697 of 2001

Whereby the sales of energy generated by wind, biomass or agricultural resources are exempt from income tax for a 15-year term.

Law 788 of 2008

Law 1715 of 2014

Kyoto ProtocolMontreal Protocol

Law 629 and 688 of 2000

Advance towards sustainable or low-carbon growthProtect and assure sustainable use of the natural capital and improve environmental quality and governance

National development plan

2014-2018Whereby the goal is to promote the development and use of renewable energy sources and boost FERNC in the domestic energy market through various instruments

There are enough signs of policy to implement a regulatory framework that permits the participation of FNCER in competition with other technologies

Contact:

Dafna Siegert

Executive Director EY

Telephone number: +57 (1) 482-1035

[email protected]

Mauricio Gómez Machado

Consultoría Regulatoria Partner

Telephone number: +57 (320) 489-9226

[email protected]

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Consultoría Regulatoria

About Consultoría Regulatoria

Consultoría Regulatoria SAS is an investment bank specializing in the public service, energy and combustible gas sectors. Its main activities include providing consultation services to stakeholders in these sectors regarding legal and regulatory issues, allowing its clients to make informed decisions, with realistic impact estimations resulting from qualitative and quantitative analyses of legal and regulatory provisions in the aforementioned sectors.Its partners have over 25 years of experience in successfully structuring power generation infrastructure projects, mining, combustible gas, rural electrification, ESCOs, and others. Additionally, in the design of electricity and gas markets and establishing regulatory provisions to include non-conventional renewable energy in the energy matrices of countries like Argentina and Mexico.Consultoría Regulatoria is prominent for being the strategic partner of several companies in the sectors of its competence, supporting strategic decisions and assuming challenges posed by the legal and regulatory dynamics of its clients

mailto:[email protected]

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