BARRIERS TO ENERGY DEVELOPMENT IN SOUTH AMERICA Presentation by Sergio Ugarte, Northeastern University, Former Vice Minister of Energy Of Peru South America: Promoting Regional Integration CLAI, George.
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BARRIERS TO ENERGY DEVELOPMENT IN SOUTH AMERICA
Presentation by Sergio Ugarte, Northeastern University, Former Vice Minister of Energy Of Peru South America: Promoting Regional Integration CLAI, George Washington University - OAS March - 2002
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South America - Heart of Darkness ?
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Energy Sector Policies Regional Objectives
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To transform South America into a developed Region, with standards of living which reflect the wealth of the land and the potential of its population
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Energy Policy: The Value of Energy
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A necessary condition, although not enough for social and economic development
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Factor in competitiveness for the cost of goods and services
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Impact on Balance of Payments
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Sustainable Development Trilogy ENERGY ECONOMY
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ENVIRONMENT
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Energy Policies: The Challenges
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Strategic:
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Reduce the regulatory, thecnical and institutional restrictions that limit the development of efficient interconnections
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Economic:
• • •
Design of a Regional Energy Market Improve overall efficiency to final user Design features of a Regional Transmission and Exchange System
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Social:
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Enormous differences: in order to understand the Region, dispersions are just as important as median values.
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The sufficient and economic energy supply is part of the Region Security.
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Power : How far are we?
Electrification Factor Uruguay Argentina Chile Brasil Venezuela Perú Bolivia 97.9% 95.2% 94.1% 93.0% 91.4% 72.2% 55.8% 03-19-2002 8
Current Situation:
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Until the 80’s, strong influence and participation of the state.
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Last decade marked by profound reforms in almost all the region (decentralization, deregulation and privatization)
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Mature and well established energy sectors, independent regulatory institutions, mostly privately power companies.
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Interconnections are happening…but slowly
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Current Situation (continuation): Two well differentiated sub-regions in South America:
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Southern Sub-Region (Argentina, Bolivia, Brazil, Chile, Paraguay and Uruguay) with increased degree of integration.
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Northern Sub-Region (Ecuador, Colombia, Peru and Venezuela), that must perfect their interconnection agreements.
Peru and Bolivia are the natural hub for the whole regional integration. Their alliance and partnership is needed.
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Current Situation (continuation):
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Balance between energy sources
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Power generation: 80% from hydro sources
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Hydropower complementarity throughout the region.
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Expectance in new natural gas fields in the region
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Gas supply is rigid, due to the existence of oligopolies or natural monopolies and its demand is not yet well developed.
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Gas infrastructure is modest in the region.
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Hydropower complementarity adds enormous value to the interconnections POTENCIAL HIDRO
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Expectance in new natural gas fields
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EXISTING GAS PIPELINES
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Potential of the Region
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Potential to enlarge economies if power market were fully integrated.
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Economic benefits of huge magnitudes by inter fuel substitution and complementary characteristics of isolated systems as compared with the integrated system.
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What do we lack?
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Interconnection infrastructure facilities are weak where existent.
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International trade agreements are not consistent, limiting severely the market integration.
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Lack of incentives for interconnection expansion during initial stages.
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Unclear regulatory definitions of firm transmission capacities.
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Regulatory and institutional barriers that discriminate against international exchanges with regard to the national market
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The economy of the region doesn’t grow
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…and our infrastructure is deficient
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How do we revert the situation?
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First, it is not just a technical problem, it is mainly political.
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Market itself and improved regulations is NOT enough to break inertia of an almost a non-growth situation.
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States MUST help to build the new infrastructure. Private sector cannot meet acceptable discount rates for some needed interconnections.
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FIRM POLITICAL WILL FOR INTEGRATION IS NEEDED
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This political decision means:
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Acceptance that even under “critical conditions” energy supply could depend form generation abroad.
• • • • •
Leave border conflicts behind.
Allow international exchanges.
Guaranteeing non-discrimination and reciprocity in dealing with demand and supply from other countries.
Promoting efficiency in the use of resources.
Allowing open access to national transmission systems.
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Developing a network scheme in South America
• Interconnections = Transport • No difference between concepts of transport systems for goods, energy or communications 03-19-2002 21
• • • • • • •
Problems to be addressed: Define properly firm transmission concepts.
Establish short-term gas market in each regional hub (Sao Pablo – Buenos Aires).
Organize a spot market for mandatory sales of surpluses and deficits Promotion of an interruptible gas market Remove asymmetries in gas and power regulatory systems.
Higher regulatory risks for investors in an integrated regional power and gas scheme.
Integrated regulation for all businesses that converge with the use of same infrastructure.
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• • • • • • •
Problems to be addressed (cont) National regulations compatible with regional integration Coordination between national transmission planning and the development of interconnections Legal fairness and protection Assurances of fair assignment of revenues between national investors and regional ones.
Elimination of market price regulations which may distort the signals of efficient prices.
Creation of suitable regional institutions Homologizing the performance criteria of every national system
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Regional Integration will prevent:
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CALIFORNIA’S DISASTER. LESSONS: We cannot pretend “Bueno, Bonito y Barato” (Good, Nice and Cheap)
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DEVELOPMENT OF GAS MARKET IN PERU: THE CAMISEA PROJECT ECUADOR COLOMBIA UPSTREAM Camisea Gas Fields
Cryogenic Separation plant in Camisea
Fractioning of condensates on the coast PERU BRASIL TRANSPORT & DISTRIBUTION
Gas Pipeline: Camisea - City Gate in Lima
Liquids Pipeline - Camisea Coast
Gas distribution network in Lima and Callao Lima LPG Camisea Cryogenic Plant Acre Liquid Fractioning
LEGEND GAS PIPELINE LIQUIDS PIPELINE
EXPORT OF LPG Titicaca Lake CHILE
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Why natural gas massification?
Reasons: Fuel Prices Lima – Commercial Clients / Small Industry 30 January 2001 16 12 8 4 32 28 24 20 Electricity
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16 LPG 14 13 5 Diesel Kerosene Natural Gas IGV 0.7
D BP 0.7
T&D AP 1.8
Gas 1.8
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LONG TERM VISION OF GAS FOR PERÚ Talara Aguaytía Piura Chiclayo Trujillo Chimbote Lima Huancayo Oroya
Nerve center “Concentrator”
Ayacucho Camisea Cuzco Apurimac Ica Marcona All the stages Arequipa Moquegua Ilo Tacna Puno
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Energy Policy: The Resources Camisea 13 TCF Gas = 1,870 TWh
= 5.8
Mantaro (840 MW) 6.5 TWh/yr 325 TWh in 50 yrs
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Energy Policy:The Resources Hydroelectric Potential 60 GW = 360 TWh/yr 18,000 TWh in 50 yrs
=10
Camisea 13 TCFGas = 1,870 TWh of Electrical Energy
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Ecuador Colombia Machala Zarumill Zorrito s a Talara Sullana Arenal Piura Oeste Chachapoyas Moyobamba Paita Chiclayo Oeste Guadalupe C.H. Carhuaquero Cajamarca Tarapoto Bellavista Océano Pacífico
Línea de 220 kV Línea de 138 kV Línea de 66 kV
Brasil Iñapari
Coming Up : Peru-Ecuador connection NATIONAL GRIDS / ECUADOR - PERU - YEAR 2003 O C E A N O P A C I F I C O
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SISTEMA DE TRANSMISION ECUADOR - PERU AÑO 2004 ESCENARIO MODERADO CENTRAL HIDRAULICA CENTRAL TERMOELECTRICA SUBESTACIONES LINEAS 220 kV.
LINEA 138 kV.
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COLOMBIA – ECUADOR INTERCONEXION
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Are we clear in our vision of Regional Interconnection?
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Interconnections are NOT “Passage ways”. They are Axis for Progress
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They converge different network businesses: Gas, power and telecommunications.
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The evolution of the regulation must take real advantage of this reality and it is not.
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Meaning of Progress 70’s = Access to energy 90’s = Access to Internet But we are in the 21 st Century now!
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03-19-2002 Convergence: -Power -Gas - Telecommunications NATIONAL AND CORPORATE STRATEGIC PERSPECTIVE 37
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DIVERSIFICATION OF TRANSMISSION AND DISTRIBUTION BUSINESS Competitiveness and mass marketing of the telecommunications business by use of the power transmission and distribution infrastructure State’s Role:To promote awareness of the value and potential of the transmission and distribution infratsructure and its contribution to the diversification of business
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Convergence Power - Telecommunications GENERALIZED USEOF OPTICAL FIBERS USE OF TRANSMISSION AND DISTRIBUTION SYSTEMS (INFRASTRUCTURE AND RIGHTS OF -WAY) DIGITALIZATION OF TELECOMMUNICATIONS Europe: End of ‘ 80s Latin America: Recent experience PARTICIPATION OF POWER SECTOR IN TELECOMMUNICATIONS
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New Tariff System
GAS POWER NETWORKS
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S Y S T E M S
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THE END
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