4. Energy System
• Generation: Process of creating electricity from others forms of
energy. It is normally generated at a power station (power plant) by
electromechanical generators normally driven by heat engines fueled
by chemical combustion or nuclear fission but also by kinetic energy
or flowing water and wind. Others technologies to generate electricity
are solar and geothermal.
• Transmission: is the movement of energy from its place of generation
to a location where it is applied to performing useful work.
Watt = Joule/second = Newton*Meter/second
• Distribution: is the final stage in the delivery of electricity (before
retail) to end users It carries electricity from the transmission system
users.
and delivers it to consumers.
6. Power Station or Power Plant
• Centralized power generation is possible because
alternating current power lines can transport electricity at
low cost raising and lowering the voltage using power
transformers.
• Central Stations, Power Station or Power Plant normally
, y
use: coal, nuclear, natural gas, hydroelectric and
petroleum.
• Power Plants also rely on solar energy, tidal harnesses,
energy harnesses
wind generators and geothermal sources.
7. Coal-
Coal-Fired Power Plant
• A coal-fired power plant produces electricity by burning coal to boil water,
producing steam which drives a steam turbine, which turns an electrical
generator.
• The
Th combustion of any fuel, including coal, emits large amounts of carbon
b ti f f l i l di l it l t f b
dioxide and other pollutants into the atmosphere, contributing to global
warming.
• The largest coal-fired power station is Kendal Power Station, South Africa
coal fired Station
and the most efficient is in Denmark.
8. Combined Heat and Power (CHP)
Plant
• Combined heat and Power (CHP) plant or Cogeneration
Plant use heat engine or power station to simultaneously
generate both electricity and heat.
9. Hydroelectric Plant
• Hydroelectric Plants produce power through use of the gravitational force of falling or flowing
water. Most hydroelectric power comes from the dammed water driving a water turbine and
generator.
• Pumped storage hydroelectricity p
p g y y produces electricity to supply high p
y pp y g peak demands by movingy g
water between reservoirs at different elevations. At times of low electrical demand, excess
generation capacity is used to pump water into the thigher reservoir. When there is higher
demand, water is release back into the lower reservoir through a turbine.
• Hydroelectric p
y plants with no reservoir capacity are called run-of- the-river plants, since it is not
p y p ,
then possible to store water
• A tidal power plant makes use of the daily rise and fall if water due to tides, such sources are
highly predictable and if conditions permit construction of reservoirs, can also be dispatchable
to generate power during high demand periods.
g p g g p
10. PPP Schemes for Power Generation
• Design, Build, Operate.
• Design, Build, Operate and Finance.
• Build, Operate and Finance
• Normally different schemes of PPPs for Power Generation rely on a
Power Purchase Agreement (PPA), were the power purchaser is a
local utility, public service provider or operator that sell the energy to
the market.
• PPA is normally a long term contract with a dual payment system.
• Dual payment system: capacity or availability charge and a usage or
offtake charge.
ff k h
• In some cases there are Tolling Agreements: the purchaser delivers
fuel to the concessionaire and it turn the fuel into electricity.
11. Typical PPA (1)
• A typical PPA may contain the following:
• (1) Preamble (2) Definitions and interpretation, (3) Conditions
Preamble, interpretation
precedent, (4) Development stage, (5) Construction period, (6)
Commissioning and entry into commercial service, (7) Plant operation,
maintenance and fuel management, (8) Dedication of capacity,
g ,( ) p y,
availability declaration, (9) Measurement of capacity, availability and
energy metering, (10) Capacity charge and payment provisions, (11)
Fuel Price provisions, (12) Billing procedures, terms of payment, (13)
Insurance, (14) Changes in tax, changes in law, (15) Force Majeure, 6)
Termination and buy out provisions, (17) Governing law/dispute
resolution, (18) Liability and indemnity, (19) Confidentiality, (20)
Representations/warranties/covenants and (21) Mi
R t ti / ti / t d Miscellaneous.
ll
12. Typical PPA (2)
• A typical PPA may contain the following Schedules:
• (1) Description of Power Station, (2) Clearances, (3)
Development milestones, (4) Interconnection and
transmission facilities, ( ) Commissioning and testing ( )
, (5) g g (6)
Metering standards and testing, (7) Despatch procedures
(8) Capacity payment and (9) Energy payments.
13. Options for PPPs
• Option A: Public sector develop the project using its own resources and then
privatizes it or prepare a PPP
• Option B: The public sector completes the feasibility studies and invites to the
private sector to finance, construct and operate the PPP project
finance
• Option C: The private sector conducts all feasibility studies and prepare the
project under a design, finance, construct and operate the PPP project
j d d i fi d h j
14. Projec Cycle of HPP PPPs
Stage Activities
Site Selection Identification of potential sites
Prefeasibility Scheme concept. Preliminary estimate of
cost and benefits
Short Feasibility Preliminary optimization of main project
parameters based largely on existing data
Full Feasibility Detailed site mapping and geological
investigation.
investigation Full Environmental Impact
Assesment.
Tender Design Business model preparation and contract
regulation based on Short or Full Feasibility
Detailed Design Adjudication and detailed design of each
element of civil works.
15. Risks in Power Generation PPPs
• Site-specific nature of projects
• Long period of construction and high construction risk
• Capital intensive
• Hydrological risk river flows make volatile output. Important water
risk, output
management
• Flow of revenues need to be predicted under real scenarios.
• Operation risks
16. Risks Allocation HPP PPPs
Risk Allocation
Hydrology Temporary deficits: Conces and Gov.
Long Term deficits:Util-Gov
Flood damage: Contractor and Conces
Costruction Cost overrun and delayed completion: Concess and
contractor. Unforeseen ground conditions: Util-Gov-
concess
Performance Equipment and project performance: concess
Transmission: Utility company
Market Utility company through take or pay or PPA
Political Government
Financial Increasing costs: utility company or gov
Environmental
E i t l Land
L d acquisition and resetlement: G Utilit company
i iti d tl t Gov-Utility
17. Market
Failure 1 PUBLIC GOOD
Market
Failure 2 MONOPOLY
Market EXTERNALITIES
Failure 3
Market ASSIMETRIC
Failure 4 INFORMATION
18. ¿Do we have a Monopoly?
¿Is it large the loss in
Market no yes
Economic efficiency
Competition From First Best to Second Best?
AC AC
P P
MgC MgC
D D
Q yes no Q
- Lump sum Subsidy ¿Regulation
- No Lineal Tarification By Competition?
- Price Discrimination
no y
yes
• Demsetz Competition
• Ramsey Tarification
(bidding)
• RPI-X
RPI-
• Contestable Markets
• R t of Return
Rate f R t
19. PRICE CAPS
(RPI, RPI-X, RPI-X+K)
RPI- RPI-X K)
Profitability or Rate of Return Regulatory Models
Tariffs Ramsey-Boiteaux
Ramsey-
for PPP
o
YARDSTICK Competition
DEMSETZ Competition
(Bidding)
20. Characteristics in LAC countries
Characteristics Brazil Chile Peru
Capacity (
p y (MW)
) 90,733 10,367 6,016
Energy (GWh) 387,451 51,640 24,267
Hydropower 80% 41% 71%
generation
Nuclear 3% 0% 0%
Generation
21. Large Hydropower Projects
Project Capacity (MW) Country
Three Gorges 18,200
18 200 China
Ertan 3300 China
Caruachi 2,160 Venezuela
Porto Primavera 1,818
, Brazil
Ita 1,450 Brazil
Serra de Mesa 1,293 Brazil
Salto Caxias 1,240 Brazil
Rio Baker-Aysen 800 Chile
23. Power Systems in Chile (1)
Systems Generation Transmission Distribution
Edelnor, Electroandina, Edelnor, Electroandina, Emelari, Eliqsa, Elecda
SING Celta, Norgener Gener,
Celta Norgener, Gener Norgener
Gasatacama
Arauco, Petropower, Transelec Chilectra, CGE,
SIC Gener, San Isidro, STS Chilquinta, Rio Maipo,
Endesa, Colbun, Transnet Saesa, Frontel, Emec,
Guacolda, E. Verde,
Guacolda E Verde Conafe, Emelectric
Conafe Emelectric,
Santiago, Pangue, Transquillota Emelat, Puente Alto,
Pehuenche, Copelec, Litoral, Luzagro,
Pilmaiquen,Aconcagua, Emetal, Colina, Luzpar.
Maipo, Vieja, Valpo,
Capullo, Andes,
Carbomet
Edelaysen Edalaysen Edelaysen
Aysen
Edelmag
g Edelmag
g Edelmag
g
Magallanes
24. Power System in Chile (2)
Type of Contracts Characteristics
Generator-Generator Generator without contract with distribution
company or free client sell energy to the spot
market at marginal cost set up by CDEC.
Generator – Free client No regulation of transactions with clients with
g
capacity of 2000 kw or more. Free to negotiate
prices because of the negotiation power.
Codelco case.
Generator – Distribution companies
p High risk for g
g generators if marginal cost of
g
operation is higher than the price. By law
distribution companies must to contract
through public tendering process.
25. Codelco-
Codelco-Chile (1)
• Corporación Nacional del Cobre (or “Codelco Chile”) is the National Copper
Codelco-Chile )
Corporation that manage the cupper production in Chile as a State owned
copper mining company. It is the largest copper producer company in the
world.
• Codelco decided in 2007 to tender to one or more independent power
producers its future electricity supply requirements in Salvador, Andina,
Ventanas and El Teniente Divisions, located in Chile´s central region and
connected to Chile´s SIC, the central interconnected transmission Chilean grid
26. Codelco-
Codelco-Chile (2)
• The power plants in Chile (combined cycle gas- fired thermoelectric plants)
usually use Argentine natural gas as a fuel and because of the shortage of it
Codelco decide to initiate the process to have safe and reliable electricity
supply.
• The SIC in Chile extends over 2000 kms and some 326.000 km2 with 11.700
km of transmission lines, serving 93% of the population
• The total capacity of SIC is 8,512 MW (2006) generating 40,334 GWh in
2006, 55.8% is hydrolectric and 44.2% is thermal.
27. Codelco-
Codelco-Chile (3)
• The project called Long-term electricity supply for Codelco-
Long term Codelco
Chile´s Divisions in central Chile, was recently adjudicated in
September of this year to Colbun and it includes two contracts for
15 and 30 years.
• The concessionaire will design, build and operate power plants of
any kind, as well as the construction of any other investment
y , y
necessary to operate them and to connect them to the trunk
transmission system of the SIC (3-10 regions)
• The concessionaire will design, build start-up and maintain the
design build, start up maintain,
new transmission system or expansions of the existing that might
be required to connect the power plant to the trunk transmission
system of the SIC.
28. Codelco-
Codelco-Chile (4)
• The concessionaire will design, develop and construct a port
design
terminal, if necessary, for the uploading of fuel that will be
needed for the power plant, or otherwise, reach and agreement
with the operator of an existing port.
• The demand to be supplied over the period of the agreement shall
pp p g
be from 450 MW up to a capacity of approximately 900 MW.
29. A project with Low Risk
• Long term contract with minimum commercial risks: Codelco has 20% of
the total existing copper reserves in the world, around 77 million metric tons.
Codelco accounts for 15% of the total Chilean electricity consumption.
• Adequate credit rating: Codelco has a rating of A according to Standard &
Poor´s.
• Chilean Regulation: It does not contemplate any specific license, only
construction and environmental studies.
t ti d i t l t di
• Selling of remaining power: the concessionaire can sell to SIC the remaining
power if the plant has excess of capacity. SIC requires annual capacity
additions of approx. 500 MW in order to match supply and demand. Average
approx demand
annual growth of 6.9% in the last ten years.
• Chile is an investment grade country: Chile is the most solid economy in
Latin America and it is rated A by S&P.
y
30. Bidding Characteristics
• Free cost to be charged t C d l I
F tt b h d to Codelco: Investment, operation and maintenance
t t ti d i t
fixed costs does not have a maximum in the bidding process. The variable
costs are recovered via a pass through mechanism with certain efficiency.
• Codelco included provisions to make the project bankable: sharing the
risks on fuels and fluctuation in the international fuel prices.
• Option for bidders: Codelco had set-up a new special purpose company
(Newco) that own all the studies, licenses and a project. The concessionaire
has the option to develop its own p j or to buy Newco at a price equal to
p p project y p q
the incurred costs by Codelco.
31. Economic Characteristics
• Bidding Variable: Codelco ill
Biddi V i bl C d l will pay fi d monthly charges i U it d St t
fixed thl h in United States
Dollars (US$) to cover the investments and the fixed operating expenses
associated with the service.
• Provisions: The contract will also include provisions for the transfer of
variable costs, except hydro plants for which no variable costs will be paid, as
well as charges for transmission fees (on a pass through basis, with certain
efficiency signals).
• Winner: Colbun was the winner offering a supply of up to 510 MW and
g pp y p
energy for 4000 GWh annually. The electricity supply will start on March 1st
of 2013 with 328 MW and it will reach 510 MW on January 1st of 2015. The
power stations will use coal and hydroelectricity. Investment US$7 billion.
33. Power System in Peru (1)
Generation Transmission Distribution
Cahua, Edegel, Egenor, Piura,
Cahua Edegel Egenor Piura Mantaro-Socabaya,
Mantaro-Socabaya Edelnor,
Edelnor Luz del Sur Ede
Sur, Ede,
Cahua y Electroandes Reforzamiento Sur, Oroya, Etevensa, Cañete, Electro Sur
Etecen y Etesur.
Policy Regulation Competition
Ministry of Energy Osinerg Indecopi
34. Yuncan Hydroelectric Plant (1)
• First Intent to bid: In 2003 the bid was suspended because of a
dispute with Pasco department authorities over ownership of the
project. The agreement is that Pasco will receive payments from
j Th i h P ill i f
the concession through a social trust fund.
• Hydro Power Plant built by the Government: The State power
y y p
company Egecen ( Empresa de Generación de Energía Eléctrica
del Centro) was building the plant with 75% of the total
investment of $262 million finance by JBIC (Japan Bank for
International Cooperation) and in same moment it had to stop
works because lack of funds from the 25% committed to the
project from the Peruvian government. Finally the project was
j f h P i Fi ll h j
completed in 2006. The plant has a capacity of 130 MW.
35. Yuncan Hydroelectric Plant (2)
• Construction companies: Skanska, Cosapi and Chizaki
• Equipment suppliers: Vatech Hydrovevey, Alstom France and
Toshiba
T hib
• LOM Project: The concessionaire will operate, maintain and
usufruct the project under a lease of the power plant built by the
p j p p y
State power company.
• Term of Concession: 30 years since the take over of the power
plant from the concessionaire. Egecen will transfer the plant in
concessionaire
perfect operating conditions for the operation and usufruct of the
concessionaire.
36. Bidding Results
• One Bidder: Peruvian Government received just one offer from Enersur, local
subsidiary of the Belgian energy company Tractebel.
• Bidding mechanism: Higher payment to the Peruvian Government.
• Result of the Bidding: Enersur offered $57.5 million paid over the first 17
months of the concession and a semi-annual usufruct fee during the first 17
h f h i d i l f f d i h fi
years of the contract and once the concessionaire receive the power plant from
Egecen. The total amount is $124.5 million.
• Social Trust Fund: In addition Enersur has to pay to the Social Trust Fund
under a payment schedule a total of $6.9 million
37. Guarantees
• Concessionaire
a) Contract Rights and first-second social payment: $10 million valid until
15 d
days after the reception of the power plant by the concessionaire.
ft th ti f th l t b th i i
b) Usufruct Rights and periodic payments: $10 million valid until the last
payment for this concept.
c) Completion: $2 million valid until 90 days after finish the contract period.
period
• Peruvian Government
a) Multilateral guarantee or commercial bank for $50 million valid since the first
payment of the concessionaire and until Peruvian Government transfer to the
concessionaire the power plant to the concessionaire.
p p
b) Peruvian government assumes the performance risk of the power plant for the
first 12 months and the concessionaire will receive a compensation.
39. CHP5 Power Plant
• Energy in Mongolia is a relevant sector where five coal-fired cogeneration
power plants are managed by a central power system, but it is necessary to
prepare more projects in urban cities and rural areas that have diesel
generators.
• One interesting project in development is the CHP5 project which anticipates
to implement a build, own and operate model for a cogeneration power plant
and th modification of th existing sub stations t produce electricity and heat
d the difi ti f the i ti b t ti to d l t i it dh t
energy for Ulan Bator.
• The capacity of the plant must be 300 MW for power and 700 Gcal for heat
energy.
energy The project finally was not adjudicated this year. Mongolian
year
government decided does not accept the unique proposal submitted by a
Chinese corporation.
• ADB will be supporting the new intent to adjudicate succesfully this project
pp g j y p j
40. Secure Fuel Supply and Bankable
PPA
• Secured fuel supply and Bankable PPA
– Generation cost: 60% of the retail tariff
– Fuel cost: 60-65% of the generation cost
– Government’s control over prices of coal used for generation of energy,
– Coal mines are in bad financial shape;
– Long term coal supply to Darhan and Erdenet CHPs must be secured,
– Not clear sources of revenues
– Coal
C l supply was not completely resolved i th CHP 5 t d d
l t l t l l d in the CHP-5 tender documents t
42. Coal deposits
Choir
Ch i
Copper and gold deposits Shivee ovoo JSC
Lime stone deposits
Copper Dalanjargalan
Khokh tsav
Mongolian Gold LLC
Mandakh
Tsagaan suvarga
Tsogt Tsetsgii Mongolian Gold LLC
Uhaahudag
Gurvan Tes
G T TAvantolgoi
Khanbogd
Nariin Sukhait Energy Resource LLC Oyutolgoi
Erdes MGL LLC
Ivanhoe Mines Mongolia LLC
Tavantolgoi JSC
SGS LLC QGX LLC
Chinhua-MAK-Nariin Sukhait
Chi h MAK N ii S kh it LLC
Mongolian Gold MAK LLC
Minerals deposits
42
43. New Projects in Mongolia
The ever-increasing electricity demand of the Southern Gobi shall be supplied as the
following:
• Construct the UB-Mandalgobi- Tavantolgoi-Oyutolgoi 670 km power and heat station
with 220 kW, with two reinforced concrete pillars and with two linked AC-400
transformations
• Facilitate to build 12 mW small size power station with the private sector initiatives near
the group of the coal mines of Tavantolgoi and implement the plan to build the power
station with the capacity not less than 300 mW through the government integrated
regulation and the PPP principles
