IEEE Power & Energy Magazine - November/December 2014 - 37

On a brighter note, the very needs of the region
are already driving the search for a solution, and there are
several opportunities for gains if one knows where to look.
was introduced in the early 1990s. The Chilean government
at the time studied different regulatory alternatives for gas
transportation and distribution and decided to follow a market approach, with minimal government intervention.
The Chilean constitution gives the state the absolute ownership of hydrocarbon deposits. It also states that exploration
and exploitation can be carried out 1) by the state or its companies directly, 2) by means of administrative concessions,
or 3) by special contracts of operation with private investors.
According to Bahamondez, writing in Gas Regulation 2014,
these contracts do not affect state ownership of the fields and
they are not concessions; they grant certain relevant rights
and benefits for both public and private parties. Nevertheless, gas transportation and distribution are not regulated,
nor do they involve fixed tariffs. Gas transportation is subject
to open-access rules, where the company owning the pipes
must make public offers of available transportation capacity
to third parties. These offers must be made with equal economic, commercial, and technical conditions for all participants. Prices are freely determined by the offering company,
normally through the negotiation of long-term contracts.

Recent Power Infrastructure Developments

generation supplied by NCRE by 2025 as a policy objective.
There is a great deal of conflict over how the remaining 80% of
generation should be supplied; natural gas is favored by environmentalists as a lower-emitting alternative that also has the
dispatchability attributes so necessary as a complement to intermittent renewable resources.
On the other hand, there are dual-fuel combined-cycle
plants that are burning diesel because they have no natural
gas contracts. The recently elected government is examining this issue. A first challenge is how to contract and bring
LNG to supply gas to those plants currently being used suboptimally. A second challenge is to define whether a gasonly path should be defined for system expansion, leaving
out coal-fired generation entirely. The government is first
assessing how to open the existing LNG terminals to third
parties, arguing that the status of the terminals as essential
facilities justifies the intervention. It is facing opposition by
the private owners of Quintero, who took the initial risk of
building it in 2008-2009, making considerable investments.
Quintero only foresees business with potential third parties
if there is gas and capacity available. The northern Mejillones terminal is offering regasification and storage services
to any potential interested party under the open-access rules.
The third party would need to find its own LNG supply-a
solution that has not yet produced any agreement.
The issue of whether to leave coal out of the expansion
plan is a difficult one, as the price at which LNG reaches
Chile makes gas a more expensive fuel alternative. Energy
generated by LNG combined-cycle units is around 20%
more expensive than energy from coal-fired generation, as
shown in Table 1. Even with prices of gas in the United

Chile is facing new challenges in its power infrastructure development as large hydropower and coal-fired power plants are running
into strong social opposition due to environmental issues. Current examples include projects such as Barrancones (coal-fired;
540 MW), Punta Alcalde (coal-fired; 740 MW), Castilla (coalfired; 2,100 MW), HidroAysén (hydro generation; 2,750 MW),
Cuervo (hydro generation; 640 MW), and even existing plants
such as Bocamina II (coal-fired; 350 MW). These difficulties
are compounded by the increasingly litigious nature of the
project approval process, which
table 1. Levelized cost of energy for coal-fired (circulating fluidized-bed boilers)
has resulted in delays for some
and natural gas-fired (LNG combined-cycle) thermoelectric plants.
projects and the outright cancelCoal
LNG-Combined Cycle
lation of others. This has given
rise to uncertainty regarding the
Unitary investment
US$2,400-2,800/kW
US$1,000-1,200/kW
long-term development of the
Capacity
factor
85-90%
50-80%
generation supply. At the same
time, generation from nonconFuel prices
US$100-130/t
US$11-13/MMBtu
ventional renewable energy
Variable cost
US$37-47.5/MWh
US$74.5-88.1/MWh
(NCRE), defined as all renewable
Debt-equity rate
70/30%
70/30%
energy except hydro plants with
capacities greater than 20 MW,
WACC rate (real)
8.43%
8.43%
is being favored. A recent law
Levelized cost
US$77.2-97.3/MWh
US$89.5-112/MWh
defines having 20% of total
november/december 2014

ieee power & energy magazine

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Table of Contents for the Digital Edition of IEEE Power & Energy Magazine - November/December 2014

IEEE Power & Energy Magazine - November/December 2014 - Cover1
IEEE Power & Energy Magazine - November/December 2014 - Cover2
IEEE Power & Energy Magazine - November/December 2014 - 1
IEEE Power & Energy Magazine - November/December 2014 - 2
IEEE Power & Energy Magazine - November/December 2014 - 3
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IEEE Power & Energy Magazine - November/December 2014 - 104
IEEE Power & Energy Magazine - November/December 2014 - Cover3
IEEE Power & Energy Magazine - November/December 2014 - Cover4
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