Generation options and the environment to assuring the efficient development of hydro developments in peru

Generation Options and the Environment to Assuring the efficient development of Hydro Developments in Peru
D. Cámac G, R Bastidas T, M. Castillo S. and C. Butrón F.

Abstract—In this paper a diagnostic of Peru’s potential of hydro power generation is made, risks and barriers that interested private investors confront are identified and over the basis of the currentregulatory framework and generation market design, some measures are proposed to be taken in consideration in the bids for long term contracts that DistCos will call so they could make feasible in order to develop hydro power projects.

Index Terms— Hydro Developments, hydro Concession potential, hydro Authorization, Theoretical Potential.

I. INTRODUCTION
he Peruvian electric market design isbased on a clear split between electricity supply with natural monopoly characteristics, for which regulated prices were set (transmission & distribution), and areas in which it was possible to create competitive conditions for freedom of pricing (generation & supply to large clients). The rates are set as the average of short-run marginal cost (SRMC) for small consumers (consumer rates) of DistCosand free prices for free consumers (contestable consumers).
The system operation spot trading function is all managed by an organization essentially of the generators (named System Electric Operation Committee – SEOC). The SEOC calculate the SRMC as a result of economic dispatch.
Peruvian electrical system is mainly hydroelectric. Next picture shows the potential production of present installedhydropower capacity using for the simulations the hydrological series of the last 42 years.
As we can see, the hydropower system is able to provide an average of 18,3 TWh. Taking into consideration that the projected energy consumption in 2007 will be 27.3 TWh, it is to be expected that, under these conditions, thermal installed capacity should provide around 9,0 TWh. During drought years, thethermal generation would be of 18 TWh, with high SRMC.

Source and elaboration by OSINERGMIN
Fig. 1 – Potential Production of Present installed Hydropower Capacity
Having access to the spot market, the generators decide what kind of risks they are going to take: in contracts with DistCos and free consumers, or spot trading. In this model the retailers don’t have any access to the spotmarkets so they just basically have to buy everything under contract from generators which restricts their flexibility
and makes it harder for them to compete effectively with the generators itself.
Currently, DistCos and free consumers in the market can purchase energy only through Full Requirement contracts with generators (contracts for maximum capacity with its associated energy, whatever theload factor would be). According to Peruvian law, the generator can not contract more energy or capacity than it has as firm energy or firm capacity. The object is to promote enough physical reserve in the system.
The prices contained in the contracts between GenCos and DistCos, for sale to the regulated retailing can not be higher than the rates set by the regulators following an administrativecalculation based on a sort of smoothed average of the SRMC projections for 24 month in the future, which requires making projections of supply and demand for similar period.
With regard to investments in hydropower generation, last decade development has been much limited as it is shown in the following picture.

Source and elaboration by OSINERGMIN
Fig. 2 – Evolution of Load and FirmCapacity by Technology
Theoretical hydrological potential
According a study developed by Technical Cooperation between the Government of the Federal Republic of Germany and the Government of Peru [3], the theoretical or raw hydrological potential of a fluvial system or basin is a measure of the total natural resources available for energy production, regardless any change coming from the works that...