Electrical distribution and its regulation: keys to electromobility and distributed generation
“WE CANNOT ADDRESS DISTRIBUTION REFORM WITHOUT UNDERSTANDING THAT IT IS A MARKET TRANSFORMATION”
Recent studies in Chile show that around 6 GW netbilling-type generation projects, without storage, could be integrated into distribution networks, which is equivalent to 50% of the maximum demand of the National Electric System (SEN). On the other hand, 426,000 new cars were sold in the country last year. If they were all electric, it is expected that a load of about 4 GW would enter the system (1/3 of the country’s maximum demand today). “In this scenario, distribution networks would experience unprecedented electricity demand. Even at the research level, it is not clear how something that could happen in 4 or 5 more years should be addressed. Everything seems to indicate that we are moving towards the need for a highly interconnected and reconfigurable distribution network, instead of the classic hierarchical structure,” said Daniel Olivares, Director of the Center for Energy Transition (CENTRA) of the Adolfo Ibáñez University, in the seminar “ Electricity distribution and its regulation: keys for electromobility and distributed generation in Chile” co-organized by CENTRA and ACEN.
In the sector there are no doubts that distribution regulation must be modernized, even more so considering the decarbonization objectives that the country has imposed. “No one in Chile is thinking that carbon neutrality can be achieved without making a major reform. For people to benefit, distribution networks have to become a two-way exchange platform that requires broad flexibility markets. We cannot address the distribution reform without understanding that it is a market transformation,” said Mauricio Riveros, Head of the Sustainable Energy Division of the Ministry of Energy.
If decarbonization, in the sense of carbon neutrality, becomes that you basically have to pay much more, according to Riveros, it is not going to happen. “We have to turn the screw, understand that decarbonization is an opportunity for new income, new actors, new business models, innovation, new supply chains and that is where it will happen. “We as a Government set the goal of 500 MW of distributed generation without any regulatory change.”
On the occasion, Ignacio Santelices, Sustainability Manager of Fundación Chile, commented that it is urgent to provide a holistic look at how the energy transition is faced from the point of view of demand. “It’s not just distribution, what will happen with marketing, with distributed generation when there are 200,000 projects in Santiago or the aggregation of demand, among others. Putting together a (distribution) law takes 5 years, processing it takes 3 or 4 more years, plus implementation, which is 2 tariff periods and we are reaching 2040.”
He left behind the initial idea of a unidirectional transport network and passive elements and the constant interaction and variety of businesses that are envisioned or that already coexist in the networks are no longer fiction. In this regard, Ximena Oviedo, Managing Partner of IESD, mentioned that it is worrying that there may come a point where people want to disconnect from the system, if it is more economical to be self-sufficient. Clearly, “there is a benefit in decarbonization, in electrifying demand, the incorporation of electromobility. In this analysis of modernizing the distribution segment, we can make it more competitive, more efficient and ensure that users have economic benefits from it. With the regulation we have, we have been adapting and we have managed to move forward.”
For his part, Luis Opazo, Director of Acesol, expressed that now “it is time and the minute and there is an urgent need to address an important transformation process in the sector, but the major distribution reform is not the only answer. In general, the literature indicates that it is the policy mixes that contribute to triggering profound transformation processes. What we have to address is a set of reforms in different sectors. The objective is to achieve decarbonization. Asking a major distribution reform to take care of electromobility, distributed resources, energy efficiency, etc., is being a bit naive.”
For Daniel Salazar, Managing Partner of the energiE Group, in distribution “the outlook is not encouraging. It is the result of unforced errors by those who have held positions of responsibility, both publicly and privately. There are authorities that have not given correct signals and an industry that in the past resisted changes and that ensured that decades passed without moving this model and only recently came to move for tariff purposes.”
Meanwhile, Eduardo Andrade, executive secretary of ACEN, added that “distribution networks are being impacted by the large number of small central generation lines that are being connected, which by 2024 will represent more than 4,000 MW of installed power, to which will be added the mobile demand that electromobility means. Without a regulation that provides the instruments that allow their orderly insertion, this will imply distortions that will affect final consumers, especially those with fewer resources, which demonstrates the need to urgently move forward in updating the law.”
Meanwhile, those 4,000 MW will continue to be self-dispatched and if we add netbilling to the above, it seems that it is impossible to postpone the transversal agreement that crosses the sector that it is the moment in which the “market has to become more complex”, as it was stated. said Riveros of the Ministry of Energy, “we need many more actors and we have to generate incentives to make those investments that allow a slightly more decentralized office to be made.”
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