The Ministry of Industry, Energy and Mining (MIEM) has ready a draft decree that recognizes renewable energy generators the ability to supply long-term firm power to guarantee supply.
The change seeks promote the operation of a market of wholesale electricity contracts and, furthermore, it aims to contribute to overcoming a “entry barriers” that many investments have today, such as the price of energyMinister Omar Paganini pointed out on Tuesday.
For 20 years Uruguay has had a regulatory framework that enables the existence of a wholesale electricity market in which purchase and sale contracts can be entered into between a private consumer and a private generator in any part of the country.
But until now, in fact, this has not happened and there have only been regulated contracts with UTE. One of the reasons why this market has not developed is due to the difficulty that private producers have in having firm power.
The current regulations recognize that this support can only be provided with thermal generation, which means that, for example, new private generators that are going to enter the system have to invest in installing diesel machines to comply with this requirement.
Now him Executive power aims to certify the firm power backup capacity possessed by renewable energies, today with high participation in the electrical matrix.
The update promoted by the government implies, for example, that a wind farm or photovoltaic solar farm that enters into a supply contract to sell energy to a large consumer will be recognized as a firm power for part of its generation. The rest of the firm, if needed, could be covered by contracting with another private company or even buying power from UTE. This according to what is negotiated with the consumer based on their requirements.
“Hostages of expensive fees”
Paganini expressed during a workshop with journalists that the modification could be “of interest above all for new investments.”
“When investments such as a data center or a green hydrogen investment with large energy needs come, what happens is that the UTE rates leave you out of the market. (…) The viability of this is given by generating a framework where if you get cheaper energy, go ahead”, he explained.
“It is allowing the new low prices of renewables to be used by large investments and not having to be held hostage to a price that is expensive. For that, the market has to work.” added. Paganini pointed out that the new regulation took two years of consultations with the different players in the electricity market, such as UTE, the Electricity Market Administration, Ursea and private generators.
The mathematical procedure to determine the recognized firmness percentages in each technology will take as a reference 1% of what is known as “critical hours”, that is, the hours in which the electrical system was “demanded” in the year. In that 1% it is observed how each of the generation sources participated. For example, if of the 2,000 MW of wind power, 500 MW participated in critical hours, 25% firmness is recognized. The new mechanism that could be in force as early as 2022 will reassess the recognized firmness values annually.
free clients
The companies Montevideo Refrescos (Coca-Cola) and Central Lanera Uruguaya, which are two large clients of UTE, have already closed contracts to buy energy for a photovoltaic park that is being built in Salto by the firms Ventus and Atlántica Yield, according to the weekly newspaper Search months ago. These free contracts have already been registered with the Regulatory Unit for Energy and Water Services (Ursea), reported the weekly Brecha.
How does it work? A contract as a free customer implies having a wind or solar generator that supplies the energy, a firm power contract and a contract with the energy distributor for the use of the network (toll) set by Ursea. These three conditions require prior validation from the Electricity Market Administration (Adme). Thus, this type of customer can buy energy from another agent and is not obliged to buy from UTE.
In this context, the Board of joint venture It also resolved some time ago —with majority votes— that large energy consumers have the possibility of choosing to be free clients of the company. Until now, all clients had regulated contracts with the entity, which is the only company that offers the electricity supply service to date.
The decision implies that these customers may have a contract in which they will pay a cheaper price than the current one for the energy they consume, if they accept the wholesale sale conditions set by the entity, and also aims to retain them in a market where The competition from new private players is beginning to emerge timidly.
