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1540-7977/16©2016IEEE54 ieee power & energy magazine july/august 2016
TTransmission sysTem expansion boomed in several south american countries in the 2000s and the early 2010s. network capacity additions were required to cope with fast-growing electricity demand, prompted by average gross domestic product growth rates of around 5% per year in 2003–2008 and 3% per year in 2008–2013. Following a trend verified in most infrastructure segments, private sector participation in transmission investments increased signifi-cantly in the period, which was the result of reforms in the electricity industry that had initiated in the 1990s.
in some of the largest electricity systems in Latin america, these reforms included common elements for the transmission segment: centralized and determinative transmission expansion planning by national-level govern-mental institutions, combined with decentralized imple-mentation and operation of transmission assets, by agents selected by means of auctions for transmission concessions.
This model experienced great success, but it is currently facing challenges also common to several south american countries. some of the most important problems are rooted in transmission implementation. acquisition of rights-of-way and environmental licensing issues are resulting either in centrally planned expansion remaining on paper longer than the central planner would wish or, when the conces-sions to implement and operate the assets are acquired, in the frustration of the expectations of investors, who may be exposed to cost overruns in implementation or the financial consequences of delays.
Digital Object Identifier 10.1109/MPE.2016.2547281Date of publication: 16 June 2016
The Expansion of Transmission
By Rafael de Sá Ferreira, Hugh Rudnick, and Luiz Barroso
©istockphoto.com/77DZiGN
july/august 2016 ieee power & energy magazine 55
The Challenges Faced in South America
This article investigates the challenges faced by three south american countries that employ the previously described framework for transmission expansion: brazil, Chile and Colombia. other countries in the region employ a similar approach to transmission expan-sion and are also currently experiencing problems with delays. one of them is peru, whose transmission system grew at an average rate of 5.1% per year between 2004 and 2014, with pri-vate investments of almost Us$2 billion in the period. peru also faces implementation issues; according to reports from its regulator, transmitters responsible for five out of 12 concessions, to be implemented by december 2015, had requested postponements of target commercial operations dates (Cods). yet, the focus on brazil, Chile, and Colombia is justified by the scale of these systems and the volume of recent transmission investments.
This article focuses on transmission implementation challenges and how planning and implementation solutions are being designed to cope with them. We will identify common elements of the strategies devised by the countries and analyze their adequacy in light of the underlying regulatory framework.
Brazil, Chile, and Colombia: Physical Characteristics and Drivers to Transmission ExpansionTable 1 summarizes some of the most relevant physical characteristics of brazil, Chile, and Colombia. The figures suggest that transmission system growth rates have even exceeded those of electricity demand in the last decade. This is explained by important drivers to trans-mission expansion in these countries, besides demand growth.
✔ Integrating generation far from load centers: although hydropower already accounts for a significant share of the electricity generation mix in these countries, there is still some untapped potential, and most of it is far from the main load centers. accessing it requires long transmission systems that often span through forest areas, as is the case of the belo monte hydro power plant (11 GW) and those of the madeira river (jointly circa 7 GW) in brazil. The development of wind and, more recently, solar power in resource-rich areas far from the load centers is also an important factor.
✔ Internal connectivity: The interconnection of previously isolated areas was also a sig-nificant driver for expansion in recent times. Take, for example, manaus, a brazilian state capital with more than 2 million inhabitants: a 500-kV axis with about 1,800 km connected the city to the national interconnected system in 2013. in the past decade, Colombia concluded assets that integrated several of its islanded subsystems to the bulk transmission grid. Chile began the construction of the 500-kV interconnection between its two large subsystems (the Central interconnected system and the norte Grande in-terconnected system) in 2015.
✔ Improving transmission system performance: This is still an important expansion driv-er in the region. Colombia and brazil employ single or zonal pricing systems (nodal en-
ergy spot prices are used in Chile), and the costs of generation redispatch due to congestion are treated off-market via uplifts and are not always allocated efficiently to consumers. redis-patch costs due to the congestion of a northwest–southwest 230-kV system in brazil amounted to more than brL390 mil-lion (Us$200 million) in 2012, before transmission capacity was increased. improvements in reliability and/or loss levels were also verified in the three countries in the past decade,. yet there is still work to be done.
although some of the systems listed in Table 1 are sur-passed in size by other south american countries (such as argentina, with 31-GW installed capacity in 2014), these jurisdictions have jointly attracted a significant amount of private investments in the electricity sector in the last decade, not only in transmission but also in generation. This can be traced back to an industry organization and regulatory framework that not only allows private participation in electricity infrastructure development but establishes clear mechanisms for entry and risk management by private players. The existence of capac-ity remuneration mechanisms for the generation segment in the three countries (auctions of
56 ieee power & energy magazine july/august 2016
reliability options in Colombia and of energy contracts in brazil and Chile) is a clear example of this, and so are the auctions for transmission concession contracts.
Common Elements of Regulatory and Institutional Framework for Transmission ExpansionThe transmission expansion framework in brazil, Chile, and Colombia combines: 1) centralized expansion planning with 2) decentralized implementation and operation of assets by agents selected via auctions for concessions (or similar gov-ernmental franchises) to provide transmission services. The essential items of this framework are described next, without detailing slight differences among the countries.
The process begins with transmission expansion plan-ning by government institutions at the national level. plan-ning is periodic and determinative: the planner identifies which assets shall be built and their target Cod. The plan is typically approved by the ministry, which then instructs a governmental institution to group the whole set of facilities identified in the plan into sets and organize auctions to select the agent to which a concession to build and operate each set will be awarded.
The auctions for transmission concessions establish a level playing field for public and private companies (includ-ing formerly incumbent agents and new entrants) to com-pete for the mandate to provide transmission services, which involves both the obligation to implement a set of facilities
and operate it for a predefined period and the right to be remunerated for that. This mechanism typically results in a large number of transmission companies operating in the country, as illustrated in Table 2.
Within the auction, the companies compete based on the annual revenues they require to implement and operate under each concession. The concession is awarded to the company that has bid the lowest annual revenue requirements (arr), and the remuneration of the concessionaire will correspond to its bid for the duration of the concession, which is specified in a concession contract or a regulatory instrument.
This arr is basically fixed during the concession con-tract or, in the case of Colombia, it varies according to a predefined pattern. The remuneration of transmitters based on congestion revenues is not commonly used in Latin america. The concession contract and the regulation estab-lish perform incentives to which the transmitters will be subject, and these typically include incentives to keep equip-ment availability within acceptable ranges and penalties due to delays in the implementation process.
The success of this model is evidenced by the notable attraction of private capital to electricity transmission. For-eign companies with a background in electricity transmission or other infrastructure segments, ranging from Canadian and european companies (such as brookfield, isolux, and abengoa) to Chinese ones (such as state Grid), acquired several transmission assets in south america in the previ-ous decade. Local transmitters formed consortia with private
table 2. The attributions of governmental institutions within the planning and auctioning process and the number of transmission companies in each country.
CountryInstitution with Attribution of Planning
Periodicity of Determinative Planning (Years)
Institutions to Which Organization/Execution of Transmission Auctions Is Delegated
Number of Transmission Companies†
Brazil EPETechnical body subordinated to ministry‡
1 ANEEL (Regulator) 96 (2015)
Chile CNE‡ 4 (annual revision) CDECs (System
operator) 14 (2015)
Colombia UPME 1 UPME (Planner) 9 (2015)
†May include special purpose vehicles from holdings active in the transmission segment.‡CNE (National Energy Commission) is formally an independent body whose communication with the presidency channels through the Ministry.
table 1. The physical characteristics of the studied countries.
Country
Average Electricity Demand Growth (%/Year)
Per Capita Electricity Consumption (kWh/Year)
Installed Generation Capacity (GW)
Total Length Transmission Lines (≥220 kV) (km)
Average Growth in Length of Transmission System† (%/Y)
Brazil 2.6% (2004–2014) 2,509 (2012) 126.7 (2014) 125,640 (2014) 4.6% (2004–2014)
Chile 3.0% (2004–2014) 3,793 (2012) 20.1 (2014) 12,330 (2015) 5.0% (2004–2014)
Colombia 4.7% (2004–2014) 1,130 (2012) 15.7 (2014) 14,117 (2013) N/A
†Including lines reported as part of the transmission system, but at voltages lower than 220 kV.
july/august 2016 ieee power & energy magazine 57
equity funds to participate in auctions. even pension funds, which are more risk averse, acquired shares of transmission assets, helping to consolidate the perception of the transmis-sion segment as one that is comparatively low risk.
after an agent acquires a concession via the auction, the next step is implementation, starting with the acquisition of rights-of-way and environmental licensing and culminating with commissioning tests and commercial operations of the facilities. This process encountered barriers since the model began to be used in the early 2000s, but delays in the com-mercial operation dates had been more manageable until the early 2010s; after that, transmission expansion implementa-tion problems increased in severity and frequency.
The following sections visit the situation faced by each country, addressing evidences of the historical successes of the expansion framework, current implementation issues, and recent solutions strategies.
Brazil
Successes of Model and Recent Difficulties with Transmission Implementationamong the studied countries, brazil auctioned the most transmission facilities in the last decade. Figure 1 shows the monetary values of the total arrs awarded as a result of the auctions held since 2007, which amount to almost Us$3 bil-lion. The dots indicate the average discounts over the arr cap set by the regulator as a reservation value in the auction, i.e., the average percentage by which the bids of auction par-ticipants were lower than the regulated bid cap, indicating how competitive auctions have been.
increases, since 2012, in the nominal arrs may suggest that the model has been working well in recent times, but the data should be carefully appreciated before such a conclusion is reached. auctions results of 2014 and 2015 were heavily influenced by two sets of high-voltage (HV) dc links span-ning through 2,500 km to evacuate the power from the belo monte hydro plant, located in the north of brazil, to south-western load centers. The arrs associated with these assets account for a big parcel of the total values each year, and bids from Chinese companies seeking to enter the HVdc business in brazil have ensured competition for these facilities.
moreover, the total volume of transmission facilities offered in auctions by the government grew steadily in recent years and, while the total awarded arrs increased in absolute values, the number of auctioned items (concessions) for which there were no bids increased vertiginously since 2012, as shown in Figure 2.
The growing number of concessions with no valid bids hints at a decreased interest in transmission auctions. While several factors contributed to this, including deteriorating macroeconomic conditions in brazil, this article focuses on the effects of implementation problems.
The most notable difficulties with transmission imple-mentation in brazil relate to acquisition of rights-of-way
and social-environmental licensing. Concessionaires are experiencing increasing difficulties with the acquisition of land-use rights, and, while the government has oversight and can interfere with the declaration of land as being of public utility, in practice negotiation with land owners has recently become more complex and costly. social-environmental licensing requires the interaction of transmitters with sev-eral poorly coordinated licensing bodies, from the national sphere to municipalities. investors complain about inad-equately specified requirements for licensing, lack of coordi-nation and opaqueness of the process due to the multitude of licensing bodies, and sluggishness due to poor incentives for public employees.
Figure 3 indicates the accumulated number of conces-sions concluded on time and with delays in the 2002–2012
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figure 2. The number of concessions per occurrence for auctions between 2007 and 2015.
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figure 1. The results of Brazilian transmission auctions between 2007 and 2015.
58 ieee power & energy magazine july/august 2016
period and the accumulate average time required for obtain-ing the installation license, within the environmental-licens-ing process that allows construction works to begin, in the same period. The deteriorating conditions since the late 2000s is clear, and it is worth mentioning that, as of January 2016, 62% of transmission facilities under implementation in brazil were delayed.
acquisition of rights-of-way and social-environmental licensing currently take place after the auction and respon-sibilities are assigned to the concessionaire. The increasing uncertainty in the costs and times for the completion of these tasks exposes transmission companies to financial risks, due both to cost-overruns and to penalties and foregone revenues in case of delays. even though concession contracts include waivers for penalties if these are caused by actions not attrib-utable to transmitters, as in the case of delays by licensing bodies, diffuse attributions during the licensing process contribute to the perception of risks by concessionaires.
The impacts of implementation issues over the actual Cod of facilities are twofold: 1) the direct shift in the implementation schedule of facilities effectively awarded as a result of auctions and 2) the postponement of the date at which the implementation efforts will actually begin if a concession fails to receive valid bids in an auction and is relocated to a subsequent tender. The latter factor should not be underestimated; e.g., the second circuit of the 500-kV paulo afonso–Luiz Gonzaga transmission line was initially going to be offered in an auction held in January 2015 and
had its target contractual Cod set to march 2018, but it was relocated to an auction held in april 2016, with the contrac-tual Cod postponed to december 2019.
delays in the effective Cod, with respect to the date origi-nally set by the system planner, impact not only transmission companies but also grid users. Generators participating in auctions for long-term contracts in brazil are, presently, for-mally exposed to financial risks due to the impossibility of injecting power to the grid and covering contractual obliga-tions, if there are delays in the Cod of transmission assets required for their grid integration. These risks had been previ-ously allocated to consumers (buyers) but were reallocated to generators in 2013. assigning risks to transmitters via penal-ties that matched the contractual financial damages was not possible in practice; the fact that the auctioning of concessions results in several, yet smaller-scaled, concessionaires caused an unbearable financial burden for most transmitters.
Seeking Solutions to the Implementation Conundrumbrazilian power sector institutions are devising strategies to overcome these implementation problems. The strat-egies implemented or currently under investigation fall into three main groups.
Drive Toward Proactive Transmission Expansion PlanningThe energy planning enterprise (epe) already took the first steps toward proactive planning. in the context of this article, this means seeking to identify transmission expansion needs with as much antecedence as possible, to give transmission companies extended times for implementing the facilities, thus reducing the probability of delays. This is particularly impor-tant for facilities needed for integrating new generation to the system. in brazil, and in the other countries analyzed here, the generation segment is liberalized, and its expansion is the result of competition. Historically, network facilities were required to allow the for evacuation of generation to the load centers that were planned and auctioned only after the outcomes of gen-eration auctions were known, which was made possible by the then-shorter transmission implementation times. since imple-mentation delays present serious barriers to this approach, epe is seeking to use the best-available information to iden-tify regions with remarkable (renewable) generation potential before generation auctions and plan transmission to allow access to these resources, while avoiding picking winners dur-ing the auctions. Figure 4 shows examples of facilities (those marked in opaque red/green) planned under this mechanism and auctioned in 2014.
Stronger Role of State and Improvements in Social-Environmental Licensingdifferent governmental spheres are seeking mechanisms to improve the environmental licensing process, also in an effort to mitigate delays and increase the attractiveness of
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figure 3. The accumulated number of projects (a) con-cluded on time and with delays and (b) accumulated average time required to obtain environmental licensing in the 2002–2012 period.
july/august 2016 ieee power & energy magazine 59
transmission concessions. a first effort comes from the bra-zilian senate. if approved, bill #378/2013, proposed in 2013 and currently under evaluation by the Constitution and Justice Commission, after passing by the infrastructure and the envi-ronment Commissions, would establish that the first environ-mental license (FeL) (of a three-step licensing process) shall be obtained by governmental institutions before the transmis-sion auctions. The FeL specifies the social-environmental requirements for a given concession. obtaining it before the auction would allow investors to accurately evaluate the efforts required in the implementation stage, thus reducing the risks of delays and cost overruns. This can contribute to mitigating the phenomenon of auctions without valid bids.
yet there are divergences about the effectiveness of this measure. some institutions advocate that the responsibility should remain with concessionaires selected via auctions, since they have stronger incentives and better means to obtain the licenses, in comparison with government agen-cies. in light of this, the ministry of mines and energy (mme) is currently seeking means to facilitate the job of the concessionaires by improving the coordination of the vari-ous licensing bodies and implementing a one-stop-shop for all licensing dealings. The improvements may also include establishing stricter response time limits to licensing bodies to fast-track environmental licensing. in this case, licensing would be kept as a responsibility of transmission concession-aires selected via auctions and take place after them.
it is worth mentioning that the planning agency, epe, has the mandate to preliminarily evaluate, while devising and compar-ing alternatives for transmission expansion, social-environmen-tal barriers that may affect the assets’ feasibility. These analyses have been available in official plans for several years.
Regulatory Efforts to Modernize and Enhance Capacity of Facilities in Existing Rights-of-Wayin 2014, the brazilian regulator introduced adjustments to the regulation on reinforcements and technical improvements
to already existing transmission facilities. in a simple expla-nation, the adjustments 1) allowed a more active participa-tion of transmission concessionaires in the process of iden-tifying cost-effective reinforcements and 2) improved the economic incentives these companies perceive to identify and implement such reinforcements. Contrary to Greenfield assets, these reinforcements to existing facilities are not auctioned but rather are directly authorized by the regulator to the concessionaire.
Though these adjustments were aimed at facilitating the refurbishment and overhaul of several transmission assets that were implemented during the 1980s and are thus reach-ing the end of their physical lifetime, the regulator focused secondarily on improvements such as the repowering of facili-ties and installing sensoring systems and remote maneuver-ing equipment. in a context where implementing new assets is becoming increasingly difficult, this secondary focus aimed at enhancing the incentives for transmission companies and independent service operators (isos) to deliver as much capacity and flexibility as possible with existing equipment and transmission lines in existing rights-of-ways.
Adjusting the Price Cap of the AuctionsFinally, it is worth mentioning that the regulator has been very proactive in analyzing the needs of increases of the auc-tion price cap, via changes in the weighted average cost of capital that is behind the caps and other activities.
Chile
Successes of Model and Growing Difficulties with Transmission ImplementationThe elements of the framework presented earlier have also been used in Chile. With the 1982 electricity reform, Chile had initially adopted a more market-oriented transmission expansion model, based on bilateral negotiations between agents. This led to an underinvestment in transmission
Analyses with BestInformation on Potential
Proactive TransmissionExpansion Decisions
Source: EPE (Maps)
SizeableInvestments:
Hundreds of kmof TransmissionLines, Hundreds
of MVA ofTransformation
Capacity
figure 4. An example of proactively planned facilities in Bahia, auctioned in 2014. (The maps were obtained from public documentation made available by EPE.)
60 ieee power & energy magazine july/august 2016
capacity and, consequently, to the establishment of a frame-work combining centralized planning and auctions to select concessionaires in 2004.
Figure 5 shows the results of transmission auctions for the Central interconnected system (Cis, one of Chile’s main currently isolated subsystems) carried out since 2005. arrs awarded via auctions for the Cis alone amount to more than Us$160 million. The bars express the arr for each set of facilities in percentage of the highest bid in the auction, with values of 100% occurring when there was a single qualified bid for a given concession. despite these occurrences and the lack of bidders interested in the Lo aguirre–Cerro navia (L.aG-C.na) transmission line in 2013 (no bidders enrolled for the 2013 auction, and the facility was tendered again in
2014), auctions have, in general, been competitive, even recently in 2014 and 2015.
implementation issues are not, however, unfamiliar to Chile. social-environmental licensing and the acqui-sition of rights-of-way have been pointed out as impor-tant difficulties. societal opposition to transmission lines is a critical issue, and open demonstrations against the facilities are a visible symptom of the not-in-my-backyard problem. The emblematic case of the polpaico–Cardones 500-kV corridor between the capitol santiago and the north is a good example of problems faced. The corridor has encountered strong opposition by local communities, as shown Figure 6. in the meantime, spot prices in the north have often reached zero values, with abundant solar and wind energy unable to be exported to the capitol.
These factors contributed to project approval processes being subject to judicialization in the recent past, causing significant delays in project implementation. in fact, the first transmission projects listed in Figure 5 suffered severe delays; the delays of the Charrúa–nueva Temuco (CHar-n.Te), el rodeo–Chena (rode-CHen) and polpaico–nogales (pLop-noGa) transmission lines were 19, 18, and 21 months, respectively. in June 2012, the Chilean ministry of energy recognized that the average delays in the imple-mentation of transmission infrastructure were of 18 months.
Seeking Solutions to the Implementation Conundrumin the second semester of 2015, the Chilean president pro-posed a bill to Congress (message #731-363), formulating several improvements to the electricity transmission model.
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figure 5. The results of auctions for transmission assets in CIS (TL indicates transmission lines and TR transformers).
figure 6. Opposition to the Polpaico-Cardones corridor. The banner reads “No to high-voltage towers!” (Courtesy of newspaper El Día, La Serena, Chile.)
july/august 2016 ieee power & energy magazine 61
The bill was formulated through a novel wide-participatory process led by pontificia Universidad Católica de Chile, the ministry of energy, and the national energy Commission. it was approved by the lower Chamber and is under evalua-tion by the senate. This bill tackles issues ranging from the remuneration of transmission agents to the creation of a new power system independent coordination agency. measures aimed at mitigating implementation issues, which are the focus of this article, are also included in the bill.
Drive Toward Proactive Transmission Expansion PlanningThe bill would modify the process and criteria for planning (long-term energy planning in general and transmission expansion in particular) in Chile, in a clear shift toward a proactive process. determinative transmission expansion planning would be carried out annually by Cne, considering a horizon of at least 20 years. The objectives to be consid-ered by the system planner are extended to explicitly include transmission expansion to facilitate competition in the gen-eration segment, support access to high-quality generation resources, and minimize supply risks, considering different scenarios, such as unavailability of energy infrastructure, natural disasters, or extreme hydrological conditions. These criteria are aligned with proactive planning, as previously mentioned. The need to bestow the transmission system with sufficient slack capacity and redundancy to achieve these objectives is explicitly mentioned in the bill.
achieving this objective would require coordination with the long-term energy plan, which shall, according to the bill, incorporate prospective scenarios of the evolution of generation development. mechanisms to ensure societal participation in the development and approval of plans are also contemplated.
The concept of development hubs is introduced in the bill, in regions with high-quality generation resources where exploi-tation is a matter of public interest. The planning of the infra-structure required to access these hubs, through a set of trans-mission facilities designed to accommodate the current and the anticipated demand of projects and connect them to the main grid, is introduced as a mandate of Cne. The development costs for these facilities would be transitorily assigned to con-sumers, until the moment at which generators connect to them.
Making the Most of Existing Assetsmoreover, while establishing the criteria to be considered by Cne for transmission expansion planning, the bill explicitly mentions that this institution shall evaluate alternatives with
modifications in existing transmission facilities, presumably including repowering and technical improvements to con-fer operational flexibility to the system. The guideline to make the most of existing assets, in a context where imple-mentation of Greenfield facilities encounters difficulties is, therefore, also contemplated in the bill.
Stronger Role of State in Determining Routes and Ensuring Rights-of-WayThe bill also introduces a novel procedure for the study and approval of transmission line routes. Under the current framework, once a transmission line is identified as neces-sary by the system planner, the facility is offered in an auc-tion with little information on its route. The actual route is to be defined ex post by the transmission concessionaire that wins the auction. The proposed mechanism proposed estab-lishes that the ministry of energy would actively engage in the preliminary definition of transmission line routes by contracting studies for this definition prior to the auc-tion and according to detailed criteria on the nature of the social, environmental, demographic, physical, and economic aspects to be considered. The preliminary route identified in this study is subject to strategic evaluation and approval by a sustainability Council of ministries. Upon approval, a formal governmental decree is issued, also prior to the auction, fixating the route and specifying that rights-of-way shall be established to allow its effectuation. The mechanism aims to mitigate risks for transmission concessionaires since the rights-of-way would be imposed as soon as the conces-sionaire, after the auction, obtains an environmental license, except in exceptional circumstances specified in the bill.
Colombia
Successes of Model and Recent Difficulties with Transmission Implementationauctions have been used in Colombia to select agents respon-sible for the implementation and operation of centrally planned transmission facilities since the early 2000s. in this country, bidding and winner selection rules are slightly differ-ent; participants’ bids correspond to information that allows calculating the net present value (npV) of the aars at a dis-count rate determined by the regulator, and the winning bid is that with the lowest npV.
Figure 7 displays the results of auctions for the national transmission system since 2013. blue bars express the win-ning bid as a percentage of the highest bid in the auction, with
Auctions have been used in Colombia to select agents responsible for the implementation and operation of centrally planned transmission facilities since the early 2000s.
62 ieee power & energy magazine july/august 2016
values of 100% occurring when a single bid was presented. This single bidder is necessarily isa, the largest transmitter in the company, predominantly owned by the state. isa is mandated to participate in every tender by the regulation. despite occurrences of a single bidder, recent auctions have been marked by competition. Competition has been verified despite problems with implementation delays in Colombia, which have been increasing in severity, with transmission companies active in the country, including isa, pointing out
that issues with environmental licensing and land-use rights contributed strongly to delays.
in the case of the nueva esperanza project, shown in Fig-ure 8 the concession was awarded to the auction winner by an act of Upme (mining and energy planning Unit, a gov-ernmental unit) and the mme dated from 2010. The original target Cod was set for august 2012. The mme postponed the target Cod in two occasions: first to november 2012, with problems in environmental licensing as the reported
cause of postponement, and later to may 2015, due to archeological findings. soon after implemen-tation efforts commenced, the trans mission company advocated, during a meeting of the asses-sor Committee for Transmission planning in august 2011, that measures to obtain environmen-tal licenses previously to tenders were adopted in Colombia to mit-igate similar problems in future auctions. at that occasion, power sector institutions answered that the investor was in a better posi-tion to manage the licensing pro-cess than the government.
as of this writing, the nueva esperanza project had not yet entered commercial operations. The system planner and the iso/
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2013
: TULU
NI 230
kV
2013
: BELL
O-ANCÓN 2
30 kV
2013
: SURÍA
230
kV
2013
: CARACOLI
220
kV
2013
: MONTERIA
230
kV
2014
: REF-G
UAV-TUN 2
30...
2014
: LOM
A 500
kV
2014
: ITUA-M
ED 500
kV
2014
: SUROCCI.
500
kV
2014
: C.C
ARIBE 5
00 kV
2014
: R.C
ÓRDDOBA 220
kV
2014
: VALL
EDUPAR 220
kV
2015
: PALE
NQUE 230
kV
2015
: CARGATO 2
30 kV
Awarded NPV of Revenues (% of Highest Bid in Auction)
Awarded NPV of Revenues (Nominal US$ Million)
figure 7. The results of auctions for the National Transmission System in Colombia (tenders since 2013).
Future Location ofNueva Esperanza
Substation
Bogotá
Source:UPME(Maps)
figure 8. The future location of the Nueva Esperanza substation superimposed transmission system (2014). (Maps were obtained from public documentation made available by UPME.)
july/august 2016 ieee power & energy magazine 63
independent market operator took measures to avoid that the absence of the project resulted in a loss of reliability to the supply of bogotá, the capitol city. These included not only operation measures (such as generation redispatch) but also the installation of static condensers and additional trans-formers in existing substations.
Seeking Solutions to the Implementation ConundrumColombian institutions have already taken the first steps to mitigate implementation problems, and other measures have been proposed in regulatory instruments currently under public consultation.
Incorporation of the Environmental and Land-Use Dimensions in Transmission Expansion PlanningFor the elaboration of the most recent transmission expan-sion plans, Upme has been executing preliminary assess-ments of social-environmental issues, including potential land-use conflicts, which may affect the implementation of facilities. These efforts have been carried out since the 2014–2028 plan, homologated in January 2015, and focus on identifying early warnings for the development of facilities and to support the definition of realistic imple-mentation times by the planner. The information on early warnings has also been incorporated as part of the support documentation to transmission auctions in an effort to not only improve the definition of target Cods by the system planner but also to aid the evaluation of implementation risks by transmission companies.
Incorporation of New Technologies as Means of Improving Performance of Existing AssetsCreG, the Colombian regulator, proposed several modi-fications to the transmission regulation in december 2014. The proposals, contained in resolution #178/2014, focus on legacy assets, which were already existing when the auction mechanism was introduced in Colombia.
These proposals include adjustments to remuneration mechanisms and to performance incentives, including a menu of contracts. The objective of the adjustments is not only to improve incentives for service quality and for the substitution of assets approaching the end of their lifetime but also to provide incentives for incorporat-ing new technologies to the system. These include smart technologies, among them, presumably, those required to enhance the observability and operational flexibil-ity of legacy assets, such as sensoring and maneuvering equipment. as in the case of brazil, the proposals can be seen as an additional effort to make the most of existing assets, improving their performance and loadability, in a context where the implementation of Greenfield assets encounter barriers.
as of this writing, resolution #178/2014 is under public consultation. although transmission companies have wel-comed certain aspects of the proposals, certain changes in remuneration mechanisms have made them reluctant to sup-port the resolution; particularly, the shift from a gross opti-mized replacement cost approach to a depreciated optimized replacement cost one, as the basis of asset valuing.
Cross-Country Comparison and Lessons LearnedTable 3 summarizes the main elements of the strategies adopted or under investigation in brazil, Chile, and Colom-bia to cope with implementation issues hindering timely and sufficient transmission expansion. These results should be interpreted in light of the fundamental elements of the trans-mission expansion framework in the analyzed countries: 1) centralized and determinative planning by national insti-tutions and 2) decentralized implementation by means of transmission concessionaires selected via auctions.
some factors contribute to facilitating the accommoda-tion of the drive toward proactive planning within the trans-mission expansion framework used in the countries, the first of which being the execution of determinative transmission
table 3. A summary of the main elements of strategies adopted by each country.
Country
Class of Strategies
Proactive Planning
Stronger Role of State and Social-Environmental Licensing, Routing and/or Acquisition of Rights-of-Way
Making the Most of Existing Assets
Brazil First experiences by EPE in 2014
Bill #378/2013 is still under evaluation; MME reportedly seeking solutions to improve licensing process
Secondary goal of adjustments to regulation on reinforcements and technical improvements in 2014
Chile Proposals contained in the bill (Message #731-363) issued in 2015; the bill currently under evaluation
Colombia Since 2014, UPME incorporates social-environmental dimension in transmission expansion plans
Proposals contained in CREG Resolution #178/2014, currently under evaluation
64 ieee power & energy magazine july/august 2016
expansion planning by a national-level institution that over-sees the whole country.
in brazil and Chile, the proactive efforts carried out by the central planner are to a large extent oriented to accessing resource-rich areas and promoting competition in generation auctions. The different orientation of the actions taken so far in Colombia explains the different coloring of the cor-responding cell in Table 3. yet informal consultation with Colombian players has revealed that discussions about pro-active planning methods are emerging.
special attention in proactive planning should be given to avoiding picking winners while designing systems to access areas with high-quality (renewable) potential, since this would harm the principle of nondiscriminatory open access as a means of promoting competition in generation. The risk of a government-led process being affected by biased politi-cal pressures, aimed at benefiting a region, is also a concern.
presumably, brazil and Chile are relying on information gathered not only via recent country-wide resource assess-ments but also via auctions for long-term generation contracts (i.e., information on areas with a high number of candidate generators) to avoid such pitfalls in proactive planning. in general terms, planning agencies seem to be aware of the drawbacks of information asymmetries and seek to employ their best efforts to overcome them; a possible approach involves methodological efforts, with the consideration of different scenarios of competitive generation and the choice of robust expansion plans to fit them.
dealing with the costs of proactively planned trans-mission facilities is also a matter of interest. The Chil-ean approach for the systems to access development hubs includes allocating costs to consumers, until the moment when generators actually access the system. The brazil-ian approach does not specify a differentiated treatment proactively planned facilities of the trunk transmission; the usual cost allocation approach will be used, which involves a 50/50 allocation of costs to the generation and the con-sumption segments as a whole and then an allocation to each agent within each segment with basis on a locational economic signal and a postage stamp (with the latter typi-cally recovering most costs).
The legislative bodies of both brazil and Chile are cur-rently evaluating bills that more strongly involve the state in the licensing process (and, in the case of Chile, in the obtaining of rights-of-way). again, this might be facilitated by governmental institutions already executing expansion planning; and, conceivably, the planners can benefit from information and know-how exchanged/acquired during licensing processes, regarding both feasibility of imple-mentation schedules and environmental costs that should be considered while comparing transmission expansion alternatives. it is worth mentioning, however, that this is not the only possible avenue to overcome implementation prob-lems. For instance, other jurisdictions in the world employ tenders where a transmission need is identified, and bidders
present different solutions (including different routes, sub-ject to the implementation challenges the bidder finds easier to overcome) as part of the competition.
in brazil, there has been opposition from power sector institutions to assign the responsibility of acquiring licenses to the planning agency, with the argument that transmission concessionaires are better positioned to do this. The coun-terproposal of fast-tracking and simplifying licensing proce-dures has been presented by the mme. similar arguments were presented in Colombia in 2011. These are legitimate concerns but some transmission investors argue that, to be able to form bids in auctions, it is of uttermost importance to at know beforehand which social-environmental liabilities will need to be addressed during the project implementation.
The third class of common elements refers to improving incentives and facilitating the identification and approval of reinforcements to existing facilities, including overhead lines in existing routes to make the most of already exist-ing assets and counteract difficulties in installing new facilities. This strategy fits a feature also essentially com-mon to the jurisdictions: these reinforcements (at least to some asset classes) are usually approved and have their revenues set directly by the regulator, rather than being auctioned. since the remuneration of transmission con-cessionaires does not depend on congestion revenues, but rather on fixed revenues defined by the regulator, changes in the remuneration rules and availability incentives are required to improve the incentive structure regarding the incorporation of new technologies. The current opposi-tion of the Colombian transmission agents to resolution #178/2014 shows, however, that the process of change is anything but simple.
For Further ReadingeCLaC. (2014). The economic infrastructure gap and in-vestment in Latin america. [online]. available: http://www.cepal.org/en/publications/37381-economic-infrastructure-gap-and-investment-latin-america
H. rudnick, r. Ferreira, s. mocarquer, and L. barroso, “Transmission expansion in fast growing economies and the challenges of renewables integration,” in Proc. IEEE Power and Energy Society General Meeting, san diego, Ca, 2012, pp. 1–8.
H. rudnick, L. barroso, d. Llarens, d. Watts, and r. Fer-reira, “Flexible connections,” IEEE Power Energy Mag., vol. 10, pp. 24–36, mar./apr. 2012.
BiographiesRafael de Sá Ferreira is with psr Consulting, rio de Ja-neiro, brazil.
Hugh Rudnick is with pontificia Universidad Católica de Chile, santiago, Chile.
Luiz Barroso is with psr Consulting, rio de Janeiro, brazil, and Comillas pontifical University, madrid, spain.
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