Power outages: the nine reasons that led the Government to create a contingency plan

After authorizing the light increases, the government created a contingency plan to mitigate or reduce power outages for this summer. What were the reasons given for the Secretary of Energy to make that decision?

In the Resolution 294/2024 of the Ministry of Economy and the Secretariat of Energy, published in the Official Gazette, the Government establishes the following reasons linked to “inheritance” through a study carried out by CAMMESA (Company Administrator of the Wholesale Electricity Market SA).

The key points of the contingency plan for power outages

1. Vulnerability and critical state of the energy sector which is evident in three key aspects: a) collection system b) functionality of the facilities to ensure current and future supply. c) lack of market signals for supply and demand.

2. “Interventionist policies”: in the last 20 years the Enforcement Authority set energy values ​​that did not take into account the real costs of supplying the system, which caused a permanent deficit in the Stabilization Fund.

3. The differences between the Subsidized Seasonal Price were covered by the State through refundable contributions to the Unified Fund to financially assist the Stabilization Fund.

4. The deficit situation of the Stabilization Fund was aggravated by the increase in delinquency of debtor agents of the MEM (Wholesale Electricity Market), especially the Distributors and Cooperatives providing public services.

5. The coverage of the required power during the last TWO (2) decades has deteriorated as consequence of insufficient investment in generation equipment that would compensate for the growth in demand and the retirement of units with exceeded useful lives or inefficient.

6. Use of 55% with peak power demands on very hot days in summer, and consequently the effective availability of the generation park is insufficient to meet peak power demands without resorting to imports from neighboring countries, and even having to affect the system’s reserve power.

7. The system faces the loss of reliability of heat engines with antiquities ranging from THIRTY (30) to FIFTY (50) years for the most extreme cases.

8. In the electrical energy transportation systems, both interregional (in extra high voltage) and regional (through trunk distribution), a state of high occupancy is evident, and in some cases, saturation due to lack of investments, for example. below the minimum needs required to maintain their operational capacity, which has forced them to resort to local generation with extra fuel costs.

9. The 2% annual growth in energy demand, along with the capacity reduction of thermal generation plants and the request to detach electricity generation plants that are about to exhaust their useful life, highlights the need for investments in new generation plants to have greater availability in the short and medium term.

Increase in rates and infrastructure works: the Government’s vision

According to the same report, the Secretary of Energy assures that “the tariff updates made have as an immediate objective recompose the economic collection system of the sector, at the same time as replenishing the functional capacity of the system to be able to meet the demand in conditions of quality and safety, by surveying the operational status of the distribution systems under federal jurisdiction and those of transportation, both interregional and trunk distribution.

At the same time, he maintains that the priority was made under the premise of “urgently eliminating the squandering of scarce resources, and covering the cost of supply, “after years of encouraging demand with deliberately low prices that did not take into account the costs of operation and expansion.”

Finally, he admits that despite the recomposition of rates, during the current emergency “the investments have not been completed since they require time to be completed and generally “They are major works that take more than a year to materialize.”