He Executive power issued a decree recognizing firm power capacity to generate electricity to new renewables, basically wind and solar. These energies -logically- generate energy when there is wind and sun, respectively. But as a whole, looking at electricity generation today as an integrated system from various sources, they have had the capacity to sustain the supply of energy in a continuous (firm) manner, at least to a certain extent. That is what is recognized now.
This issue -rather technical- has a key business consequence. To these new parks renewable energy They were required to have firm support (basically, generation based on fossil fuels) very high (around 50% of total capacity), which raised the cost and made it difficult to sell directly to big consumers. With the new decree and the aforementioned “recognition”, this requirement of firm power is much lower than before, which lowers the cost and opens business opportunities. It is also a further recognition of the renewable energy, not polluting the atmosphere. Being required to have strong fossil energy back-up attached to them doesn’t make much sense.
But in joint venture the decree fell like lightning because some of its members consider the new provision as a threat. It happens that today joint venture it is buying energy from already installed wind and photovoltaic farms, at prices that -on average- are notoriously higher than the new ones that would be entering, and competing to supply large consumers, which would constitute unfair competition; see the risk that several large consumers will leave joint venture and begin to provide themselves with independent generators. This vision is that of the director of joint venture In representation of Town meeting (Ec. Enrique Pees Voice) and the director representing the Broad Front (Dr. Fernanda Cardona). It is also that of the union. It is not the first time that the FA and the Cabildo come together, in opposition to a liberal initiative.
In fact, months ago joint venture sought to renegotiate those contracts signed at prices that today are perceived as high, to lower them, extending the term of the contracts in return. But the negotiation did not come to fruition and the situation remained unchanged.
The changes will be gradual and will also depend on another key issue for the electricity market: the cost of transmission tollspaid by generators/consumers to the grid (of joint venture) for transmitting electrical energy between the source and the point of consumption. In the opinion of the generators, these toll costs are currently excessive and may represent up to 30% or more of final cost. From UTE, It is emphasized that the costs have to cover network management, maintenance and -obviously- investments. Nothing is free. In any case, the tolls are defined by Regulatory Unit for Energy and Water Services (Ursea).
free electrons
The new decree is one more step in the opening of the electricity marketwhich began to be configured from the Regulatory Law of the Energy Framework (16,832)of the year 1997, which included free generation and the creation and regulation of an electricity market, with its own administration (ADME). The law was approved in 1997 (second presidency of Dr. Julio Maria Sanguinetti) and especially during the Broad Front governments (2005-2020) hundreds of megawatts of generation based on renewable energy were added, from investments local and international business in wind farms and, more recently, photovoltaic, as well as some biomass-based generation companies. wind farms joint venture also added, as well as the generation of the pulp mills.
All these projects were included in the supply of demand through fixed price contracts. The regulatory framework also enabled from the beginning the possibility of contracts between companies and a spot market, but these have had little development due to various limitations. One of them is the one that rises with the new decree, but in joint venture it is discussed whether to challenge it. The directory is divided.
From the Ministry of Industry, Energy and Mining (MIEM)headed by Eng. Omar Paganini, It is understood that the new decree will promote investment in generation and lower costs, which will result in benefit of the economy and consumers. In particular, it will make it possible to attract projects with high energy demand, and which until now could not be installed due to cost and/or backup capacity. Projects to generate green hydrogen and also for batteries for various uses (among them, electric mobility) are mentioned. In turn, many international companies, increasingly aligned with environmental objectives, see a very attractive opportunity in supplying renewable energy with new contracts, which would reinforce their sustainability. It is the case of Montevideo Soft Drinks SAwhich has already signed -in the current regime- an electricity supply contract with the wind farm Albisu (Jump) of the international company Atlantic renewable energy. In this case, the firm power is provided by a company that generates based on biomass.
From the Uruguayan Association of Private Electric Power Generators (AGPEE) defend the new decree. They emphasize that the Cost of Supply of Electricity Demand (CAD) has decreased substantially with the incorporation of the renewable energy of investor parks. According to their numbers (based on a study by the Exante consulting firm), the unit cost fell from 64 to 38 U$S/MWh, a 50% drop in real terms (graph). The rates of joint venture They went down, but in a much smaller percentage. According to AUGPEE this has allowed a substantial improvement in the results of UTE.
The directors who oppose the decree and the union speak of privatization. I understand that to privatize is to sell state-owned capital to an independent entrepreneur or non-state company. This is not the case: the process of recent years has open more space to investment in energythat he Uruguay it needs in order to continue growing. It is obvious that for joint venture this is a challenge, the issue is how to face it. The state company has a point in highlighting the asymmetry between the current contracts (which it pays for), compared to the new, more competitive ones, which could take customers away from it. But it also has room to improve its competitiveness and lower rates. And if you are burdened with obligations of a more social nature and subsidize certain sectors or population, it would be good to make it transparent and clarify the accounts. Energy and social policies are different things.
Source: Ambito
