The draft (see) of the new power transfer regulations , which proposes four main objectives, will be open for public consultation until 23:59 on September 24th:
- Having a sufficiency target and a sufficiency metric for the national electricity system (SEN), which allows allocating power to generating units based on compliance with said target.
- Determine the system's sufficiency requirements, according to the periods of greatest demand in the aforementioned system, delivering an efficient and sustainable signal to the demand that are consistent with said requirements.
- To have a methodology for allocating power to generating units that is applicable to any technology and that this allocation is based on the contribution that the aforementioned units make to the sufficiency of the system.
- To improve various methodological aspects related to the determination of power transfers between generating companies established in the General Law of Electrical Services.
It has been a fairly participatory and open process, which has allowed for the generation of certain consensuses and critical mass regarding what should be done in this regulation.
The proposal submitted for public consultation is very different from the initial ideas or intuitions.
Getting to the heart of the matter, I believe that establishing a sufficiency target for the system, to be determined by the authority as a public policy decision that addresses the reality and challenges, is positive.
Another relevant aspect is the change in the mechanism for defining peak control hours, which will be done with a study and not based on a technical criterion that may have made sense at some point but is now seen as arbitrary.
It has also been highlighted as an advance that the system has moved from two states of forced unavailability (IFOR) to four states, which allows for better recognition of the unavailability of facilities independently of their dispatch.
One of the most striking aspects of the proposal is the introduction of powerful incentives for the installation of storage systems, which are set out in the transitional provisions. This could have a huge impact on the future development of the system and the decarbonization process.
It is a signal that was requested, but its magnitude is possibly surprising; however, for the signal to have the intended effect, the steady-state regime must be consistent with this signal.
On the downside, a complex methodology is incorporated, the specific effects of which, depending on the type of technology, have been outlined by the ministry, but are still to be specified based on what is determined by the technical standard.
Another drawback is precisely that its effective implementation will require the development of technical standards, the enactment of which has proven to be complex and require extensive discussion periods.
Added to this is the large number of relevant aspects that must be determined by exempt resolutions of the National Energy Commission, which do not have the same participation standards as technical standards nor are they subject to the control of the Comptroller General of the Republic.
This introduces uncertainty.
Another point of concern is that this initiative, which began in the context of the flexibility strategy announced by the government, has required considerable time and dedication, and other specific, short-term measures to effectively address the system's flexibility needs have lagged behind.
It is necessary to redefine priorities to address this issue, considering the long-term impacts of this regulation, and to move forward decisively. What do you think will be the main considerations of the renewable energy industry regarding this draft? In this area, there are various legitimate interests, not all of them aligned, even among different renewable technologies.
Those power generation companies with technology plants that are most severely penalized by the new methodology will likely make their observations.
Companies that own photovoltaic plants have raised particular concerns, believing that the methodology being introduced particularly penalizes solar power plants.
Companies that have generating units in the system and invested considering power as a service that allows for predictable and stable income will likely demand a longer adaptation period to the new rules, while another sector of the industry has raised the need to bring forward the implementation times of this initiative, considering the challenges of the transition and the current needs of the system.
It is noteworthy that the proposal indicates that the changes to the Power Margin and Theoretical Reserve Margin that exist today must be applied from the publication of the regulation.
Let us remember that the Theoretical Reserve Margin is the minimum overcapacity in generation capacity that allows the supply of peak power in an electrical system or subsystem with a certain sufficiency, given the characteristics of the generating units and the transmission systems of the electrical system.
This will require adjusting the market size immediately, which will very soon impact the companies that are currently involved in power transfers.
This will be a very controversial aspect in my opinion, not only from the point of view of income but also because it would eliminate the basis of the 10% theoretical reserve in a situation of preventive rationing.
It seems like a counterintuitive sign.
One aspect that I believe will be valued by the renewable energy sector is the signal, as I indicated earlier, to investment in storage to the extent that the permanent regime is consistent with the transitional treatment.
It's an incentive to incorporate energy storage into renewable generation projects, such as one of the projects awarded in the recently announced tenders for regulated customers. Do you think these demands from the sector will be addressed by the government in the new power transfer regulations? It's unlikely that all the sector's demands could be met in these regulations, as the interests and perspectives of the various stakeholders are not the same.
I believe that, nevertheless, there is a consensus that there are some positive aspects to the proposal, at least in the current regulatory context.
The implementation period is one of the most discussed aspects of the proposal and, for some, its opportunity.
For some actors, the 9 years it will take for full implementation, more or less, is reasonable; for others, the demands of the energy transition process require earlier implementation.
I believe the Ministry's decision to incorporate storage incentives starting from the issuance of the regulations attempts to resolve these opposing views, but doubts remain as to whether it will be sufficient.
On the other hand, it could be argued that this is not the time to make these changes when we are in a situation of hardship; for others, it is an opportunity that should not be missed.
The challenges of the energy transition increasingly justify a market redesign, and this draft does not introduce a relevant change in that direction, as it is based on the current regulatory framework.
It is also very likely that opinions will be raised demanding a greater adjustment to the market design, an expectation that goes beyond the discussion of this instrument.
Finally, given the limited time remaining for this administration and the time normally required for the review of a regulation by the Comptroller General of the Republic, its processing may not be completed, which opens the possibility that a new government may review the definitions contained in this instrument.