IDEAS home Printed from https://ideas.repec.org/a/gam/jeners/v15y2022i12p4336-d838202.html
   My bibliography  Save this article

Chilean Electric Transmission Regulation: From a Merchant Approach to Central Planning

Author

Listed:
  • Fernando Fuentes

    (Departamento de Economía, Facultad de Administración y Economía, Universidad Diego Portales, Santiago 8581169, Chile)

  • Pablo Serra

    (Departamento de Economía, Facultad de Economía y Negocios, Universidad de Chile, Santiago 8330015, Chile)

Abstract

From the 1980s onwards, many jurisdictions reformed their electricity sectors to create energy markets. To this end, they unbundled transmission from generation, raising the issue of whether and how to regulate transmission. This paper contributes to this literature by analyzing the 40-year Chilean experience. To do so, it describes the initial transmission regulation, the changes introduced, the causes that triggered them, and their results regarding grid access and expansion and their impact on the energy market. The Chilean Electricity Act, issued in 1982, established open access to transmission facilities but left access and expansion conditions unregulated. This situation caused generators’ grid access problems, harming energy market competition. In 2004, lawmakers amended the Act to require the regulator to develop annual expansion plans and regulate transmission remuneration and financing. Following these changes, transmission expanded adequately for about a decade. However, since 2016, renewable energy curtailments have been significant due to congestion on some transmission lines due to construction delays. The increasing empowerment of civil society in the decision-making processes of new investments is relevant in explaining the delays. The main lesson is that citizen consensus-building is crucial for grid expansion.

Suggested Citation

  • Fernando Fuentes & Pablo Serra, 2022. "Chilean Electric Transmission Regulation: From a Merchant Approach to Central Planning," Energies, MDPI, vol. 15(12), pages 1-15, June.
    • Handle: RePEc:gam:jeners:v:15:y:2022:i:12:p:4336-:d:838202
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1996-1073/15/12/4336/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1996-1073/15/12/4336/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Egerer, Jonas & Rosellón, Juan & Schill, Wolf-Peter, 2015. "Power System Transformation toward Renewables: An Evaluation of Regulatory Approaches for Network Expansion," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 36(4), pages 105-128.
    2. M. Pollitt, 2004. "Electricity reform in Chile. Lessons for developing countries," Competition and Regulation in Network Industries, Intersentia, vol. 5(3), pages 221-263, September.
    3. Javier Bustos-Salvagno & Fernando Fuentes H., 2017. "Electricity Interconnection in Chile: Prices versus Costs," Energies, MDPI, vol. 10(9), pages 1-17, September.
    4. Oren, Shmuel S. & Spiller, Pablo T. & Varaiya, Pravin & Wu, Felix, 1995. "Nodal prices and transmission rights: A critical appraisal," The Electricity Journal, Elsevier, vol. 8(3), pages 24-35, April.
    5. Wu, F.F & Zheng, F.L. & Wen, F.S., 2006. "Transmission investment and expansion planning in a restructured electricity market," Energy, Elsevier, vol. 31(6), pages 954-966.
    6. Schill, Wolf-Peter & Egerer, Jonas & Rosellón, Juan, 2015. "Testing Regulatory Regimes for Power Transmission Expansion with Fluctuating Demand and Wind Generation," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 47(1), pages 1-28.
    7. Renato Agurto & Fernando Fuentes & Carlos J. García & Esteban Skoknic, 2021. "The macroeconomic impact of the electricity price: lessons from Chile," Empirical Economics, Springer, vol. 60(5), pages 2407-2428, May.
    8. Stephen Littlechild, 2012. "Merchant and regulated transmission: theory, evidence and policy," Journal of Regulatory Economics, Springer, vol. 42(3), pages 308-335, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ali Darudi & Hannes Weigt, 2024. "Review and Assessment of Decarbonized Future Electricity Markets," Energies, MDPI, vol. 17(18), pages 1-38, September.
    2. Chao, Hung-po & Wilson, Robert, 2020. "Coordination of electricity transmission and generation investments," Energy Economics, Elsevier, vol. 86(C).
    3. Friedrich Kunz & Juan Rosellón & Claudia Kemfert, 2017. "Introduction of Nodal Pricing into the new Mexican Electricity Market through FTR Allocations," The Energy Journal, , vol. 38(1_suppl), pages 157-172, June.
    4. Gerbaulet, C. & Weber, A., 2018. "When regulators do not agree: Are merchant interconnectors an option? Insights from an analysis of options for network expansion in the Baltic Sea region," Energy Policy, Elsevier, vol. 117(C), pages 228-246.
    5. Zenón, Eric & Rosellón, Juan, 2017. "Optimal transmission planning under the Mexican new electricity market," Energy Policy, Elsevier, vol. 104(C), pages 349-360.
    6. Guler, Burak & Çelebi, Emre & Nathwani, Jatin, 2018. "A ‘Regional Energy Hub’ for achieving a low-carbon energy transition," Energy Policy, Elsevier, vol. 113(C), pages 376-385.
    7. Claudia Kemfert & Friedrich Kunz & Juan Rosellón, 2015. "A Welfare Analysis of the Electricity Transmission Regulatory Regime in Germany," Discussion Papers of DIW Berlin 1492, DIW Berlin, German Institute for Economic Research.
    8. Pineau, P.-O. & Dupuis, D.J. & Cenesizoglu, T., 2015. "Assessing the value of power interconnections under climate and natural gas price risks," Energy, Elsevier, vol. 82(C), pages 128-137.
    9. Simshauser, Paul, 2024. "On static vs. dynamic line ratings in renewable energy zones," Energy Economics, Elsevier, vol. 129(C).
    10. Hinker, Jonas & Hemkendreis, Christian & Drewing, Emily & März, Steven & Hidalgo Rodríguez, Diego I. & Myrzik, Johanna M.A., 2017. "A novel conceptual model facilitating the derivation of agent-based models for analyzing socio-technical optimality gaps in the energy domain," Energy, Elsevier, vol. 137(C), pages 1219-1230.
    11. Anupama Sen and Tooraj Jamasb, 2012. "Diversity in Unity: An Empirical Analysis of Electricity Deregulation in Indian States," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    12. Schober, Dominik, 2013. "Static vs. dynamic impacts of unbundling: Electricity markets in South America," ZEW Discussion Papers 13-033, ZEW - Leibniz Centre for European Economic Research.
    13. Daniel Platz, 2009. "Moving Beyond the Privatisation Debate: Different Approaches to financing Water and Electricity in Developing Countries," Working Papers id:1856, eSocialSciences.
    14. Paul Joskow & Jean Tirole, 2005. "Merchant Transmission Investment," Journal of Industrial Economics, Wiley Blackwell, vol. 53(2), pages 233-264, June.
    15. Brunekreeft, Gert, 2004. "Market-based investment in electricity transmission networks: controllable flow," Utilities Policy, Elsevier, vol. 12(4), pages 269-281, December.
    16. Benjamin F. Hobbs & Yuandong Ji, 1999. "Stochastic Programming-Based Bounding of Expected Production Costs for Multiarea Electric Power System," Operations Research, INFORMS, vol. 47(6), pages 836-848, December.
    17. Simshauser, P., 2020. "Merchant utilities and boundaries of the firm: vertical integration in energy-only markets," Cambridge Working Papers in Economics 2039, Faculty of Economics, University of Cambridge.
    18. Pollitt, Michael, 2009. "Evaluating the evidence on electricity reform: Lessons for the South East Europe (SEE) market," Utilities Policy, Elsevier, vol. 17(1), pages 13-23, March.
    19. Li, Yanfei & Chang, Youngho, 2015. "Infrastructure investments for power trade and transmission in ASEAN+2: Costs, benefits, long-term contracts and prioritized developments," Energy Economics, Elsevier, vol. 51(C), pages 484-492.
    20. Joskow, Paul L & Tirole, Jean, 1999. "Transmission Rights and Market Power on Electric Power Networks I: Financial Rights," CEPR Discussion Papers 2093, C.E.P.R. Discussion Papers.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jeners:v:15:y:2022:i:12:p:4336-:d:838202. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.