Hydro Costa Rica 2012

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Renewable Generation Outlook in the Central America Electricity Market

April 2012

Oscar Jimnez & Fernando Montoya Carbn Ingeniera, Costa Rica & SNC-Lavalin, Canada ABSTRACT: The Central American countries created long ago the Regional Electricity Market or MER, with the purpose of optimize the operation and development of the generation resources. This market will be reinforced with the commissioning of the SIEPAC interconnection line, due in 2012, with 300 MW of interconnection capacity in its first stage, with the possibility of doubling this capacity in the near future. This paper reports about a study to forecast the operation and development of the generation systems of the MER countries, considering the future investments up to the year 2015. According to this study, the renewable generation is expected to increase from 61% in 2009 up to 74% in year, making a comeback to what has been a market dominated by fossil fuel installations during the last 15 years. The energy generation will come from 57% of hydro-electric sources, 9% from geothermal, 5% from biomass, 3% from wind power, and 26% from fossil fuel production. This is a very welcome result, given the concerns about climatic change and oil scarcity in the years ahead. INTRODUCTION: The Central American countries initiated since the nineteen seventies studies for the possibility of creating a regional electricity market (MER). These let in 1996 to the subscription of the Framework Treaty for the Regional Electricity Marked. During the next years this Treaty was approved by the countries National Assemblies and studies carried out to define the details of the institutional and legal framework for the Regional Marked. Along with this, the basis for the development and construction of a Regional Interconnection were laid, named the SIEPAC interconnection. The objectives of the MER are several: a) improve the reliability of the combined electrical systems; b) to optimize de operation of the combined electrical systems; and c) to create the possibility of a bigger and more efficient electricity market, for instance by the construction of generating projects of regional size. Instrumental for this market is the construction of the SIEPAC, a $500 million project, comprising the construction of a 1800 km long, 230 kV line, along with its associated sub-station and national system electrical reinforcement, which will allow the transmission, in its first stage of up to 300 MW capacity between contiguous countries. This infrastructure project is already in a commissioning stage, due to finish in about a the year. Regarding the institutional framework, the Treaty created a dedicated purpose transmission company (EPR) in charge of the development of the SIEPAC interconnection; a regional market operator (EOR); and a regional regulatory body (CRIE). Theses institutions are already in place, the definition of detailed rules and regulation are being discussed between members. The regional operator (EOR) is required to carry out indicative planning studies covering at least 5 years into the future. The aim of these studies is the survey the expected evolution of the electricity supply and demand, including forecast of the generation resources and fuels; analysis of the future system reliability of the regional generation and transmission system; and the expected energy transaction within the MER. The main results of this Regional Indicative Planning Study, for the period 2011-2015, is reported in this paper, with emphasis in the development of renewable resources. Central America is a region of the world endowed with a large base of renewable resources; which unfortunately has been poorly developed until recently. For the contrary, during the period from 1990 to 2007, a large increase of fossil fuel generation took place. It was not until the last four to five years that a reversion of this trend has started to take place.

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METHODOLOGY: For the regional planning several stages were followed: Establishment of a regional data base including detailed data about: electricity demand, generating equipment and its fuel, and main transmission system Recollection of detailed information about generating and transmission projects under development for the period under study and for all MER countries. Survey of fuel costs forecast for next years, generally using sources like the Energy Information Agency, the World Energy Agency, and other reputed institutions. Use of specialized software to define and optimize the future electricity dispatch, in order to minimize the operating costs for the MER system. In this case, the Stochastic Dual Dynamic Programming or SDDP software, from PSR inc., Brazil, has been applied. Results analysis and reporting.

The SDDP software has been used extensively in the MER countries for the dispatch optimization and programming, and is specially suited for scheduling of hydro-thermal systems. The objective of hydrothermal

scheduling is to determine the sequence of hydro releases, which minimizes the expected thermal operation cost, given by fuel cost plus penalties for rationing along the planning horizon. The computation is done with monthly time steps. Figure 1 shows the execution flow of operation planning
activities, the input data, and the links between the SDDP modules. Figure 1 SDDP Execution Flow (source PSR inc.)

With this procedure it was possible to forecast the future operation of the MER, including how much generation will come from renewable resources.

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DATA BASE: The Regional Electricity Market, consisting of the six Central American countries, at December 2009 had an installed capacity of 10 846 MW and peak demand of 6 757 MW. The historical evolution of installed capacity and peak demand is shown in Figure 2. Table 1 shows the composition of the generation. In 2009 about 47% was produces by hydro, 39% by fossil fuels, 8% by geothermal, and 4% by biomass (mainly sugar-cane bagasse), and 1% by wind. Figure 2 Historical evolution of installed capacity and maximum annual demand
12000 10000

Capacidad Inst. (MW)

PANAMA 8000 6000 4000 2000 0 COSTA RICA NICARAGUA HONDURAS EL SALVADOR GUATEMALA Dem.Maxima

1985

1995

1997

1999

2001

2003

2005

2007

Table 1 Composition of generation in MER Countries (Sources: CEPAL 2010 and EOR)
Generation 2009 (MW) Country GU ES HO NI CR PA Total Country GU ES HO NI CR PA Total Hydro 2889 1561 2797 290 7224 3894 18656 Hydro 36% 28% 43% 9% 78% 57% 47% Geothermal 280 1421 0 263 1186 0 3150 Wind 0 0 0 110 326 0 436 Biomass 1069 161 173 206 48 0 1657 Fossil Fuels 3736 2520 3608 2241 452 2985 15542 Fossil Fuels 47% 45% 55% 72% 5% 43% 39% Total 7974 5663 6577 3110 9236 6879 39439 Total 100% 100% 100% 100% 100% 100% 100%

Generation 2009 (%) Geothermal Wind Biomass 4% 0% 13% 25% 0% 3% 0% 0% 3% 8% 4% 7% 13% 4% 1% 0% 0% 0% 8% 1% 4%

The projections of electricity demand in MER countries were obtained based on econometric models and linear regressions. The results are used in this report come from the national planning authorities and a compilation made by the Working Group on Regional Indicative Planning (GTPIR) of the Council of Central American Electrification (CEAC). Table 2 presents the rates of growth of energy demand and peak power for each country for the period 2011-2015, whose projections for each country are presented in Figure 3. As can be seen, the energy production will increase from 42.6 TWh, to 50.6 TWh, while maximum demand will increase from 7.2 TW to 8.6 TW.

2009

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Table 2. Growth Projections

Country Guatemala El Salvador Honduras Nicaragua Costa Rica Panam Energy Annual Growth 2.1% 2.8% 5.1% 5.5% 4.9% 6.3% Max. Demand Annual Growth 3.0% 3.2% 5.0% 3.3% 4.8% 6.3%

Figure 3 Demand Projections, MER countries

Energy
60 000 50 000 40 000

Maximum Demand PA CR
10 000 8 000

PA CR NI HO

GWh

30 000 20 000 10 000 0 2011 2012 2013 2014 2015

HO ES GU

MW

NI

6 000 4 000 2 000 0 2011 2012 2013 2014 2015

ES GU

(PA:Panam, CR:Costa Rica, NI:Nicaragua, HO:Honduras, ES:El Salvador, GU:Guatemala) The data base of the hydroelectric projects includes detailed characteristics of their energy parameters, like reservoir capacity, productivity factors (MW/(m3 /s)), installed capacity, availability, multiyear series of incoming water discharge covering a period of 1969-2009, etc. This data includes the existing plants as well as the projects already in development and construction which will be commissioned from 2011 to 2015. Table 2 shows the list of identified hydroelectric projects under development, along with the capacity and estimated commissioning date. In total it is estimated that 2187 MW of hydro projects will be commissioned. Panama is leading this kind of development with more than 800 MW of projects. Table 3 Hydroelectric Projects under development
Project Capacity (MW) GUATEMALA GU-Sta-Teresa GU-PaloViejo GU-Dist_I GU-Cobano GU-SnCristob GU-Renace-II 16.0 80.0 15.0 12.0 19.0 107.0 EL SALVADOR ES_CHAPARRAL ES_5Nov_Ampl HONDURAS HO-San_Juan HO-Chamelec HO-Mezapa HO-La_Vegona HO-Laureles HO-Licitac_1 HO-Licitac_2 6.6 11.0 9.4 38.5 4.8 40.0 40.0 7 1 7 1 1 1 1 2011 2012 2012 2013 2013 2014 2015 66.0 80.0 1 1 2013 2014 4 8 7 7 7 1 2011 2012 2012 2012 2013 2015 Month Year

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Project NI_LARREYNAG NI_PANTASMA NI_SALTO Y-Y NI_TUMARIN CR_Pirrs CR_Toro 3 CR_Amp_Cachi CR_BotTorit CR_BotChucas CR_BotCapuli CR_BalsaInf PA_Gualaca PA_Bajo Mina PA_Lorena PA_Pedregal PA_Chan I PA_MiniChan PA_Prudencia PA_Baitun PA_Cochea PA_SBartolo PA_PerlaNorte PA_PerlaSur PA_SLorenzo PA_Bonyic PA_Pando PA_Caldera PA_MontLirio PA_BajoFrio PA_BBlanco PA_LasCruces PA_Tizingal PA_PlanetasI PA_Macano PA_Estrechos PA_LaLaguna PA_RP-490 Total Capacity (MW) NICARAGUA 17.2 13.0 25.0 250.0 COSTA RICA 128.0 49.7 160.0 50.0 50.0 50.0 37.0 PANAMA 25.2 56.0 33.8 20.0 212.8 9.7 56.0 88.7 12.5 14.2 10.0 10.0 8.1 31.3 32.0 4.0 51.7 56.0 28.8 9.2 4.6 4.5 3.4 10.0 9.3 9.9 2187 MW 12 2 2 3 5 5 12 12 6 10 10 10 10 1 4 1 7 7 7 10 10 10 10 10 10 10 2010 2011 2011 2011 2011 2011 2011 2011 2012 2012 2012 2012 2012 2013 2013 2013 2013 2013 2013 2014 2014 2014 2014 2014 2014 2014 10 6 11 1 1 1 1 2011 2012 2013 2014 2014 2015 2014 1 1 1 7 2013 2013 2015 2014 Month Year

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Wind plants are another renewable resource with important development in the incoming years. This resource is very interesting in the case of the MER countries because having a large base of hydro plants it is easier to accommodate wind plants, which tend to fluctuate production in the short term. In this case, hydro plants with reservoir are able to absorb these changes. Fig. 3 shows typical production of existing and planned projects in Central America. Also the production is concentrated mainly in the months from December to April, coincident

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with the dry season. Table 4 shows the list of existing and under construction wind plants, which will reach a total of 462 MW by 2015. Fig. 3 Typical plant factors of wind plants in Central America
Factor Planta Promedio - EOLICAS 1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 Ene Feb Mar Abr May Jun Jul Ago Sep
Movasa CR

Oct

Nov

Dic

Amayo NI Pesa CR

Aeroenergia CR TAOBRE PA

Table 4 Wind power plants, existing and under construction

Country Honduras Nicaragua Nicaragua Nicaragua Nicaragua Costa Rica Costa Rica Costa Rica Panam Total Name HElica Cerro Hula NI_Elico Amayo 1 NIAmayo 2 NI_Eol_BluePower NI_Eol_EOLO CR_Eolico Existing CR_Eol_Bot CR_EolValle Central PA_Eol_Taobre Existing Future 40 100 100 Units 30 20 12 Capacity (MW) 100.0 40.0 23.0 40.0 44.0 70.1 50.0 15.0 80.0 183.1 279.0 Commiss. Date ene11 Existing Existing feb12 dic12 Existing Existing ene12 oct12

Another important factor to consider is the effect of the extra-regional interconnection: Guatemala-Mxico and Colombia-Panam. Guatemala-Mexico interconnection consists of a transmission line of 103 km (32 miles in Mexico and in Guatemala 71 km) at 400 kV, capable of expansion to a 2nd. circuit, and the expansion of two substations, one in Tapachula (Mexico) and the other in Los Brillantes, Retalhuleu (Guatemala), where it reduces the voltage to 230 kV. The project was commissioned in mid 2009 and became operational in mid 2010, the initial capacity of the link is estimated at 200 MW in the direction of Mexico to Guatemala and 70 MW in the reverse direction. While the two countries markets are not integrated, it is intended that the power and energy exchanges take place entirely in a market scheme. As part of the project, a legal structure designed to ensure the elements that allow binational coordination both during construction and operation of the link. In March 2009 the governments of Panama and Colombia signed an agreement to develop and implement a coordinated operational and commercial regulatory scheme that allows the exchange of electricity between the two countries. In April 2009 the "Colombia-Panama Electric Interconnection (PCI)", was created as a private company responsible for building and operating the power transmission line between the two countries. The project involves the construction of a transmission line of 300 MW of about 614 km between the substations Cerromatoso in Colombia and Panama II S/E. The estimated total project amount is about US$ 300 million. These interconnections were considered regarding the expected marginal prices in Mxico, and Colombia. For instance, the Colombian electrical market has very low prices for the forecasted period, and therefore most of the interconnection capacity will carry energy from that country toward Panama and the rest of the MER countries.

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RESULTS: As is customary in that type of studies, several scenarios were calculated, considering different forecast for oil prices, demand growth, with or without the Colombian interconnection, etc. Here the results for the so-called base case are presented. Table 5 and Figure 4 show the results of Base Case in terms of generating resources. Imports from Mexico, although large in absolute value, accounts for only 1.2% to 1.4% of the total demand of MER. The generation from renewable resources, which in 2009 reached 18.656 GWh, will increase sharply to 26.975 GWh in 2011 and up to 36.813 GWh in 2015, thanks to the entry of a very substantial amount of renewable projects in almost all countries the region. These projects are especially hydropower, but also include wind, geothermal and bagasse. For its part, the thermal generation will experience a decrease, from 35.6% in 2011 to 26.3% in 2015. This will mark an important milestone in the Region, as it will reverse a trend of increasing thermal generation that began in the late nineties. This is illustrated in Fig. 5. Table 5 Energy Balance Forecast, MER Countries, in GWh
Source Hydro Wind Geothermal Biomass Coal Oil Total Generation Mxico Imports Colombia Imports Losses Deficit Demand % Losses/Generation %Dficit/Demand % Rewable/Gener. % Mxico/Gener. % Coal/Gener. % Fossil/Gener. 2011 20 426 569 3 445 2 535 2 399 12 525 41 899 542 0 -1 733 37 40 744 4.1% 0.1% 64.4% 1.3% 5.7% 35.6% 2012 23 026 569 3 886 2 527 2 690 11 384 44 083 536 0 -2 088 23 42 554 4.7% 0.1% 68.1% 1.2% 6.1% 31.9% 2013 24 791 1 479 4 211 2 521 3 419 9 588 46 010 610 0 -2 296 58 44 382 5.0% 0.1% 71.7% 1.3% 7.4% 28.3% 2014 26 369 1 474 4 221 2 520 5 458 7 760 47 803 671 0 -2 203 62 46 333 4.6% 0.1% 72.3% 1.4% 11.4% 27.7% 2015 28 349 1 472 4 492 2 500 5 515 7 602 49 930 646 0 -2 369 229 48 436 4.7% 0.5% 73.7% 1.3% 11.0% 26.3%

Figure 4 Energy Balance Forecast, MER Countries, in GWh

60 000 50 000 40 000

Losses Colombia Imports Mxico Imports Oil Coal Biomass Geothermal Wind

GWh

30 000 20 000 10 000 0 -10 000

2011 2012 2013 2014 2015

Hydro

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Figure 5 Forecast for renewable and fossil fuels generation

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1980

Historical

Forecast

% generation

1985

1990

1995
Fossil

2000

2005

2010

2015

Renewable

CEPAL 2011, EOR-2011

CONCLUSIONS: This paper reports about a study to forecast the operation and development of the generation systems of the MER countries, considering the future investments up to the year 2015. The renewable generation is expected to increase from 61% in 2009 up to 74% in 2015, making a comeback to what has been a market dominated by fossil fuel installations during the last 15 years. This increase in renewable generation is promoted by several reasons: the increase in the oil prices in the last 8 years, the changes in the regulatory framework in most of the MER countries aimed precisely to improve and incentive that kind of generation, and also the existence of a largo resource base of hydropower, wind power and geothermal. REFERENCES
EOR (2011), Planificacin Indicativa Regional de Amrica Central, 2011-2015, Informe Final, Ente Operador Regional.

SIEPAC (2005), Justificacin Econmica Segundo Circuito Lnea SIEPAC. Apoyo a la Unidad Ejecutora y a la EPR. CEAC, SNC-Lavalin CEPAL, (2010), Centroamrica: Estadsticas del Subsector Elctrico, 2009, Informe Preliminar del Segmento de la Produccin de Electricidad, Documento LC/MEX/L-976.