Central America Regional Electricity Market

Luis Chang, Ministry of Energy, CDMER Pro tem President Regional Electricity Market (In spanish: Mercado Eléctrico Regional, MER) Background

Since 1976 the region began intra regional electricity exchange

In 1996 , the 6 countries of Central America (Guatemala, , , , y Panamá), decide to initiate a gradual process of electric integration, through the interconection of their national electric networks, and subscribed a Treaty with objectives to reach:

• Promote the development of the electrical industry.

• Satisfy the electricity needs of the region with sustainable development.

The Central America Electric Market Treaty Frame, establishes:

• A 7th market to make regional electricity transactions between agents (state and private electricity companies of each country)

Central America • Coexistence between the 6 markets and this regional market 6 countries at strategic region • Created 3 regional organism as institution Installed Capacity: 16,897 MW Generation 13,756 GWh • Created a Company to construct and operate the first transmission infrastructure line, Cepal, 2017 denominated: Siepac

Regional electric transmission Guatemala system, Siepac Honduras Panaluya Río Lindo Transmission Guate Norte Line 230 KV Guate Este T Tamara COUNTRY kilometres Ahuachapán

15 Sept. Guatemala 282 El Salvador Nicaragua El Salvador 287 SIMBOLS Honduras 270 SUBSTATION 230 KV Nicaragua 309 Ticuantepe SINGLE CIRCUIT Costa Rica 489

DOUBLE CIRCUIT Panamá 151 TOTAL 1,788 Cañas Costa Rica • 15 electricity substations • Reactive power compensation Parrita Panamá

• Fiber-optic network communication Palmar Norte Río Claro Panamá • Designed 300 MW transmission capacity Veladero MERs Components

Legal Framework Regional Organisms Infrastructure and finance

• International Treaty, and its • CDMER - Policy coordinator •SIEPAC transmission line was amendments issued by protocol • Director Council constructed and is operated by a * Central America Electric Market *Formed by Energy Company: Empresa Propietaria de la Treaty signed by the 6 countries. Ministry/Secretary of each country. Red – EPR - *Spanish: Consejo director del MER - *Spanish: Tratado Marco del Mercado CDMER eléctrico de América Central •EPR is formed by state electricity

companies from each country, and extra • CRIE - Regulatory Organism region partners companies from Spain, • Regulatory Rules, issued by the *Commission of Regional Electric regional regulatory organism Interconnection Colombia and .

*Market rules maker and set tariffs *Formed by 1 delegate from each •The infrastructure is financed by a • Regulatory harmonization country *Spanish: tariff, charged to electricity demand Comisión Regional de Interconexión tariff of each country. Eléctrica –CRIE-

• EOR – Regional Market and System Operator CRIE and EOR are financed by a *formed by 2 delegates from each tariff, charged to electricity country demand tariff of each country. *Spanish: Ente Operador Regional –EOR- Fulfilment of regional market rules and coexistence with national regulations Characteristics: Diferents Fields – Diferent Regulation The regional market Treaty is a Law in each country, but has its own field of appliance, the regional electric Coexistence: Rules on each field market have to coexist together in harmony • Regional market is a 7th market • Must be coexistence and harmony between the National Regional both normative: national and regional Market field Market field • Regional regulator organism has to coordinate with nationals regulators. Electricity national Treaty Law • Respect the market model of each country. • Each country decide how to do the harmonization National Regulatory Regional • Each country adapt its own rules to allow to its National rules markets agents do transactions on regional market. harmonization Rules interface • Each national regulator has to do interface between its rules with the regionals rules. • Each agent that makes transactions at regional market has to fulfill regional and national regulation. Relationship between MER and national organisms Coordinate and National Energy CDMER is formed facilitate the CDMER by the policy compliance of the Ministry/Secretary maker of each Treaty. country

Coordination between them to allow Regional normative coexistence, harmony Nationals Ensure Regulator Regulators compliance of Ensure the national compliance of regulatory MERs framework regulatory Coordination market operation framework Nationals and transactions market and system Operate the Operators regional system with Regional economic criteria Operator

Electricity Exchange between agents from Regional 6 countries Electricity Market National Electricity Market (7th market) (6 independent markets) Annual exchange in regional market, toseptember 2019

Annual energy transactions

2,500

2,000

1,500 GWh

1,000

500

0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 GWh 196 276 290 368 336 344 308 689 1,443 1,368 1,947 2,447 2,651 2,182 About 34% of the transactions years are on opportunity market and In 2013, "different" regional rules and nationals harmonizations were 66% in the contract market; but implemented. Since that, the growth in the volume of transactions is is for short term market, a year notorious, it is equivalent to 15% of the annual region's generation. or less. Real time https://www.enteoperador.org/

Transfer capacity between countries - october 2019 North - South *Guatemala-El Honduras- Nicaragua - Costa Rica - Salvador- Nicaragua Costa Rica Panamá Honduras Peak 300 220 190 50 Valley 300 220 200 100 Minimum 300 190 210 50

South to North *Guatemala-El Honduras- Nicaragua - Costa Rica - Salvador- Nicaragua Costa Rica Panamá Honduras Peak 300 150 150 150 Valley 300 100 140 50 Minimum 300 220 100 100 *Máxima capacidad de transferencia simultánea a través de Guatemala, The design capacity of SIEPAC along the 6 countries (300 MW), is not reach yet. El Salvador y Honduras. Step Forward Third Protocol amendment, major challenges Issue Description • Currently, a third protocol INSTITUTIONAL • MER Governance: reinforcement CDMER roll as MER policy director. amendment has being CRIE and EOR are technical organism, but not policy makers. formulated based on improvements identified • Creation of Regional Committee of Appellations, adscript to CDMER, but and reinforcements independent: Instance for impugnation of resolutions/rules issued by necessary to direct the the Regulator (CRIE) development of the MER INFRASTRUCTURE • Problem: Maximize transfer capacity between countries: The design towards the objectives of capacity of SIEPAC along the 6 countries (300 MW), is not reach yet. the Treaty. • Is necessary to reinforce the national transmission lines, to release SIEPAC line from national electricity transactions. • Improve the planning coordination between national and regional organisms to identify the investment needs on transmission lines on • Additionally, are necessary each country. regulatory reforms that EXTRA REGION Define the treatment to interconnect with countries no members of the allow the development of RELATIONSHIP Treaty: Politics decisions long-term contracts in the And must be defined in agreement with the third country: regional market. • Political, technical guidelines, and regulatory principles • infrastructure and its technical and economical feasibility Thank You!

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