Ministry of Mines and Energy Unidad de Planeación Minero Energética Minister of Mines and Energy Hernán Martínez Torres. General Director UPME Carlos Arturo Flórez Piedrahita Subdirector of Energy Planning Alberto Rodríguez Hernández Issued by Subdirección de Planeación Energética With consulting from Comité Asesor de Planeamiento de la Transmisión – CAPT, conformado por: Corporación Eléctrica de la Costa Atlántica S.A. E.S.P. Electrificadora de Santander S.A. E.S.P. Cerro Matoso S.A. Occidental de Colombia, Inc Diaco S.A. Empresas Públicas de Medellín E.S.P. Codensa S.A. E.S.P. Emcali S.A. E.S.P. Interconexión Eléctrica S.A. E.S.P. Empresa de Energía de Bogotá S.A. E.S.P. Empresa de Energía del Pacífico E.I.C.E E.S.P. UPME Team Beatriz Herrera Jaime Denice Jeanneth Romero López Elga Cristina Saravia Low Francisco de Paula Toro Zea Henry Josué Zapata Lesmes Jaime Alfonso Orjuela Vélez Jaime Fernando Andrade Mahecha Jairo Ovidio Pedraza Castañeda Javier Andrés Martínez Gil Johanna Alexandra Larrota Cortés José Vicente Dulce Cabrera Libardo Acero García Luis Carlos Romero Romero Oscar Patiño Rojas TABLE OF CONTENTS INTRODUCTION ................................................................................................................................... 5 1. ECONOMIC SITUATION............................................................................................................ 8 1.1. ECONOMY GROWTH ....................................................................................................... 8 1.2. INFLATION ...................................................................................................................... 10 1.3. EXCHANGE RATE .......................................................................................................... 11 1.4. EMPLOYMENT................................................................................................................ 12 1.5. EXPORTS AND IMPORTS.............................................................................................. 13 2. ELECTRICITY MARKET SITUATION ..................................................................................... 21 2.1. INSTITUTIONAL SCHEME.............................................................................................. 21 2.2. MARKET STRUCTURE................................................................................................... 21 2.3. ELECTRIC ENERGY DEMAND ...................................................................................... 22 Table 2-3 NIS Monthly maximum power ........................................................................................ 27 2.4. INSTALLED CAPACITY AND GENERATION................................................................. 31 2.5. TRANSMISSION.............................................................................................................. 38 2.6. DISTRIBUTION AND SELLING....................................................................................... 41 2.7. MODIFICATIONS TO 2005 – 2006 REGULATORY SCHEME...................................... 44 3. ENERGY AND ELECTRIC POWER DEMAND PROJECTIONS ............................................ 48 3.1. METHODOLOGY............................................................................................................. 48 3.2. MARCH 2006 ASSUMPTIONS........................................................................................ 49 3.3. ENERGY AND ELECTRIC POWER DEMAND PROJECTION SCENARIOS ................ 51 4. RESOURCE AVAILABILITY AND PRICE PROJECTION ...................................................... 57 4.1. RESOURCES AVAILABILITY.......................................................................................... 57 5. GENERATION EXPANSION ................................................................................................... 65 5.1. GENERATION EXPANSION PROJECTS IN COLOMBIA .............................................. 65 5.2. ENERGY GENERATION AND DEMAND PROJECTS IN ECUADOR............................ 67 5.3. GENERATION AND DEMAND EXPANSION PROJECTS IN PERU............................. 67 5.4. GENERATION AND DEMAND EXPANSION PROJECTS IN PANAMA........................ 68 5.5. GENERATION AND DEMAND EXPANSION PROJECTS IN THE REST OF SIEPAC COUNTRIES ................................................................................................................................. 69 5.6. GENERATION EXPANSION PLAN METHODOLOGY ................................................... 70 5.7. GENERATION REQUIREMENTS FOR ENERGY IN THE COLOMBIAN ELECTRIC SYSTEM ....................................................................................................................................... 72 5.8. CONCLUSIONS AND RECOMMENDATIONS ............................................................... 86 6. TRANSMISSION EXPANSION................................................................................................ 89 6.1. BASIC INFORMATION .................................................................................................... 89 6.2. LONG TERM ANALYSIS 2015-2020............................................................................... 90 6.3. COASTAL AREA ANALYSIS.......................................................................................... 91 6.4. SHORT AND MEDIUM TERM ANALYSIS 2007 - 2015.................................................. 92 6.6. USE OF NEW TECHNOLOGIES IN THE NTS’s SOLUTION OF SPECIFIC PROBLEMS 124 6.7. 2006 PLAN RESULTS ................................................................................................... 126 7. ENVIRONMENTAL ASPECTS .............................................................................................. 128 7.1. ENVIRONMENTAL REGULATION................................................................................ 128 7.2. TRANSFERS ................................................................................................................. 128 7.3. EMISSIONS ................................................................................................................... 129 8. ANNEXES .............................................................................................................................. 132 8.1. RESOURCES AVAILABILITY AND PRICES PROJECTION ........................................ 132 8.2. NETWORK OPERATORS EXPANSION PLANS.......................................................... 144 8.3. SHORT-CIRCUIT LEVELS IN THE NTS SUBSTATIONS ............................................ 161 8.4. DESCRIPTION OF EVENTS AND AVAILABILITY OF NTS ELECTRICAL SUBSYSTEMS, DECEMBER 2004 – DECEMBER 2005 PERIOD ........................................... 162 8.5. NTS LINES AND SUBSTATIONS ENTRY DATES....................................................... 165 8.6. NON-CONVENTIONAL SOURCES OF ENERGY –FNCE- .......................................... 170 9. ACRONYMS and ABBREVIATIONS .................................................................................... 174 10. CONVENCIONS AND UNITS............................................................................................ 175 INTRODUCTION La Unidad de Planeación Minero, The Colombian Energy Planning Unit – UPME, is pleased to present at the disposal of the whole power sector and other interested parties, the Reference Expansion Plan Generation – Transmission 2006 – 2020, which in compliance with Law 143 of 1994, Electric Law, identifies the country’s needs with regard to new generation capacity and recommends National Transmission System -NTS- expansion projects, in order to ensure the appropriate electric power supply in the immediate future and in the horizon up to year 2020. This version of the plan starts with a brief description of the country’s main macroeconomic aggregates recent evolution. Chapter 1, Economic Situation, with the purpose to present the analysis and results. Chapter 2, Electricity Market Situation, presents data, indicators and relevant events in the different segments of electricity chain, from the electric power demand to the supply, starting with international interconnections, and finishing with a review of the regulatory scheme modifications since 2005, used to define the methodology and scope of the Plan. The energy demand and electric power projections, used in the analysis performed, as well as their methodological aspects, are the purpose in chapter 3. In Chapter 4, Resources Availability, Natural Gas and Coal Prices Projection, are inputs for further chapters. The Expansion and Generation studies, described in Chapter 5, are based on expansion projects foreseen for Colombia, as well as for neighboring countries such as Ecuador, Peru, Panama, and other countries which are part of SIEPAC (Electric Interconnection System for Central American countries), considering the possible states that arise from simultaneousness between the four critical variables which determine the various scenarios of generation expansion requirements in the country: gas price and availability, increase on energy demand and the carry out of international interconnections. In this plan, the need to incorporate at least 150 MW by 2009 and 700 MW for the period between 2011 and 2015, or 1000 MW, for same period, if the interconnection with Central America is carried out, and if there is a high increase on demand and as well as a need for new generation capacities based on mineral coal are identified. The analysis of the Transmission Expansion on Chapter 6, considers the Bogotá