The Changing Market Place: The New Energy Markets in Latin America

1
The Changing Market Place The New Energy Markets
in Latin America

• United Nations Workshop on Energy Efficiency,
  Global Competitiveness Deregulation
• New York, N Y, February 1and 2, 2000

Jaime Millan Inter- American Development Bank
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From the mule to the airplane

• From a State-owned vertically integrated,
  financially unfeasible sector, barely able to
  meet growing energy demands from the regions
  economies
• Towards an economic, financial, social,
  environmental and politically sustainable sector

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Presentation

• The New Energy Markets an Overview
• Energy Outlook
• Power Sector Reform
• Access to Modern Energy
• Environmentally Sustainable Energy
• Who Cares for the Poor
• Conclusions

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The new energy markets an overview

• A Commodities market very competitive, with low
  margins for wholesale electricity, oil and oil
  products and natural gas. Convergence between
  electricity and natural gas markets
• An energy services market including electricity,
  fuels and end-use energy efficiency.
• A market for transmission and ancillary services
  and a market for distribution, regulated
  monopolies with open access.
• A competitive market for goods and services for
  decentralized systems
• But we are not there yet

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Energy outlook 2000-2009

• Electricity demand will continue to grow, while
  moderated by end-use energy efficiency, 5 to 7
  annual average
• 80 - 85 GW of new power generation capacity
  mostly in the power sector
• Natural Gas will become the fuel of choice for
  power generation
• accelerating convergence between power and
  natural gas markets at regional level
• making the power sector less investment intensive
• becoming a bridge to the clean and cheap energies
  of the future

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The big opportunities are yet to come..

• Privatizations 2000
• Power Generation 60,000 MW in Brazil 3, 000 in
  Colombia 2,000 in Central America and in
  Mexico?
• Distribution in CO, PE, EC, HO, and in MX?
• New investments in the next decade
• 80 to 85,000 MW power generation capacity
• Regional Gas pipelines and transmission lines
  worth more than US 20 billions
• ESCOS for Energy efficiency and co-generation

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Power sector progress of reform
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Selected milestones in Power sector reform

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• 1982 Chile NEW LAW
• 1991 LAC COCOYOC
• 1992 Argentina, Peru NEW LAW
• 1992 Mexico IPP LEGISLATION
• 1994 Colombia, Bolivia NEW LAW
• 1995 Brazil Concessions, open access
• 1996 Brazil IPPs, ANEEL
• 1997-9 Brazil 60 Dist. 16 Gen. Private
• 1999 Mexico It may be true
  this time

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Competition and ownership in the LAC power sector
Chile
BO 98
ES 2000 ?
PA 98
Private
BO 2000
Peru 2000
AR 98
BR 2003
CO 2000
Guyana
PE, ES 98
BR2000
Mixed
Jamaica
CO 94
MX, CR, GU, PA, ES, NI
Public
Retail Competition
Wholesale Market
Monopoly
Single Buyer
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Power sector reform some results

• Argentina
• Price reductions wholesale market (WM) 50,
  regulated market 15
• 4500 MW new capacity,
• Service extended to around 5 million people
  without service or illegally connected
• 82 of users from the Great Buenos Aires
  satisfied with the service..
• Chile
• Private sector participation in system expansion
  with mostly local financing
• Substantial improvements in internal company
  efficiency
• Chilean companies become the new Multinationals
  in LAC power sector
• Colombia Government finances get a break with
  privatization and private sector participate in
  natural gas based power generation expansion
• Nicaragua and Guatemala Reform is welcome by
  IPPs with a 30 reduction in PPAs prices

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Integration of regional energy markets
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Regional Power Networks South America
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Access to modern energy
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Environmentally sustainable energy
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Co2 emissions by sector in 1996
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Primary energy mix for electricity may change
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Who Cares for the Poor?

• Rural Markets
• Concessions The PAEPRA program in Argentina
• Small providers The PRODEEM program in Brazil

• The Urban Poor
• Regularizing illegal connections and providing
  access to the poor The EDENOR experience in
  Argentina

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Conclusions

• Latin America starts the millenium with new
  energy markets that, while still at their
  infancy, offer the potential for sustainability
• Market development is very uneven
• Some countries like Chile and Argentina are
  pioneers worldwide
• The three largest energy consumers, Brazil,
  Venezuela and Mexico are just beginning
• New delivery mechanisms like ESCOS arent born yet

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Conclusions.

• A radical transformation yet with still big
  challenges ahead
• Consolidating sector reform
• Transferring efficiency gains to consumers while
  keeping investors happy
• Access to rural population and the poor
• Developing environmentally friendly energy
  production and consumption patterns
• Integrating regional energy markets
• Mobilizing financial resources

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Conclusions

• ...Do not expect anything from the new century.
  The new century expects everything from you
  
• Gabriel Garcia Marquez