| Abstract |
Geothermal energy is the upcoming attraction in the Chilean electricity market, due to the announcement of a joint venture between Enel Green Power (51%) and Chile`s state-owned oil company ENAP (49%) to launch an EPC contract for the Cerro Pabellón geothermal project in Chile. This is going to be the first geothermal power plant in Chile, and is scheduled to enter into commercial operation by the end of 2017. In this paper a twofold analysis regarding this technology is conducted: the regulatory context and market impact of this new technology. On one hand, the regulatory framework of the Chilean electricity market is analyzed in order to determine the constraints imposed on this particular technology, as well as those characteristics that are recognized and remunerated within the market. On the other hand, an extended analysis of the economic operation of the ongoing project is conducted, identifying its performance in the spot and capacity markets, as well as the impact of entering into long-term contracts (Power Purchase Agreements, PPAs) with large consumers. The latter analysis is based on the long-term hydrothermal scheduling tool used by the Chilean system operator, which is based on stochastic Benders decomposition to account for long-term hydro uncertainty. As renewable energies are growing fast in the country, the analysis focuses on the impact on the project’s future profits due to an increasing penetration of variable renewable energy – mainly solar photovoltaic power plants – in the areas surrounding the location of the project. Furthermore, the impact of hydrology is quantified in order to establish the influence of this variable on the project’s operational margins. |