Liquefied natural gas (LNG) is an important source of primary energy in electricity production in Chile. In fact, in 2019 about 8.4% of total electricity generation came from the use of this fuel.
In Chile there are two regasification terminals. In the central area, the Quintero LNG terminal sells gas to Enel’s combined cycle thermoelectric plants and indirectly to the Colbún and Metropolitana Generator units. In the north, the Mejillones LNG terminal mainly supplies LNG to the combined cycles of Engie, Tamakaya and Enel.
Generators operating their LNG-based power plants, unlike other fossil fuels, have a specific regulations associated with them, allowing them to declare a portion of their purchases as “inflexible”, giving them priority in the office programmed by the Coordinator over the rest of the generator park. In this sense, generators can use their fuel in the operation of their combined cycles declaring a zero variable cost, shifting the supply curve of the generator park and modifying the order of merit of the units. The practical consequence is that a combined cycle under an inflexibility condition has the same dispatch priority as a renewable energy plant, or even higher, if you consider the programming of the operation in much of 2019.
Although the standard states that the state of inflexibility should be an exceptional condition of the operation, in practice LNG declared inflexible averaged 2.3 million cubic meters per day (MMm3/d) in 2019, about 60% of the LNG used in the combined cycles in that year. In perspective, strong LNG declarations accounted for 5% of all energy generated in that year; the equivalent of a 500 MW generating plant, a little less than two combined cycles, generating all year round. Of the companies that buy LNG, only Generator Metropolitana did not declare LNG volumes uncompromising during that year.
LNG declarations under an inflexibility condition have important implications in the spot market for transactions between generators. On the one hand, they modify the priority in the economic clearance of the plants, therefore, they force the operation of the cycles combined with LNG, changing the optimal operating record of the reservoirs and eventually, being able to cause pours of renewable energy. On the other hand, they depress system prices, marginal energy costs, and impact energy sales at the spot of other generators, mostly renewable generation.
The recent study published by BdE: Uncompromising liquefied natural gas and its impact on the National Electricity System, reports the impact of inflexible LNG declarations1. This Brief summarizes its main results. The full study can be downloaded from the BdE website.
