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Barrera, J., Beaupuits, P., Moreno, E., Moreno, R., & Munoz, F. D. (2021). Planning resilient networks against natural hazards: Understanding the importance of correlated failures and the value of flexible transmission assets. Electr. Power Syst. Res., 197, 107280.
Abstract: Natural hazards cause major power outages as a result of spatially-correlated failures of network components. However, these correlations between failures of individual elements are often ignored in probabilistic planning models for optimal network design. We use different types of planning models to demonstrate the impact of ignoring correlations between component failures and the value of flexible transmission assets when power systems are exposed to natural hazards. We consider a network that is hypothetically located in northern Chile, a region that is prone to earthquakes. Using a simulation model, we compute the probabilities of spatially- correlated outages of transmission and substations based on information about historical earthquakes in the area. We determine optimal network designs using a deterministic reliability criterion and probabilistic models that either consider or disregard correlations among component failures. Our results show that the probability of a simultaneous failure of two transmission elements exposed to an earthquake can be up to 15 times higher than the probability simultaneous failure of the same two elements when we only consider independent component failures. Disregarding correlations of component failures changes the optimal network design significantly and increases the expected levels of curtailed demand in scenarios with spatially-correlated failures. We also find that, in some cases, it becomes optimal to invest in HVDC instead of AC transmission lines because the former gives the system operator the flexibility to control power flows in meshed transmission networks. This feature is particularly valuable to systems exposed to natural hazards, where network topologies in post-contingency operating conditions might differ significantly from pre-contingency ones.
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Carvallo, C., Jalil-Vega, F., & Moreno, R. (2023). A multi-energy multi-microgrid system planning model for decarbonisation and decontamination of isolated systems. Appl. Energy, 343, 121143.
Abstract: Decarbonising and decontaminating remote regions in the world presents several challenges. Many of these regions feature isolation, dispersed demand in large areas, and a lack of economic resources that impede the development of robust and sustainable networks. Furthermore, isolated systems in the developing world are mostly based on diesel generation for electricity, and firewood and liquefied petroleum gas for heating, as these options do not require a significant infrastructure cost. In this context, we present a stochastic multi-energy multi-microgrid system planning model that integrates electricity, heat and hydrogen networks in isolated systems. The model is stochastic to capture uncertainty in renewable generation outputs, particularly hydro and wind, and thus design a multi-energy system proved secured against such uncertainty. The model also features two distinct constraints to limit the emissions of CO2 (for decarbonisation) and particulate matter (for decontamination), and incorporates firewood as a heating source. Moreover, given that the focus is on low-voltage networks, we introduce a fully linear AC power flow equations set, allowing the planning model to remain tractable. The model is applied to a real-world case study to design a multi-energy multi-microgrid system in an isolated region in Chilean Patagonia. In a case with a zero limit over direct CO2 emissions, the total system's cost increases by 34% with respect to an unconstrained case. In a case with a zero limit over particulate matter emissions, the total system's cost increases by 189%. Finally, although an absolute zero limit over both, particulate matter and direct CO2 emissions, leads to a total system's cost increase of 650%, important benefits in terms of decarbonisation and decontamination can be achieved at marginal cost increments.
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Diaz, G., Munoz, F. D., & Moreno, R. (2020). Equilibrium Analysis of a Tax on Carbon Emissions with Pass-through Restrictions and Side-payment Rules. Energy J., 41(2), 93–122.
Abstract: Chile was the first country in Latin America to impose a tax on carbon-emitting electricity generators. However, the current regulation does not allow firms to include emission charges as costs for the dispatch and pricing of electricity in real time. The regulation also includes side-payment rules to reduce the economic losses of some carbon-emitting generating units. In this paper we develop an equilibrium model with endogenous investments in generation capacity to quantify the long-run economic inefficiencies of an emissions policy with such features in a competitive setting. We benchmark this policy against a standard tax on carbon emissions and a cap-and-trade program. Our results indicate that a carbon tax with such features can, at best, yield some reductions in carbon emissions at a much higher cost than standard emission policies. These findings highlight the critical importance of promoting short-run efficiency by pricing carbon emissions in the spot market in order to incentivize efficient investments in generating capacity in the long run.
Keywords: Carbon tax; Equilibrium modeling; Market design
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Fernandez, M., Munoz, F. D., & Moreno, R. (2020). Analysis of imperfect competition in natural gas supply contracts for electric power generation: A closed-loop approach. Energy Econ., 87, 15 pp.
Abstract: The supply of natural gas is generally based on contracts that are signed prior to the use of this fuel for power generation. Scarcity of natural gas in systems where a share of electricity demand is supplied with gas turbines does not necessarily imply demand rationing, because most gas turbines can still operate with diesel when natural gas is not available. However, scarcity conditions can lead to electricity price spikes, with welfare effects for consumers and generation firms. We develop a closed-loop equilibrium model to evaluate if generation firms have incentives to contract or import the socially-optimal volumes of natural gas to generate electricity. We consider a perfectly-competitive electricity market, where all firms act as price-takers in the short term, but assume that only a small number of firms own gas turbines and procure natural gas from, for instance, foreign suppliers in liquefied form. We illustrate an application of our model using a network reduction of the electric power system in Chile, considering two strategic firms that make annual decisions about natural gas imports in discrete quantities. We also assume that strategic firms compete in the electricity market with a set of competitive firms do not make strategic decisions about natural gas imports (i.e., a competitive fringe). Our results indicate that strategic firms could have incentives to sign natural gas contracts for volumes that are much lower than the socially-optimal ones, which leads to supernormal profits for these firms in the electricity market. Yet, this effect is rather sensitive to the price of natural gas. A high price of natural gas eliminates the incentives of generation firms to exercise market power through natural gas contracts. (C) 2020 Elsevier B.V. All rights reserved.
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Inzunza, A., Munoz, F. D., & Moreno, R. (2021). Measuring the effects of environmental policies on electricity markets risk. Energy Econ., 102, 105470.
Abstract: This paper studies how environmental policies, such as renewable portfolio standards (RPS) and carbon taxes, might contribute to reducing risk exposure in the electricity generation sector. We illustrate this effect by first computing long-term market equilibria of the Chilean generation sector for the year 2035 using a risk-averse planning model, considering uncertainty of hydrological scenarios and fossil fuel prices as well as distinct levels of risk aversion, but assuming no environmental policies in place. We then compare these risk-averse equilibria to generation portfolios obtained by imposing several levels of RPS and carbon taxes in a market with risk-neutral firms, separately. Our results show that the implementation of both policies can provide incentives for investments in portfolios of generation technologies that limit the risk exposure of the system, particularly when high levels of RPS (35%) or high carbon taxes (35 $/tonCO2) are applied. However, we find that in the case of a hydrothermal system, the resulting market equilibria under RPS policies yield expected generation cost and risk levels (i.e. standard deviation of costs) that are more similar to the efficient portfolios determined using a risk-averse planning model than the ones we find under the carbon tax.
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Moreno, R., Bezerra, B., Rudnick, H., Suazo-Martinez, C., Carvalho, M., Navarro, A., et al. (2020). Distribution Network Rate Making in Latin America. IEEE Power Energy Mag., 18(3), 33–48.
Abstract: Following the trend observed in developed economies, various Latin American governments are committed to reducing greenhouse gas emissions, particularly in the power sector. In countries such as Chile, Peru, Colombia, Brazil, and Mexico, various regulatory policies have been issued to meet renewable-generation integration targets and satisfy the increasing demand from consumers for supply quality. Meanwhile, the integration of distributed generation (DG) in rural and urban areas as well as the increasing need to integrate electric vehicles (EVs) in urban areas are driving important reforms in the distribution sector.
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Munoz, F. D., Suazo-Martinez, C., Pereira, E., & Moreno, R. (2021). Electricity market design for low-carbon and flexible systems: Room for improvement in Chile. Energy Policy, 148(B), 111997.
Abstract: Chile was the first country that privatized all generation, transmission, and distribution services, and introduced competition in the generation segment. Nearly four decades after its creation, many features of the original electricity market design remain unchanged. In this paper, we provide a brief history of the Chilean electricity market and explain its main limitations going forward. Some of these include the use of a cost-based mechanism for spot transactions based on a merit-order curve, low temporal granularity of spot prices, missing forward markets to settle deviations from day-ahead commitments, inefficient pricing of greenhouse gas emissions due to administrative rules, and a capacity mechanism that does not reflect a clear resource adequacy target. Many of these limitations are also present in other electricity markets in Latin America that, when privatized, mirrored many features of the electricity market design in Chile. Failing to address these limitations will provide distorted incentives for the efficient entry and operation of resources that could impart flexibility to the system, increasing the cost of decarbonizing the power sector.
Keywords: Market design; Electricity; Flexibility; Decarbonization
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Pichel, A., Moreno, R., Figueroa, M., Campos, J. L., Mendez, R., Mosquera-Corral, A., et al. (2019). How to cope with NOB activity and pig manure inhibition in a partial nitritation-anammox process? Sep. Purif. Technol., 212, 396–404.
Abstract: The treatment of pig manure can be performed by anaerobic digestion to diminish the organic matter content and produce biogas, and the resulting digestate has to be subsequently treated for the removal of nitrogenous compounds. The partial nitritation-anammox (PN-AMX) process constitutes an interesting alternative. In the present study, three different short experiments were initially performed to study the influence of nitrite oxidizing bacteria (NOB) present in the inoculum and the pig manure composition over the start-up of the PN-AMX process. The presence of NOB in the inoculum showed to be more crucial than the available anammox activity for a good performance of the PN-AMX process. Batch activity experiments showed a reduction of at least 44.4% in the maximum specific anammox activity due to the pig manure, probably owed to its conductivity (between 6 and 8 mS/cm). In the subsequent long-term operation of the PN-AMX process with non-diluted pre-treated pig manure, the NOB were successfully limited for DO concentrations of 0.1 mg O-2/L, and a nitrogen removal rate (NRR) of 0.1 g N/(L.d) was achieved despite the presence of significant NOB activity in the start-up. A strict control of the DO concentration, with an optimal range of 0.07-0.10 mg O-2/L, was fundamental to balance the removal of nitrogen by PN-AMX and prevent NOB activity. The presence of organic matter, with a ratio sCOD/N in the influent between 0.18 and 1.14 g/g, did not hinder the PN-AMX process, and the contribution of heterotrophic denitrification to the removal of nitrogen was less than 10%.
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Reus, L., Munoz, F. D., & Moreno, R. (2018). Retail consumers and risk in centralized energy auctions for indexed long-term contracts in Chile. Energy Policy, 114, 566–577.
Abstract: Centralized energy auctions for long-term contracts are commonly-used mechanisms to ensure supply adequacy, to promote competition, and to protect retail customers from price spikes in Latin America. In Chile, the law mandates that all distribution companies must hold long-term contracts – which are awarded on a competitive centralized auction – to cover 100% of the projected demand from three to fifteen years into the future. These contracts can be indexed to a series of financial parameters, including fossil fuel prices at reference locations. Drawing from portfolio theory, we use a simple example to illustrate the difficulties of selecting, through the current clearing mechanism that focuses on average costs and individual characteristics of the offers, a portfolio of long-term energy contracts that could simultaneously minimize the expected future cost of energy and limit the risk exposure of retail customers. In particular, we show that if the objective of the regulator is to limit the risk to regulated consumers, it could be optimal to include contracts that would not be selected based on individual characteristics of the offers and a least-cost auction objective, but that could significantly reduce the price variance of the overall portfolio due to diversification effects between indexing parameters.
Keywords: Price risk; Energy auctions; Portfolio optimization
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Sanchez-Lopez, M., Moreno, R., Alvarado, D., Suazo-Martinez, C., Negrete-Pincetic, M., Olivares, D., et al. (2022). The diverse impacts of COVID-19 on electricity demand: The case of Chile. Int. J. Electr. Power Energy Syst., 138, 107883.
Abstract: This paper analyzes the impacts of the first wave of COVID-19 (March 2020 -September 2020) on the electricity demand of different types of consumers in Chile, including residential, commercial, and industrial demand. We leverage data from 230 thousand smart meters of residential and commercial consumers in 32 communes of Santiago (the capital city of Chile), which allows us to investigate the evolution of their demands with an hourly temporal resolution. Additionally, we use demand data of large industrial consumers provided by the Chilean system operator to study the impact of the pandemic on different economic sectors. This paper demonstrates that the COVID-19 pandemic, and the associated containment measures, have featured a drastically different impact on the various types of consumers in Chile. In particular, we show that the demand of residential consumers has increased throughout the first wave, even when we isolate the effects of the pandemic from those related to weather. Furthermore, we study how these effects change in different communes of Santiago, contrasting our findings with the socio-economic levels of the population. In effect, we find different demand response patterns depending on the socio-economic background of consumers. We also show that commercial demand has significantly declined due to the containment measures implemented and that the hospitality and construction economic sectors have been the most affected in the country.
Keywords: Electricity demand; COVID-19; Smart meters; Energy policy
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