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In Chile, the interconnected systems (SIC and SING) are coordinated by their respective System Operators (CDEC), which program and adjust constantly the dispatch of generating units, as well as the operation of transmission facilities. The goal is to operate at minimum cost, subject to security restrictions and technical limitations.

The dynamic characteristic of the interconnected systems generates the need for a spot market, where generation companies can trade energy in real time to adjust their positions with their contractual obligations.

A power plant is an energy production unit – more precisely, energy transforming unit – which, like any other production unit, requires inputs (fuels) to produce a product (electrical energy). The variable cost of a generated electrical energy unit is closely related to the cost of the used inputs. For example, for a coal fired power plant, the variable cost of each generated MWh depends on the amount of coal required to move the turbine. If the generation of 1 MWh requires 0.4 tons of coal, and the coal price per tone is USD 100, the variable fuel cost will be 40 USD / MWh. The non-fuel variable cost has to be added to obtain the total variable cost, but for thermoelectric units, it is usually not a relevant fraction of the total variable cost.

Generating units operate in an integrated and highly coordinated manner. Together with the transmission facilities and the demand, they conform what is called a grid. In Chile, the interconnected systems (SIC and SING) are coordinated by a Center for Economic Load Dispatch (CDEC). The lesser systems Aysén and Magallanes are only considered electrical systems and have no CDEC. As signaled by the General Electric Service Law, the CDEC’s pursue to:

1. Preserve the supply service security of the electrical system.
2. Warrant the most economical operation of the aggregate electrical system installations.
3. Warrant open access to the backbone transmission systems and the sub transmission system.

The first two definitions are fundamental to understand who, when and how generates the electricity that reaches consumers.

The CDEC projects the demand curve, which must be satisfied using the markets available generating capacity. As the total capacity exceeds demand, it must be determined which units will supply the demand – electricity is not stored, thus supply must equal demand at any given moment. This implies that some plants will operate at full capacity, some will be dispatched partially and others simply will not operate. The operation is determined by the CDEC and not by the plant owners or operators. The CDEC programs the dispatch of the generating units in ascending marginal cost order, until the demand is satisfied, subject to safety criteria and technical limits.

Solving this problem is not extremely difficult when the variable production cost of each plant can be determined. In a thermoelectric power plant, it suffices to know the efficiency of the plant and the fuel cost, whose price is known as companies must inform their fuel purchase contracts to the CDEC. What complicates the problem is the existence of hydroelectric reservoirs. Although water does not have a direct cost, the possibility of storing it in the reservoir for future use introduces an opportunity cost.

A simplified way to understand the value of stored water is as follows: if the cost of the last generated MWh – the most expensive one – was USD 100, then releasing water from the reservoir to generate that last unit would avoid using fuel worth USD 100. The problem is uncertainty. Prices may go up, so saving the water for an extra day could end up saving USD 110 instead of USD 100. Hydrology introduces additional uncertainty, it could rain, making stored water less valuable, or a drought could produce the opposite effect.

Another important point is the geographical location of the plants. The SIC’s cheap hydro generation is concentrated in the Maule and Bío Bío regions, where plants export its production to the demand center, towards Santiago. Transmission loses and tolls, asides from the limited capacity of transmission lines, introduce a transport associated cost. Thus, the CDEC also determines how to operate the transmission system.

The result of systemic analysis conducted by the CDEC is a daily generation program, which determines the dispatch of each unit within the system on an hourly basis. Obviously the program does not exactly match the actual demand, so constant adjustments are required.

Electric energy consumers are supplied, in quantity and price, according to the power purchase agreements (PPA) they have signed with generation companies. Regulated consumers, such as residential clients, do not negotiate directly with the generators – that is the job of electric distribution companies. Each generation company sustains its commitment with a combination of its own capacity and spot market purchases or sales. In the spot market, generating companies level their surplus/deficit by selling/buying energy at the price sot for by the CDEC, which is equal to marginal cost calculated hourly for each node.

Generating statistics for each interconnected system are found in the following links:

Following SIC + SING aggregate statistics.

Note: All information on this page is based on gross generation and the power unit used is GWh.

Following table shows the generation of both the SIC and the SING from year 2001 up to , the last month being included entirely.

Following chart shows each technology’s share of the total electric generation over the past 12 months.

The primary energy sources utilized in these systems are mainly water (reservoir and run-of-the-river) and fossil fuels (coal, natural gas and diesel). Following chart shows each primary energy source’s share of the total electric generation in the past 12 months.

Following chart shows each primary energy source’s share of the total electric generation from January 1, 2001, to date:

The electric generation by company is closely related to its installed capacity. Following chart shows parent company’s share of the total electric generation (SIC + SING) over the past 12 months, including subsidiaries.

Following chart shows how electric generation has evolved since 2001 to date. The percentage indicates the annual generation growth.