Transmission planning-from a market approach to a centralized one-the Chilean experience

Abstract

Electricity transmission planning does not have a common solution worldwide, with most countries trusting on alternatives adapted to the local energy markets' regulatory regime. The fast-growing conditions of the Chilean energy market, driven by private agents, meant the need to introduce changes to the original 1982 regulatory framework, being transmission pricing and investment among the main issues assessed in 2004. The original framework based on free market bilateral negotiations among the transmission owner and the interested parties had its main conflicts associated to the lack of transmission investment signals and lack of a common method to value and allocate the use of the existent transmission assets, that provoked a free rider actuation by some agents. For that reason transmission expansion and pricing was modified into a co-operative regulated scheme with participation of every agent participating in the energy market. As a result of the regulatory modifications, investments in the trunk transmission system have reactivated but some improvements to the process must be done.