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Chilean Electric Transmission Regulation: From a Merchant Approach to Central Planning

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  • Fernando Fuentes

    (Departamento de Economía, Facultad de Administración y Economía, Universidad Diego Portales, Santiago 8581169, Chile)

  • Pablo Serra

    (Departamento de Economía, Facultad de Economía y Negocios, Universidad de Chile, Santiago 8330015, Chile)

Abstract

From the 1980s onwards, many jurisdictions reformed their electricity sectors to create energy markets. To this end, they unbundled transmission from generation, raising the issue of whether and how to regulate transmission. This paper contributes to this literature by analyzing the 40-year Chilean experience. To do so, it describes the initial transmission regulation, the changes introduced, the causes that triggered them, and their results regarding grid access and expansion and their impact on the energy market. The Chilean Electricity Act, issued in 1982, established open access to transmission facilities but left access and expansion conditions unregulated. This situation caused generators’ grid access problems, harming energy market competition. In 2004, lawmakers amended the Act to require the regulator to develop annual expansion plans and regulate transmission remuneration and financing. Following these changes, transmission expanded adequately for about a decade. However, since 2016, renewable energy curtailments have been significant due to congestion on some transmission lines due to construction delays. The increasing empowerment of civil society in the decision-making processes of new investments is relevant in explaining the delays. The main lesson is that citizen consensus-building is crucial for grid expansion.

Suggested Citation

  • Fernando Fuentes & Pablo Serra, 2022. "Chilean Electric Transmission Regulation: From a Merchant Approach to Central Planning," Energies, MDPI, vol. 15(12), pages 1-15, June.
    • Handle: RePEc:gam:jeners:v:15:y:2022:i:12:p:4336-:d:838202
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    References listed on IDEAS

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    6. Renato Agurto & Fernando Fuentes & Carlos J. García & Esteban Skoknic, 2021. "The macroeconomic impact of the electricity price: lessons from Chile," Empirical Economics, Springer, vol. 60(5), pages 2407-2428, May.
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