Variable Renewable Energy: How the Energy Markets Rules Could Improve Electrical System Reliability

In the last 10 years, significant changes have been observed in the operation of electrical systems resulting from the increasing incorporation of Variable Renewable Energy (NCRE--Solar PV, WIND) characterized by strong volatility in its energy production, due to climatic effects, which affect the reliability in the operation of the electrical system. These technologies also show a significant reduction in their capital costs, which are currently competitive compared to conventional alternatives for energy production, with the advantage of contributing to reducing the production of greenhouse gases. Therefore, increasing reliability operational problems are expected in the future, which must be resolved to supply the demand safely and at minimum cost. LATAM's countries are making slow progress in updating their regulatory frameworks for the electricity sector to include changes that improve the integration of NCRE generation without reducing the quality of service. This document describes possible regulatory changes that could be implemented to promote a system safe operation including (a) intra-hours marginal costs, (b) day-ahead/intraday energy markets, (c) incentives to better forecast the NCRE generation production profile, (d) participation of NCRE generation in the capacity market, and (e) including BESS as ancillary service for frequency/ramp power control.