Chrisitan Rodriguez

Analysis of the impacts of a quota market on the Chilean electricity market: A renewable energy perspective

After analyzing the electricity market and the current Chilean energy situation, changes in the policy framework and their impact on NCRE development, and researching the perceptions of the market, this dissertation finds that, although policy changes in the law and economic incentives have had positive impacts on the NCRE development in Chile to date a real materialization of these projects has not existed and these initiatives have had the effect of leveling the playing field between traditional generation technologies and NCRE but not of creating real incentives for the development of the lattes

The type of mechanism most used to promote NCRE development has been the feed-in tariff. Installed capacity outcomes fulfilled by this type of mechanism have been extremely successfully in Germany and Spain.

However, as the tendency is to create liberalized and deregulated markets; the analysis of this dissertation suggest that of the three mechanisms analyzed  NFFO and  ROC are the ones that have created less distortion to their respective electricity market, promoting more competence and among different technologies and in a cost efficient way.

The analysis concentrates on the implications of applying a quota mechanism with certificates to incorporate NCRE into the Chilean electricity matrix. The results of the economic analysis showed that the extra costs impact of a 5% quota on the electricity tariff is low; nevertheless it could affect the competitiveness of the electricity market. Thus, there is a risk for future government interventions by increasing the quota (demand) which would have according to the economic analysis greater impact on electricity tariff.

As can be seen from the economic analysis a direct relation exists between the costs of reducing the risk of supplying and the benefits that these reductions carry. Improving energy security necessarily increase the costs associated; however, avoiding energy supply deficit has social and economic benefits, and these will increase as the economic development is greater.