LNG-based power projects line up for Chile auction

OREANDA-NEWS. Chiles national energy commission (CNE) is launching a ground-breaking tender for long-term electricity supply for regulated customers in both of its power grids in anticipation of their interconnection in 2017.

Projects based on imported LNG are likely to feature prominently in the auction. Chiles government is promoting natural gas as a generation fuel after years of legal strife with opponents of hydroelectric and coal projects.

The new tender for 20-year contracts starting in 2021 includes hourly blocks to accommodate intermittent wind and solar projects, an innovation first introduced in a 2014 tender.

Gas power stations are seen as a natural complement for alternative renewable plants because they can be switched on and off more easily than other types of conventional plants, such as coal units.

The upcoming tender could cement the development of more than 1,700MW of gas-based generation in the southern region of Bio Bio. French EDF subsidiary Biobiogenera is expected to bid with a 640MW combined cycle unit tied to an LNG terminal off the southern city of Concepcion that US energy firm Cheniere plans to install. A first 640MW unit of the plant known as El Campesino already won a contract in the December 2014 tender at \\\\$110/MWh starting in 2019.

US utility Duke is also planning to participate with a 500MW gas project that it could build on the site of its existing 240MW Yungay thermal unit in Bio Bio.

Chile?s state-run oil company Enap, which is expanding into power generation, is looking for partners to develop other gas-based plants in central and northern Chile.

Enap is already an offtaker at Chile?s newly expanded Quintero LNG terminal on the central coast. Depending on future demand for regasification capacity, Quintero could undergo a second expansion to its full design capacity of 20mn m3/d.

The top four power generators in Chile, Frances GDF Suez, Italian Enel-controlled Endesa, US AES subsidiary Gener and Chilean Colbun, could also participate in the tender.

GDF Suez, the leading generator in the SING, is currently developing the interconnection between Chile?s central SIC and northern SING grids. Up until now, tenders for regulated supply were conducted separately for each grid. The company also controls the Mejillones LNG terminal in northern Chile, the heartland of the countrys energy-intensive copper mining industry.

A formal invitation to bid in the new tender will be issued on 29 May, according to a CNE resolution published late yesterday. The CNE, working on behalf of distributors, is seeking 13,750GWh/yr divided into three blocks. Bids are due on 20 April 2016.

Rather than a public ceiling price, the CNE will maintain a reserve price which can be adjusted if market conditions significantly change the project cost.

The CNE plans to launch another tender next month for a smaller volume of long-term regulated supply starting in 2017.