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Electric power Market Report

The electricity market currently has an idle generation capacity exceeding the recommended level of 33% of demand for energy by 12 percentage points. This gap between supply and demand is the result of a significant rise in investment in hydroelectric power plants, natural gas processing plants and renewable energy resources (wind power plants and mini-hydroelectric plants) in the last decade, although it’s also a result of a lower growth in demand than the initial forecasts. Cancellation or delays in mega mining projects and a lower growth rate of internal demand generally explain this situation.

The different providers in the electricity market —generating companies, distributors and even transmission companies— all agree that the regulatory framework of the sector (based on a dispatch framework of the most efficient energy generators) at the time stimulated the development of energy projects through the use of different technologies. However, they have varying positions regarding the changes that need to be introduced in the model to make long-term investment sustainable and simultaneously reduce the tariff distortions in the different segments of the market.

The lack of direction and initiative from authorities to define the course of the sector —for example, the protests and anti-protests about the declaration of natural gas prices, as well as the delays regarding the future of the southern gas pipeline— gives way to legislative proposals which lack detail, generating a very dangerous regulatory uncertainty.

Meanwhile, the demand for electricity will show a moderate growth in the medium-term. The start of some mining operations and the development of diversified investment projects will drive the gradual increase of spot market prices over the next four years. This will enable the market to enter a rebalancing phase and for some large-scale electricity generation projects to resume.

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