Government sets high wind tariff -- Ecuador boost to financing

Ecuador's electricity regulator, Conelec, has given wind power a huge boost by passing new regulation that sets not only clearly defined rates for wind power but also a series of rules and obligations to favour the development of wind and other renewable sources of energy. The regulations state that wind power will sell at $0.1005/kWh for ten years for plants that come on-line before end 2004. For wind plants installed from 2005, Conelec will revise prices to take effect until a date that is still to be established.

Furthermore, dispatch centre Cenace will be obliged to favour generation from renewables up to maximum limits set by the wholesale energy market. If generation exceeds those limits, power will be dispatched in order of price from the cheapest first, in competition with plants using conventional fuel sources. Power quality requirements are the same as those for conventional generation sources.

The regulations, announced at the end of September, also establish $0.0006/kWh/km transmission payments with a $0.015 ceiling in the event that a new line needs to be built, and that the plant owner builds 100% of the transmission line itself. The regulations apply to renewable generation plants covering wind, solar, geothermal and biomass of up to 15 MW, a ceiling that could be increased as the country's generation base expands.

Minister's interest

The likely effect of the regulation on the wind market remains unknown. At Conelec officials doubt the regulation will cause an immediate wind rush. Geothermal is a competitor and it is widely reported that the energy minister, who initiated the law, has an interest in a geothermal field. Furthermore, the political and economic climate does not have a reputation for the kind of stability which might attract investors in wind farms.

The only company with any registered interest in wind power in Ecuador is Marketec Solviento. It's manager, Antonio Bayas, says the regulation will be a big help in the all important search for financing. Marketec has completed feasibility studies at a site in Imbabura province, some 150 kilometres north of capital city Quito, for a 10 MW wind farm. At the ten square kilometre site, winds average 6-7 m/s in the September-April windy season, gusting to 23 m/s. Marketec would like to proceed from the study stage to installation and operation of what would be Ecuador's first wind farm, with a view to adding a further 10 MW in the future. This, however, depends on securing financing, which is where the regulatory change could make a big difference.

Two percent target

Apart from Marketec's studies, there are no detailed studies on Ecuador's wind potential, according to Conelec. It is intending to ask Latin American energy organisation Olade for funding to contract studies for both wind and biomass. The funding would hopefully be approved as part of next year's budget. Wind measuring would take a minimum of 12 months to complete.

Conelec seeks to increase renewable generation to the point where it covers 2% of national demand. Despite demand stagnating at around 1800-1900 MW in the last two years, it is expected to start growing at 5% a year, says a Conelec official. Furthermore, international power companies established in the country, such as Spain's Unión Fenosa, estimate the country has the potential to become a net energy exporter.

Ecuador is in the process of modernising its power sector and is gradually removing subsidies to bring prices into line with international averages and end the long standing situation of distributors lacking the money to pay generators. The country's 18 regional utilities and six generators are all scheduled for privatisation. Despite some setbacks in the timetable due to unsettled political and economic factors, authorities expect to offer the companies to the private sector in 2001.