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Andean Region

Regional Background and the Energy Sector

Countries in the Andean region are working to establish a regional electrical interconnection, which can help to enhance competition in power generation and supply, encourage resource diversity, and reduce system operation costs by enabling countries to take advantage of existing generation assets across different geographical locations.[1] However, great effort is needed to coordinate the advancement of a regional power market at the political, regulatory, economic, and technical levels.

In this context, the Andean Electric Interconnection System (SINEA) initiative was established by Chile, Colombia, Ecuador, and Peru (with Bolivia as an observer) in 2011. Its aim is to promote regional interconnections within the countries of the Andean Community of Nations (CAN) with Chile as a partner. Additionally, SINEA works to capitalize on the economic benefits derived from commercial exchanges of energy; main objectives include increasing efficiency, diversifying and optimizing generation sources, and improving the security and reliability of the electricity supply.[2] 

CAN Decision 816 in 2017 lays out a framework to establish an Andean Short-Term Contracts Market (Mercado Andino Eléctrico Regional de Corto Plazo, or MAERCP). CAN Decisions 536, 720, 757, 789, and 811 also establish norms regarding cross-border power trade and the MAERCP. Chile, as a CAN observer government, plans to adopt all CAN norms and decisions regarding regional power market development and trade.

 

Our Work

With support from the Bureau of Energy Resources’ (ENR) Power Sector Program (PSP) of the United States Department of State, NARUC is working with Andean governments to provide regulatory tools and share best practices to support the development of cross-border power projects, the evolution and development of a regional electricity market, and the integration of renewable energy into the region’s energy sectors.

The partnership is designed to ensure regional harmonization remains in the forefront of national plans to enhance energy sector regulatory frameworks. Through the partnership, NARUC provides a platform to advance dialogue on market goals and share regulatory best practices to regulators from Chile (La Comisión Nacional de Energía [CNE]), Colombia (Comisión de Regulación de Energía y Gas [CREG]), Ecuador (Electricity Regulation and Control Agency [ARCONEL]), and Peru (Osinergmin).

 

Focus Areas and Selected Engagements

Regional Market Development

In 2021, NARUC kicked off a new partnership between the U.S. Department of State, NARUC, and the participating countries of SINEA by exploring key concepts related to regional power market development. NARUC experts shared considerations that regulators can take in fostering the development of a regional network model for a reliable and efficient interconnection and touched on examples of multi-regional electricity market planning in the United States, relevant cost allocation, and ancillary services among other topics. As a result, participants learned about the technical and economic value generated through regional markets and regional transmission planning, such as increased reliability, cost savings, competition, and benefits to end-users.

Additionally, as the region embarks in establishing the MAERCP, participants have expressed their desire to ensure that the economic benefits of regional market integration surpass economic costs. For this reason, NARUC experts discussed methodologies of determining the benefit/cost ratio and provided examples of value propositions calculated for different regional markets in the United States. Other topics discussed included methodologies of determining the benefit/cost ratio for potential regional projects, the value proposition of regional interconnections, and the importance of market monitoring.

Moving forward, partnership will continue to focus on providing measures to address regional goals identified in the SINEA 2020-2030 Roadmap, which raises strategic proposals aimed at shaping the MAERCP. Such goals include promoting transparency in integrated power systems or regional markets, regional transmission planning and cost allocation fundamentals of tariff design, support for regional harmonization, and support for the creation of the Technical Regulatory Working Group outlined in the Roadmap.

 

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Photo Credit: ©diegograndi  / Adobe Stock

 

At A Glance

Andean Region Regulatory Bridges

Project Dates: 2017 - Present

Primary Partners:

Government of Chile

Government of Colombia

Government of Ecuador

Government of Peru

Contact Us About This Project


[1] “Regional Markets: Innovation Landscape Brief.” IRENA. https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2019/Feb/IRENA_Regional_markets_Innovation_2019.pdf la=en&hash=CEC23437E195C1400A2ABB896F814C807B03BD05#:~:text=Regional%20markets%20can%20help%20reduce,efficient%20generators%20in%20the%20region.

[2] Echevarría Barbero, Carlos. “Un paso más hacia la interconexión eléctrica de los países de América Latina.” Inter-American Development Bank. https://blogs.iadb.org/energia/es/un-paso-mas-hacia-la-interconexion-electrica-de-los-paises-de-america-latina