Generators weigh the benefits of small gas-fired plants

Given current high oil prices and uncertainty over gas supplies from Argentina, Chilean generators are considering installing small-scale gas-fired plants to supply refineries and isolated areas of the country, according to industry sources. The small gas turbines, which can be fixed or mobile, are traditionally used as peaking units, but market conditions are making 24-hour generation with these turbines more feasible. Much-awaited power sector legislation passed earlier this year provides financial incentives for small generation projects to supply power to isolated areas, particularly in southern Chile, which is undersupplied due to transmission limitations. In addition, with Argentina's gas situation still uncertain and oil prices at US$55 a barrel internationally, Chilean generators and state oil company Enap are looking at mini cogeneration plants as a low-cost alternative to large gas or diesel-fired plants. Many generators have put plans for larger gas-fired plants on ice, pending clarification of Argentina's gas situation and the need for regulations regarding who pays the cost of back-up diesel generation when gas supplies are cut. During gas supply interruptions to Chile from Argentina this past southern hemisphere winter, generators were forced to bear the burden of higher diesel-fired generation costs, which they say is unfair. Despite gas exports from Argentina returning to normal during the summer months, the gas situation in Chile "is very dynamic; we don't know what's going to happen because it's not our resource," an Enap source said. Given the lack of clear regulations in the sector, generators are turning to small gas-fired plants, which are relatively cheap and quick to install, as a less capital-intensive short-term solution to the country's power needs. For example, local generator Endesa (NYSE: EOC), has won the BOT (build-operate-transfer) contract to supply Enap's RPC refinery in Concón and is considering installing an 80MW cogeneration plant, a source from Endesa's engineering arm Ingendesa said. The tender closed in September 2003 but has been put on hold due to gas supply problems from Argentina during this past southern hemisphere winter, the source said. Endesa is considering buying Pratt & Whitney's FT8 TWINPAC gas turbines for the plant, the source said. The TWINPAC unit is a pre-engineered, factory-packaged 50MW gas turbine system, with two turbines each.