CNE releases perception study regarding the bidding process for supply to regulated clients

PRESS RELEASE from CNE
May 9, 2024

(Machine translation of original release, issued in Spanish)

The results of the study commissioned from the Criteria Consulting Firm, which surveyed the opinion and perception of generating companies that have participated in these processes, consider possible improvements in future tenders.

Within the framework of the constant monitoring it carries out of the country's energy markets, the National Energy Commission (CNE) commissioned the Criteria Consulting firm to carry out the opinion study "Perceptions about the bidding process for supply to regulated clients", with the objective of to know the opinion and perception of the generating companies that have participated in these processes and thus evaluate the performance and potential improvements to this mechanism, whose award ceremony for the last process was carried out recently.

This is how, within the study, carried out with a standardized methodology, 25 generating companies representing the national market participated, both new entrants and consolidated companies, and of various sizes, considering from those less than 100 MW to those exceeding 1,500 MW of capacity. installed capacity.

The main lines of inquiry of the survey aimed to understand the factors that affect participation in the tender, as well as the perception regarding the modifications introduced in the 2023/01 tender process and the topics that the industry considers would be relevant to future processes.

Results

Among the main results of the study are the following findings:

The factors that most affect the participation of potential bidders are financing difficulties (88%), generation market conditions (72%) and difficulties in obtaining permits (72%).

Furthermore, 60% point out that there are other corporate reasons, such as prioritizing portfolios in execution, restructuring and sale of assets, which affect participation a lot or quite a bit, while 40% indicated the scarcity of projects developed in ready-to-build condition.

When detailing these reasons, the companies surveyed highlighted regulatory and infrastructure factors, such as uncertainty due to rate stabilization policies and transmission congestion, and economic and risk factors associated with financing and the perception of an unstable regulatory environment.

Regarding the changes made to the 2023/01 Tender Rules, 92% of those surveyed indicate that the systemic cost transfer mechanism has been an important factor when interested in and participating in this tender, as has the zoning of demand and supply points (84%).

On the other hand, the storage incentive was valued positively by 56% of those surveyed.

Regarding the general evaluation of the bidding processes, 76% of those surveyed positively evaluate the times and deadlines of the process, while 72% positively evaluate the accessibility of the documents of interest; 64% do so regarding the availability of documents, and 56% evaluate positively the clarity of the information and its dissemination.

Expectations and possible improvements to the bidding processes

Regarding the expectations and assessment of supply bidding processes for regulated clients, 72% state that they are relevant processes to achieve supply at efficient prices for regulated clients, while 56% mention the importance of the bidding mechanism in the incorporation of new generation projects.

On the other hand, almost half (48%) of those surveyed point out the importance of these bidding processes in promoting the entry of new players into the market and in promoting the energy transition (48%).

Regarding the areas of improvements to the Bidding Terms, the study reveals the following aspects:

• Increase regulatory stability and protect signed contracts.
• Reserve price according to the market and improve storage incentives.
• Possible incorporation of 'take or pay' clauses and minimum billing guarantees.
• Make contracts more flexible to allow adjustments to market changes and encourage the participation of new actors and technologies.

Scopes

Marco Mancilla, Executive Secretary of the CNE, pointed out that the results of this study “constitute a relevant input for the monitoring that we permanently carry out regarding the supply bidding mechanism, so carrying out this type of exercise allows us to have a better understanding systematic of the perceptions of the agents of this market.

“A relevant result that the study shows regarding the evaluation of the generation market and perception of its future is that, although the current view of the respondents on the generation market is not positive, in general, the industry has an optimistic look at the health of the sector facing 2030,” he said.

"Finally, the idea is to move forward together with the industry and all interested parties in this issue, so that the objective of ensuring continuous electricity supply at the lowest possible cost to regulated clients continues to be met, which is why the CNE has mechanisms of participation for all those interested in these projects

See Full Report here