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demand response markets in the LAC region that could be used to support variable renewable generation, although Chile’s market is perhaps the furthest along.111 Expanding Transmission Infrastructure Transmission expansion is an issue closely related to regional integration. Countries in the LAC region are already seeking to expand their transmission networks in order to strengthen existing connections, extend service to new locations within their borders, and interconnect with neighboring countries. Higher penetrations of renewable energy might require additional layers of planning for the transmission system. New transmission capacity may be needed to integrate and balance variable renewable energy resources as well as access many of the best renewable resources (such as those shown on Figure 5) often located far from population centers. Transmission planning methodologies are in place throughout the region to accommodate the growth of conventional centralized generation, but the expansion of smaller-scale power plants may call for new approaches to transmission planning and implementation. New transmission can be difficult to finance and build because of the upfront capital cost, planning and development risks, and timing challenges. Since transmission and generation are generally not built simultaneously, generators face the risk that sufficient transmission capacity might not be built if it is not already in place, whereas transmission developers bear uncertainty related to the probability that the line might not be fully utilized due to insufficient generation. To address the challenges, several countries and states112 have enabled the construction of dedicated transmission lines to renewable resource-rich areas, supported by special regulations and cost recovery provisions. The open seasons implemented in Mexico provide a good example.113 The options available will depend on each country’s electricity market structure. Large concentrations of renewable energy resources exist that could meet significant proportions of regional demand if they could be developed. Near-term opportunities could be unlocked, for example, renewable energy scale-up in Mexico and Brazil could be enabled with a $660 billion investment in immediate transmission.114 To realize such opportunities, regional policymakers will need to identify innovative models for transmission capacity planning, cost allocation, and financing. Energy prices Although many regulatory frameworks are leaned to leave electricity prices to be set through a market or market-alike dynamic aiming towards efficiency, market agents clearly play according to a set of rules that in some cases explicitly deters or keep NRETs from participating in such market dynamic. The way in which biddings for the expansion of the power system are designed determines the incentives for the different technologies. Market rules in generally lack mechanisms to value the benefit of RETs in terms of long-term price stability -one of the benefits that NRETs provide is to stabilize electricity prices in single-buyer markets. In order to achieve a truly level playing field between NRETs and conventional technologies, all generators would need to be asked to offer a constant electricity price over the long term (which would Rethinking our energy future p. 24PDF Image | White Paper on Renewable Energy for the 3GFLAC
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