Partie 2 ou 3 Nouvelle conomie lectrique - Centre International de ...

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Partie 2 ou 3 Nouvelle conomie lectrique - Centre International de ...

- 22 -concentrated than the previous integrated public monopolies, so that the public authorities canbe kept at a distance and incentives to efficiency introduced. In this organisation, the functionof the competition-based exchange, if it is introduced, must be kept on the edge of theindustrial organisation for simple short-term adjustments, without the spot prices becomingthe driving force behind the contracts.Faced with the foreseeable repeated failure of the competition-based model when faced withthe capacity development stakes, there will probably be a return to principles similar to thoseof the single buyer, with priority given long-term contractual agreements. This is the casewith the system defined in Brazil in 2003 following the serious crisis of 2001, which can beexplained in part by lack of investment. But the model of the single buyer and long-termcontracting is full of pitfalls with shortcomings which have to be carefully balanced with theadvantages, in order to meet the challenge of new capacity development.3.2. Advantages and shortcomings of long-term co-ordination systemsThe “single buyer” device is integrated into an industrial organisation where the “singlebuyer” entity holds the monopoly of wholesale over the distributors and sometimes over themajor consumers. This was the first model to be applied in developing countries with the aimof getting round the restrictions on financing public electricity companies against the generalbackground of debt crisis.- The governments authorise private businesses to invest in order to produce and sellelectricity in the context of long-term contracts signed with the “single buyer” business.- The public authority (ministries) organise programming of capacity development. Whenthe need of new capacities is identified at mid –term, the entries occur following aninvitation to tender and the applicants’ entry into competition in independent production.- These “power purchase agreements” (PPA), -- which will allow funds to be obtained fromlenders to finance most of the investment through “project financing” (that is, outside thescope of the balance sheet) -- are generally drawn up with risk sharing clauses and capitalprofitability conditions that are the most favourable to independent producers in the firstrounds of auctions: Take or Pay clauses (which do not therefore the single buyer todispatch them according to variable costs whatever the position of its own equipments inthe merit order) and price clauses with a payment structure that contains a significantfixed term.These clauses “create hostages” -- in the sense of the transaction cost theory(Williamson,1986) -- and protect investors against any market risk. PPAs structured in this way will thenallow the construction of very complex contractual arrangements, which organise financing,purchase and operation of equipment, purchases of fuel, government guarantees through aseries of contracts. This is particularly the case with the Build-Own-Operate-Transfer (BOOT,BOO) and Build-Lease-transfer (BLT) arrangements. It must be added that most often, in theinstitutional and economic environments of the countries in which the Single Buyer model isimplemented, the State must guarantee payment for the electricity sold to the single buyer orfor guarantees of loans. The advantages and shortcomings of this model must be pointed outin comparison to the public monopoly model and the competition-based reference model.3.2.1 The advantages and shortcomings of the long-term co-ordination modelincentives inv elec north south energy policy.doc created by Dominique Finon on 14/05/2004printed by JQ on 12/22/2004 at 11:43 22/31

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