Self-Sufficiency for Regulated Consumers Through Renewable Energy Sources – Renewable Energy

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Renewable energy sources are increasingly important in the fight against climate change1. They are also essential for achieving safe and environmentally friendly energy development.2. As a result, companies increasingly tend to assume environmental commitments in the international private sphere, including electricity consumption with clean energy3.

In this regard, Ecuadorian legislation, as an alternative to electricity purchase and sale systems4considers the possibility of installing and operating unconventional renewable energy systems for electrical energy self-sufficiency5.

This article (i) contains the main characteristics of distributed generation systems and (ii) summarizes the procedure to be followed before the electricity distribution company concerned (hereinafter, the “Distributer”) for their installation and operation.

  1. Distributed
    Generation system

By regulation n°ARCERNNR-013/2021 of April 05, 2021 (hereinafter, the “Regulation“), the Agency for Regulation and Control of Energy and Non-Renewable Natural Resources (hereinafter, “ARCERNNNR”) regulated Article 24 of the Regulations of the Public Electricity Service Law (hereinafter, the “RGLOSPEE“), which authorizes any natural or legal person to install and operate systems for the production of electrical energy independently, on the condition of maintaining a supply contract with the Distributor and benefiting from the supply of the public energy service ( below, “regulated consumer“).

The systems must have the following main characteristics:

I. Its nominal power must be less than 1 MW6.

ii. Its annual production must be equal to or less than the annual energy demand of the regulated consumer.

iii. Must be a distributed production systemseven. In other words, the energy must be produced from small production plants, close to consumption (in the same service area8where the regulated consumer is located) and connected to the electricity distribution network.

iv. It should be based on non-conventional renewable energy sources (eg wind, solar, etc.).

Distributed Production Systems for Self-Sufficiency (hereinafter, “SGDA”) do not limit the electrical energy consumption of the traditional distribution network. Thus, if the SGDA does not cover the demand of the regulated consumer, the latter may also consume electricity from the network. On the other hand, as provided for in Article 18 of the Regulations, if due to the operating conditions of the SGDA or variation in consumption, there are surpluses of energy produced by the SGDA, these will be injected into the electricity distribution. Consequently, a credit will be generated in favor of the regulated consumer, who will be compensated with the consumption made from said network.

Thus, any company can install and operate, for example, solar panels connected to the distribution network, with a nominal power of less than 1MW, to produce clean energy and cover all or part of its demand.

2. Procedure

The following procedure must be followed to install and operate an SGDA:

I. The regulated consumer must ask the Distributor to determine whether or not it is possible to connect the SGDA to the electricity distribution network. In said request, the general data of the regulated consumer and of the SGDA must be included (for example, the nominal power, an estimate of the annual energy to be produced, the primary energy resource, the point of connection to the distribution network, between others).

ii. If the Distributor determines that the connection is feasible, it will accept the request and establish the connection diagram and the operating conditions of the SGDA.

iii. Once the “connection feasibilityis granted as defined by the standard, the subject consumer must demonstrate to the Distributor that he meets the requirements set out in the Regulation to install and operate the SGDA. For which you must present the following basic information:

  • Location of the asset or property where the SGDA will be installed;

  • SGDA technical report;

  • Design of the works and/or necessary developments of the distribution network for the connection of the SGDA; and,

  • Project implementation schedule.

iv. If the Distributor determines that the requirements are met, it will issue the Certificate of Qualification, ie the document which allows the regulated consumer to install and operate the SGDA under the conditions approved and established by the Distributor.

Those wishing to benefit from this scheme should consider the following:

  • The SGDA must be installed according to the execution schedule approved by the Distributor.
  • The regulated consumer must bear the costs of the work and/or fittings required to connect the SGDA to the distribution network.
  • The necessary assistance must be provided to the Distributor to carry out the tests he deems relevant on the equipment that will allow the connection of the SGDA to the distribution network.
  • The regulated consumer will be responsible for the quality and operational safety of the SGDA vis-à-vis the Distributor and the competent authorities. Also, will be responsible for any damages to third parties arising from such operation.
  • The Qualification Certificate will be valid for the useful life of the SGDA:














Technology Useful life (years)
Photovoltaic 25
Wind 25
Biomass 20
Biogas 20
Hydraulic 30
  • The certificate of qualification can be terminated for various reasons9, among them, due to: (i) an increase in the nominal power of the SGDA without prior authorization from the Distributor, (ii) the expiry of its period of validity, or (iii) the decision of the regulated consumer . At the end of the Qualification Certificate, the SGDA will be disconnected from the distribution network.

In conclusion, the SGDA is an attractive option for regulated consumers who wish to make environmental commitments, such as meeting their electricity demand with clean energy. In addition, if the SGDA is properly structured, its installation and operation could be cheaper than the regular consumption cost of the electricity distribution network. In this case, the investment is profitable, and the consumer could install the SGDA to: (i) eliminate his consumption from the distribution network; or (ii) reduce it and possibly compensate for it if the SGDA produces energy beyond its own needs.

Footnotes

1 Hugo Altomonte, dir., “Unconventional renewable energies in the electricity production matrix: three case studies”, ECLACconsulted on October 31, 2021, https://repositorio.cepal.org/bitstream/handle/11362/40975/S1601254_es.pdf?sequence=1&isAllowed=y

2 Susa Jiménez, “Unconventional renewable energies: promotion policies in Chile and around the world”, Libertad and DesarrolloISSN: 0717 – 1536, accessed November 21, 2021, https://archivos.lyd.org/other/files_mf/sie218energiarenovablenoconventcionalpoliticasdepromocionenchileyelmundosjimenezsetember2011.pdf

Santiago Hoyos, Carlos Franco and Isaac Dyner, “Integration of unconventional renewable energy sources in the electricity market and its impact on the price.”, Engineering and Science, doi: 10.17230/ingciencia.13.26.5, http://www. sawelo.org.co/pdf/ince/v13n26/1794-9165-ince-13-26-00115.pdf

3 Veronika Henze, “Corporate clean energy purchases grew 18% in 2020, despite mountain of adversity” BloomberNEF, January 26, 2021, https://about.bnef.com/blog/corporate-clean-energy-buying-grew-18-in-2020-despite-mountain-of-adversity/

4 The sale of electricity between private individuals is possible according to two regimes: (i) the buyer must qualify as a large consumer and buy all of his electricity demand from a producer or self-producer approved as such with the competent authority; or (ii) the buyer must be a shareholder of a self-producer to buy electricity from the latter.

5 Paragraph 10 of article 3 of the LOSPEE provides that “… Non-conventional renewable energies are considered sources: solar, wind, geothermal, biomass, tidal, hydroelectric of smaller capacities, according to the terms and conditions established in the regulation, and others that will be defined in the respective regulation . “

6 According to ARCERNNNR, the average consumption of regulated customers at residential, commercial and industrial level is 141.42 kWh, 575.68 kWh and 9,739.14 kWh respectively. Available at: https://www.controlrecursosyenergia.gob.ec/wp-content/uploads/downloads/2021/09/Estadistica-2020-baja.pdf

7 Article 3 of the RGLOSPEE defines distributed generation as: “(…) Small production plants installed close to consumption and connected to the distribution company’s network. “.

8 Article 3 of the RGLOSPEE defines the service area as “…the geographical area delimited by the Ministry of Energy and Non-Renewable Natural Resources in which an electricity company provides the public service of distribution and marketing of electrical energy and the public lighting service…”.

9 Ecuador, Regulation No. ARCERNNR-013/2021, Official register 448, 10 May 2021, art. 11.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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