1. NEW ENERGY REGULATION IN THE TRANSMISSION SECTOR & GEOTHERMAL BUSINESS Carlos Jorquera E-mail: jorquera@gmx.net

2. Content NEW REGULATION OF THE TRANSMISSION SECTOR NEW REGULATION OF THE GEOTHERMAL SECTOR

3. Need of a new Regulation CONTEXT Chile had the highest Energy Price in the Region High penetration of “variable - intermittent ” generation (Solar and Wind) The transmission system is not robust enough  Tx congestions avoid the connection for new generation  Limited access to the Tx  Grid Operator is not an independent entity. Higher requirement from the communities and lack of legitimacy Higher environmental requirements CENTRAL OBJECTIVES a.Transmission should promote the development of a competitive market and should reduces the energy prices. b.Improve security and quality service standards. c.Improve the role of the “Grid Operator*

4. NEW REGULATION - TRANSMISSION TOPICS ABOUT THE NEW REGULATION a.LONG TERM PLANNING b.DEVELOPMENT OF GENERATION CLUSTERS c.DEFINITION OF THE TRANSMISSION PATH d.REMUNERATION OF TRANSMISSION e.SUBTRANSMISSION AND PRIVATE TRANSMISSION f.INDEPENDENT GRID OPERATOR

5. NEW REGULATION - TRANSMISSION a.LONG TERM PLANNING  Increases the planning horizon to 10-20-30 years  Add new criteria's in the evaluation (allow competence, avoid risk supply, energy policy)  Annual planning process  Add social, environmental and territorial aspects. b.DEVELOPMENT OF GENERATION CLUSTERS  Identification of geographical areas with generation potential of public interest.  Transmission development: public initiative - repower private initiative.

6. NEW REGULATION - TRANSMISSION c.DEFINITION OF THE TRANSMISSION PATH  The State defines the path and in relevant cases does a Strategic EIA and tenders the construction.  Private sector: defines the final location of the tower inside the path; negotiates the electric-concession with land owners; construction and operation (tender process). d.REMUNERATION OF TRANSMISSION  Demand pays for the transmission – stamp system. e.SUBTRANSMISSION AND PRIVATE TRANSMISSION  Subtransmission: expansion is mandatory and centralized planned.  Open access

7. NEW REGULATION - TRANSMISSION f.INDEPENDENT GRID OPERATOR  Independent body created by law.  It is supposed to improve the objectives and obligations from the energy sector.

8. NEW REGULATION - GEOTHERMAL CONTEXT -The development of a geothermal project can take up to 10 years. -Exploration and exploitation concessions. -Access of geothermal projects to Regulated Energy Auctions EXPLORATION CONCESSION EXPLOITATOIN CONCESSION  Exploration Concession: 2-4 years.  Exclusivity period: 2 years  Award process of the exploitation concession: more tan 2 years.  Exploitation concession: does not expire in time; provide the legal title.

9. NEW REGULATION - GEOTHERMAL CONTEXT -Lack of financing from commercial Banks in the early exploration activities. -CAPEX reported by the developers has increased over time. -Geothermal Law kick off in year 2000. Source: Energy Ministry (December 2015) December 2015N° Exploitation 9 Exploitation in Process 26 Exploration 76

10. NEW REGULATION - GEOTHERMAL CHANGES TO THE REGULATION a.Changes the concessional system to a one Geothermal Concession: Reduces the development period and cost. The developer concentrates in the Project and not in administrative issues. Development control: milestone definitions and incremental yearly fees. b.Creation of a Public Data Base with data from the projects that start production or reject the concession. c.The rights provided by the law are now concentrated into the geothermal sector. Eliminates the right of using ground water. d.Ensures sustainable exploitation and sustainable closing of the Project.

11. NEW REGULATION - GEOTHERMAL CHANGES TO THE REGULATION e.Changes “the geographical form” of the concession limits: Can adjust the form to other existing limits. f.Establishes limited periods for the responses of other governmental entities (concession award) g.Provides the energy ministry more flexibility to call for geothermal tender processes. h.Deletes the need of a public tender when a concession is requested in a zone with an existing “geothermal likely zone/registered geothermal hot spot”.

12. SUMMARY  The new regulation in the transmission sector is in the last administrative approval process and improves the energy sector. It takes into account the short-medium and long term of the sector.  The new regulation in the geothermal sector is pending to be submitted to the parliament and senate, and have being agreed with the stakeholders.  Both regulations do not take into account incentives like Feed in Tariff or tax incentives.  The geothermal business gets improve and facilitates the development of the projects.  Increases the certainty in the estimation of the transmission costs.  Secure access to market: Free access to the electricity system.  Special condition: the energy authority could take care of the transmission power line (cluster concept).  Concessional system become more easy and reduces the administrative periods (reduces potentially from 10 to 6 years).  Introduces exponential penalties if the project is not developed (avoid speculation)  Creates a national database  information management.

13. NEW ENERGY REGULATION IN THE ELECTRIC SECTOR – GEOTHERMAL BUSINESS Carlos Jorquera E-mail: jorquera@gmx.net