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The Economic, Environmental and Developmental Benefits of High-Voltage Interconnections Between South and North America via Central America and the Caribbean


Michael Hesse Wolfe, International Energy Planning Consultant, USA

Peter Donalek, Hrza Engineering Company, USA

Peter Meisen, Global Energy Network Institute, USA

ENERLAC 93

Bogota, Colombia

June 15 - 18, 1993

1. SUMMARY

This paper addresses the potential for expanding current efforts to complete power system interconnections in Central America towards an Inter-American Transmission System (IATS), that would interconnect northern South America with North America via Central America and the Caribbean. The principal reason for expansion of the concepts for interconnection would be to emphasize the greater utilization of renewable resources by deliberately creating an export trade in energy derived mainly from major sources of renewable hydropower in South America. The energy would be delivered initially to the countries of Central America and Mexico from sources in Colombia and Venezuela, and eventually with Brazil, Ecuador and Peru. The initial transmission system envisaged is a hybrid, comprising a three-terminal high voltage direct current (HVDC) system between a converter terminal in Colombia and an inverter terminal in Mexico, connected mid-isthmus to an a.c. Central American Interconnected System via a HVDC tap-station. Eventually this hybrid system could be expanded to include terminals in Brazil, Ecuador and Venezuela connected to additional bipoles to Mexico and a marine cable system to Florida via the Antilles in the Caribbean. Emphasis is given to an initial program for firming of existing generation and transmission capability in Central America, to be followed by a planned expansion of generating capacity in source countries with transmission interconnection facilities extending from South to North America via Central America and the Caribbean.

Staged expansion of the interconnection would enable considerable regional economic and environmental benefits to be realized. The principal economic advantages of interconnection are rationalization of investment in new generation and transmission facilities, coupled with improvements to operating flexibility and efficiency, resulting in reductions to cost of supply. To these would be added new revenue resulting from export of surplus energy derived from renewable resources and consequent environmental benefits resulting from the displacement of fossil-fired thermal generation. A regional environmental development compact (EDC), which would place these benefits in a regional perspective, could provide the political framework for cooperation by regional participants. It is envisaged that there would be a positive role for OLADE and ECLAC in support of CEAC and other regional participants to the EDC. Also addressed is the financial support necessary from the World Bank and regional banks, IDB and BCEI, together with a suggestion for conversion of existing commercial debt to local currency components of investment in generation and transmission facilities. In this way an initial economic boost is given to national economies by debt conversion to be followed by progress towards economic growth and integration.

There is momentum towards hemispheric economic integration in the Americas, provided by several regional economic areas, or common markets, at different levels of development, from nascent political formation to legislative process [1]. These regional economic groupings are part of the present pattern of convergence towards evolved forms of integrated economic areas. The global economy tends to encourage this convergence, with participation at different levels by regional trading blocs. One feature of this convergence is the supportive role played by energy exchange made possible by regional power system interconnections.

In South, Central America and North America, four subregional economic groupings have been formed or are being actively pursued. These are natural groupings evolving in geographical contiguity and economic affinity. Andean countries along the Cordilleras Blancas began the process of economic market formation under the terms of the Andean Pact but, due to adverse economic circumstances, convergence to meaningful integration has been slow. Argentina, Brazil, Paraguay, and Uruguay formed MERCOSUR in the southern cone but progress towards integration is also slow. In the countries of Central America, some progress was made to form a Central American Common Market but efforts have languished due to conflict situations in the isthmus area over the past decade. At the present time, efforts are being made to revive hopes for Central American integration. Possibly the best example of positive progress in the hemisphere is the expansion of NAFTA to include Mexico together with Canada and the United States. This can be expected to provide an example of what can be achieved with regional economic integration in North America. The example will surely cause re-examination of the basis for further progress with economic common markets in Central and South America. A precedent is thus set for forward movement in other subregions of the Americas, one feature of which would be extension of power system interconnections to facilitate intra-regional energy exchange.

In the progress towards economic integration of common market areas, energy could be defined in terms of its role as a leading sector. As we near the year 2000, the impact of energy on the global environment is more certain of critical review than in past decades. The unique advantage of energy as a catalyst to economic integration in the Americas is that renewable energy resources such as hydropower exist in abundance in countries of South America, whilst they are already well developed in North America. The possibility of energy transfer based upon this renewable resource development imbalance is then a factor that could contribute to economic integration between South and North America, via Central America and the Caribbean.

2. Renewable Energy and Interconnection for Economic Growth

The potential of renewable energy development to spur economic growth and integration of common markets is two-fold. Firstly, it would provide energy for local industrial and commercial growth requirements, contributing to domestic and, through trade expansion, regional economic growth and market integration. Secondly, if energy export from renewable resources were to be introduced on a sufficiently large-scale, revenue from export sales would contribute to local and regional development as well as preservation of the regional environment. This could only be made possible by extended power system interconnections.

At first, renewable energy would contribute to reduced consumption of fossil fuels, which would reduce both foreign exchange requirements for those countries having to import petroleum or coal and the environmental impact of fossil fuel combustion on air quality in urban areas. As subregional interconnection is extended, these benefits are also provided to wider areas. An example of this would be the proposed interconnection between Machala in Ecuador to Tumbes in Peru to enable surplus hydropower from the Paute Project to replace thermal generation in Tumbes [2a]. The first stage is modest: A seasonal range of power between 5 and 8 MW to be exported over a 69 kV line, but nevertheless the savings are tangible in terms of both the cost of alternative generation and relative environmental impact.

As more ambitious interconnections are completed, economic andenvironmental effects are magnified. Once the second stageinterconnection between Machala and Tumbes is completed, 30 MW of transfer capacity will be available between Ecuador and Peru. Interconnection capacity will be further increased in this border area by the Puyango-Tumbes binational project. In the northern Andean zone, a ten-fold increase in transfer capacity is projected for the 300 MW capacity 230 kV interconnection between Venezuela and Colombia, to link San Mateo and El Corozo via a 50 km transmission line through the Andes [2a].

Also in the Andean zone, plans for interconnections between Ecuador and Colombia are under implementation which will eventually enable reliable, economic energy exchange between the central systems of both countries, taking full advantage of seasonal hydroelectric generation diversity between the Amazon and Pacific basins [2a]. This emphasizes the considerable benefits that are associated with major system interconnections, which certainly contribute to economic growth of subregional participants. Greater utilization of hydropower also enhances environmental benefits from development of renewable resources.

Along the Atlantic coast of northern South America, prefeasibility studies have been made by the governments of Venezuela and Guyana to determine the relative economic advantages of an interconnection between two hydropower projects on the Lower Caroni in Venezuela and the Guyana electric power system. Delivery of power would be made from the future Macagua II and Tumeremo stations, which would be interconnected by a 200 km section of 400 kV line in Venezuela, to a terminal at Linden in Guyana over a 400 km section of 200 kV line.

Benefit/cost analyses indicate that this export of power from Venezuela would enable Guyana to realize significant fuel cost savings and avoid possible energy rationing [2a]. In this case, development of dedicated hydropower generation for export would be possible, enabling Venezuela to earn revenue from renewable energy resources and Guyana to displace the need for costly fossil fuel generation. Mutuality of interest is then possible, which would lay the basis for future expansion of dedicated generation for export of electrical energy converted from renewable resources.

One such future market for hydropower in reasonable proximity to northern South America is the subregional grouping of countries in Central America. The intent to form a Central American Common Market has been aided by the extension of transmission interconnections between countries along the isthmus. Apart from Belize, the other six nations of Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica and Panama are sequential links in the chain of countries from Mexico in southern North America to Colombia in northern South America. In 1991, only a 230 kV transmission link between Honduras and El Salvador remained to be built to complete interconnection between all six electrical power systems of Central America [2b]. The natural extension to this formation would be a southern interconnection between Panama and Colombia to be followed by a northern link between Guatemala and the central interconnected system of Mexico. As capital formation for generation expansion in Central America is partially reliant on private sources, most new generating plants are relatively small and their output tends to be absorbed immediately by local demand after commissioning. Seasonal hydropower, such as from run-of-river plants in Costa Rica, enable whatever surplus energy is available periodically to be exported via existing interconnections. The present need is to firm supply capacity in the six countries taking into consideration the limited surplus available for export. Future reinforcement of transmission capacity should be planned in context of the need to optimize on shared generation capacity via interconnecting links. There are several medium size hydropower sites available for development: Boruca in Costa Rica and Copalar in Nicaragua [2b]. The output of these could be shared following a sequential building program that would enable investment capital to be allocated with an efficient disbursement schedule. These larger plants, in the order of 300 MW capacity, could be developed on a joint basis together with associated transmission interconnections. However, during the period of generation and transmission capacity firming, it would be appropriate to evaluate the feasibility of extending transmission from Panama to Colombia for interchange of surplus hydropower. Alternatively, dedicated hydropower could be developed in Colombia and Venezuela for export to Mexico via Central America. In this case, it would be essential to fully evaluate the relative technical and economic merits of EHV AC or HVDC as a preferred transmission mode. At some juncture, the purpose of the Inter-American transmission system would change from a normal mode of energy interchange between national systems to also include delivery of power over a long-distance interconnection from Colombia to the natural regional demand center, Mexico City. At this stage it is likely that a hybrid system would be required, comprising a three-terminal HVDC system from Columbia to Mexico City, with a tap-station in Central America to the underlying interconnected a.c. system on the isthmus.

In the 2lst century, it may be possible to further expand hydropower exports from South America to North America by building dedicated HVDC transmission systems from terminals in Colombia, northwestern Brazil, Ecuador and Venezuela to three energy centers on the border between Mexico and the southern United States [3]. The energy centers would be developed within the context of NAFTA, primarily for renewable energy export to the U.S. and termination of the Inter-American transmission system. These energy centers would serve to buffer flows of power northwards to the NERC regions of WSCC, ERCOT and SPP. This would complete the interconnection of South America with North America. Its transfer capacity could then be gradually increased, as required, according to demand growth in relation to economic sources of renewable energy supply. In addition, if feasible, a marine cable interconnection could be made from Venezuela to Florida via the Antilles in the Caribbean. The map in Figure I shows the general location of interconnection terminals and overland/undersea routes for the Inter-American Transmission System.

Figure I
Inter-American Interconnection Terminals and Corridors

3. Natural Convergence of Regional Needs and Potentials

Over the last decade, many countries in the region have undergone domestic political turmoil, civil strife and foreign intervention. United Nations population trends predict 50% more people in the region in the next 25 years, most preferring urban areas. [4] Both the people and the environment of the region are suffering as a result, with widespread poverty still being the norm for millions of Latin Americans.

The benefits of electrical energy: clean water, refrigeration of food and medicine, waste disposal, communications; are available to only the wealthier minorities in each country. Lack of electricity can be easily correlated with high rates of infant mortality, as well as high birth rates. [5] A priority of sufficient electric power for all should be a social commitment made by all leaders of the region.

3.1 Regional Environmental Needs and Renewable Energy

All developing countries are dedicated to improving the standard of living for its citizens. Yet protecting the environment in the process of development is often forgotten. Burning wood for cooking and heating supplies the immediate needs of survival, but clears forested lands more quickly than they are replanted. The "cleaner" power technologies that are now available are usually more costly than the budgets of the nations can afford, and proprietary interests often keep new technology out of reach.

The great opportunity of the Mexico to Colombia-Venezuela region is vast potential of renewable energy. Hydro, geothermal, wind and solar energy are abundant beyond the actual energy needs of the region. Along with high voltage power transmission, these sources can be tapped for domestic development, and the excess used for export. These energy sales will have two major benefits: first, to return income for national development programs and debt repayment, second, to displace the more polluting fuels with cheaper electricity from non-polluting renewable sources.

3.2 Potential of Renewable Energy as a Catalyst for Growth

By working in concert, the Latin American countries could interest both technical expertise and foreign investment into the region. This investment into primary infrastructure, will bring jobs in construction, operation and maintenance of power transmission and control centers. More importantly, this integration of electrical infrastructure will help bring the economies of Latin America into a more competitive world standing. New markets will naturally open as the region's economic situation recovers.

4. Role of Intra-Regional Power System Interconnections

Interconnection of power systems within the region serves as a tangible sign of the economic integration of national economies into logical sub-regional market areas. International power flows over transmission systems represent another form of trade, with electrical energy being the basic exchange commodity. However, intra-regional power transmission interconnections are made in response to definite technical, economic and financial criteria. These criteria are discussed below in relation to proposed regional interconnections.

4.1 Economic Operation of Interconnected Power Systems

The usual motive for interconnection is to improve the economic operation of generation and transmission systems, as they expand to form more viable territorial extensions. Improvements to operation include the ability to utilize generation on a more rational basis for energy generation. Thermal unit operating efficiencies and cost of fuel are taken into consideration by economic dispatch and variations in hydrologic cycles are compensated for in the case of hydropower. Reliability of supply is improved as the number of generating units are increased through interconnection of supply areas. Firm power and economic energy may be exchanged to suit the operating requirements of interconnected supply systems.

4.2 Optimization of Capacity and Transmission Expansion

Advantages that may be gained from interconnection are associated with overall system expansion, including the timing of capacity additions which are key to financial investment. When a system is entirely self-reliant, more capacity has to be built to satisfy demand and reserve margin requirements. Interconnection enables sharing of capacity additions over time, which results in postponement of system additions. The cost of generating plant and transmission interconnections may be shared by adjacent utilities, such that investment in generation and transmission facilities to individual participants is minimized or deferred. Optimization of supply networks enables power demand to be met with a minimum of new generating capacity additions and transmission extensions for interconnected system expansion.

4.3 Rationalization of International Investment Programs

In this time of budgetary restraint, system interconnections allows rationalization of international investment programs. Capital is used efficiently as minimal outlays are possible with least cost expansion programs. Optimization of supply facilities over the expansion period enables capital plant additions to be postponed, or sometimes canceled, which results in reductions to capital disbursements through time. In addition, power system interconnection is being given new emphasis with increasing international environmental awareness. Stack emissions are reduced whenever thermal plants are postponed or canceled, which would be a positive consideration by international and regional financial institutions such as the World Bank and Inter-American Development Bank.

4.4 Interconnection of Energy Sources to Distant Markets

In addition to advantages resulting from local system interconnection, it is now possible to contemplate regional interconnections between major sources of renewable energy to distant demand centers. Advances in transmission technology allow delivery of large capacity blocks of power and energy over very long distances, from remote sources to distant markets. Transmission corridors up to 7,000 kilometers are within the extended range of high voltage d.c. (HVDC) and it is therefore possible to think in terms of continental distances for HVDC transmission reach [6]. Thus, remote renewable energy sources that would not be developed near-term to satisfy local demand can be thought of as potential sources of supply for distant markets, particularly if alternative generation sources are mainly fossil. The imperatives of environmental development suggest that one of the principal ways to counter global warming and regional pollution from fossil combustion would be to include more renewable energy sources in the supply mix. Interconnection of remote renewable energy sources to distant markets for displacement of fossil generation would be one way in which a major impact could be made on sources of environmental pollution.

4.5 Potential for Export of Surplus or Dedicated Energy

In Central and South America there is great potential for export of renewable energy, either surplus to local requirements or as a dedicated supply for energy export. Abundant hydro resources exist in northern South America and both hydro and geothermal resources exist, along the Isthmus of Central America. It is entirely conceivable to deliver hydropower from Colombia to Mexico via the countries of Central America. It is also possible to think in terms of a more inclusive system of interconnection to link hydropower sources in Colombia, Brazil, Ecuador, and Venezuela with North America via overland transmission systems through Central America and by a combination of marine cables and island transmission systems across the Caribbean. However, it is necessary to carefully plan the staged interconnections through time, with close coordination by participating nations within the region.

4.6 Integration of Systems to Maximize Economic Growth

With long-term maximization of economic growth as an objective, it is necessary to think in terms of steadily approaching the goal, within a well coordinated master plan to integrate existing plans for system interconnection along the Isthmus of Central America with extensions to North and South America. Extension of the interconnection between Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica and Panama will be necessary to link major sources in Colombia, Brazil, Ecuador and Venezuela with Mexico and the United States. Basically, what could be accomplished through time would be intra-regional interconnection of power systems that would build on existing interconnected networks within the Andean, Central American, and NAFTA market areas embracing Mexico and certain US-NERC regions.

5. Regional Distribution of Power-Energy Demand Centers

The main power and energy demand centers under consideration for assessment of the potential for future interconnection of South and North America via Central America and the Caribbean are Mexico City and the capital cities of Central American countries, assuming that a limited number of taps would be made to transmission systems comprising the Inter-American Transmission System (IATS). It is further assumed that power delivered to demand centers would be available to supply a portion of country loads via interconnected national transmission systems. In order to approximate the relative distribution of power along the transmission system, total national demand projections are given in Table 1.

Table 1:
Diversified Demand for Mexico and Countries of Central America

(Megawatts)

 
1980
1984
1989
1995
2000
Mexico **1
17,340
25,250
34,300
         
Guatemala
330
500
850
1,500
2,400
El Salvador
340
500
750
1,200
1,800
Honduras
160
270
440
800
1,300
Nicaragua
270
390
610
860
1,400
Costa Rica
450
630
990
1,700
2,600
Panama
400
500
990
2,000
3,500
Total **2
1,700
2,600
4,200
7,300
11,700

Sources:

**1/ 1989 Forecast of Comision Federal de Electricidad (CFE)

**2/ Central America Power Interconnection: A Case Study in Integrated Planning, World Bank Energy Department Paper No. 15, April 1984

It may be observed that the Central American country loads are of a similar order of magnitude and that their total diversified demand is approximately 1/4 of the total diversified demand for Mexico in 1989, ranging up to 1/3 in 2000. The load growth of Mexico is increasing at a faster rate than that of the six Central American countries, indicative of the stagnation in Central America. However, in relation to the justification for interconnection, Mexican load growth offers a definite incentive to eventually supply the CFE system mix with electrical energy from hydropower sources of northern South America.

The primary factor which would govern the economic transfer of power to Central America and Mexico would be the amount of power relative to installed capacity and the delivered cost of energy in relation to prevailing energy tariffs. The 1988 values given in Table 2 are indicative of respective levels in the countries of Central America.

Table 2:
Countries of Central America (1988)
Installed Capacity
Energy Sales
Cost of Energy
Average Tariff
MW
GWh
U.S. cents/KWh
U.S. cents/KWh
Guatemala
741
1,835
3.8
6.1
El Salvador
651
1,662
2.5
4.3
Honduras