Chile

RECAI: Country focus

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RECAI 39 - Country Focus: Chile

 

Double or nothing. The doubling of Chile’s renewable energy target has rightly generated significant headlines. The requirement for utilities with more than 200MW of capacity to generate at least 20% of energy from renewable resources by 2025 was signed into law on 14 October, replacing the previous obligation to secure 10% by 2024 (both excluding hydropower plants over 40MW). This is equivalent to around 6.5GW of renewables capacity, up from 1GW.

The change is good news for developers, since it effectively guarantees demand for an ambitious amount of clean energy. The Chilean renewable energy institute estimates the country is currently generating around 5%–6% of energy from renewable sources, leaving significant opportunities for new capacity over the next decade to meet the target.

Climbing down. The 20% by 2025 target represents a compromise though, after an earlier version of the bill calling for 20% by 2020 was passed by the lower house but opposed by energy minister Jorge Bunster. The reason given was the transmission system’s inability to cope with the additional capacity needed to meet the target, particularly given the distance of urban load centers from anticipated solar and wind sites. The shift to 2025 buys time to create a more robust transmission infrastructure, but represents a slight climb down in ambition.

Auction back-up. The new legislation also allows for the Government to hold annual auctions to award 10 year power contracts to renewables projects from 2015, which may be necessary if utilities fail to meet the new targets. While credits must be purchased by those energy providers not meeting the quota, the current surplus of clean energy (relative to the current 5% quota) could drive prices down this year, from an average of US$12/MWh between 2010 and 2012.

Unsubsidized and proud. The other news putting Chile firmly in the headlines has been the announcement that it will host the world’s largest unsubsidized solar PV project. The 70MW plant will be developed by Swiss renewable energy producer Etrion, French energy giant Total SA and Spain’s Solventus Energías Renovables, taking equity stakes of 70%, 20% and 10% respectively. Construction will start in Q4, with operations expected in early 2015, when it will sell to the spot market, but with the potential for future PPAs. Overseas Private Investment Corporation (OPIC), the US Government’s development finance institution, will contribute 70% of funding for the US$200m project in US dollar denominated debt, with the rest coming from equity.

Also in this article:

  • Setting records
  • Breaking records
  • From goal to grid
  • Wind woes
  • Wind takes the wheel
  • Marine wades in

Read full article (pdf, 2.8MB)

 

Local office contacts:

   Javier Vergara

   Raul Sandoval