Not long ago, Chile revised the Energy
Act, the largest such change to the Chilean energy sector in 35
years. The primary goal is that 70% of national electricity
generation is to come from renewable sources by 2050. In addition,
it is intended that there will be a 25% reduction in consumer power
prices by 2021, with all households having continuous access to
quality energy services.
A few weeks ago, Chile´s latest
renewable energy auction was awarded and the country has moved
closer to its goals.
Under the supply tender, around one third
of the current consumption of the country's regulated
grid-supplied consumers was up for grabs starting in 2021. Well
over-subscribed – by a factor of about seven – 84
companies submitted 85,000 GWh of bids for the just over 12 TWh of
available contracts. Contracts were awarded at an average price of
Among the winning bidders were developers
such as Mainstream Renewable Power, which won seven of the
government contracts on offer to the collective tune of 1 GW of new
wind power projects. With an overall investment worth US$1.65
billion, Mainstream plans to build and operate seven utility-scale
projects located throughout Chile.
However, the lowest offer was revealed as
coming from Solarpack, which won a 280 GWh/year slice of the pie
with a record-breaking bid of $29.1/ MWh from a 120 MWp
photovoltaic (PV) solar installation, the lowest price reported
from a solar project world-wide to date. Solarpack, through its
subsidiary Maria Elena Solar S.A, will construct the Granja Solar
project, which will be located in the region of Tarapaca. It is
expected to enter commercial operation in 2019.
Although quite exciting, success does not
come easy or without risks for those entering or operating in the
Chilean energy market.
Transmission capacity restrictions exist
in the northern part of the SIC, which prevents the transmission of
energy from both wind and solar for several hours a day and has
seen spot market power prices fall to zero for prolonged periods in
This has prompted further development of
the transmission grid, including a US$1 billion, 753 km line to
address congestion on the northern parts of the central grid that
is due for commissioning next year.
In addition, the attractiveness of Chile
as an investment destination of renewables will largely depend if
projects are being built that are commercially viable. Low prices
are great for the country but companies need to make a return on
their investments in order to keep the momentum moving forward.
Where are the opportunities?
Later this year, the National Energy
Commission is to call for another tender for 3,800 GWh for delivery
beginning in 2023. In 2017, a further call for 7,200 GWh to supply
from 2024. In 2018 , auctions for 8.900 GWh, to start supplying in
2025, are already planned.
In addition to this, we believe that the
government will continue to fund research of renewable
technologies. Chile has potential in other areas such as geothermal
and wave technology.
Companies that can support the storage of
energy will also thrive due to the intermittently of renewable
Lastly, companies that provide services
and products to the renewable market will thrive as more projects
are approved and built. This will include engineering companies,
technology companies that can increase efficiencies, and
manufacturing companies that provide physical infrastructure.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Notwithstanding international and domestic adversities (ups and downs of prices for crude oil, peso-dollar parity, a not so-friendly neighbor president), the energy reform, perhaps the most daring of those undertaken by President Peña, offers yet a lot to reap from.
To achieve the goals, the Brazilian Government will carry out at least three energy auctions per year in the modalities A-3, A-5, Alternative Sources and Reserve Energy.
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