Chile’s exceptional natural resources, stable government and healthy economy make it attractive to clean energy investment. The government has set ambitious long-term goals for adding clean energy capacity and begun implementing policies to help achieve them. The country was one of the first nations in Latin America to set long-range targets for adding clean generating capacity. This includes a clean energy mandate at 20% of generation by 2025.
In 2016, renewables represented 12% of all energy generated in Chile. In 2025, Chile’s clean energy generation is expected to surpass the 20% target. In terms of the boom itself, wind generation in Chile surged from 1.4TWh in 2014 to 2.3TWh in 2016, while solar output spiked from 0.5TWh to 2.6TWh. Together, these technologies represented 6% of the country’s total power generation in 2016, up from virtually zero five years ago.
Chile is divided into four power systems: Sistema Interconectado del Norte Grande (SING), Sistema Interconectado Central (SIC), Sistema Eléctrico de Aysén (SEA) and Sistema Eléctrico de Magallanes (SEM). These systems are not interconnected and power cannot be traded between them yet.
As of May 2017, a SIC-SING interconnection was under construction, however, via a 600-kilometer transmission line expected to be available in 2018. Ahead of that, system operators CDEC-SING and CDEC-SIC merged, effective January 1, 2017, becoming Coordinador Eléctrico Nacional (CEN).
SIC and SING are by far the most important systems, accounting for 99% of Chile’s total installed capacity, with 17GW and 5GW installed, respectively. As of May 2017, Chile had installed 1.9GW of solar and 1.3GW of wind capacities.
In September 2014, Chile created a time sub-block system for power auctions, in which generators commit to supply electricity during a certain time block. Clean energy technologies have had more opportunities to win contracts by taking advantage of times of day when natural resources are plentiful in relation to demand.
Chile auctions are technology-blind, with wind, solar, gas and other technologies competing head-to-head. Since its implementation, Chile has held three power auctions and contracted in a total of 24TWh/year. It is expected that as much as half of the power contracted will be supplied by renewables.
In 2014, a net metering program was published. Under net metering, retail electricity consumers who have renewable energy or co-generation installations smaller than 100kW will be able to connect to the national grid, deliver surplus generation and obtain credit for excess electricity provided. As of May 2017, distributed energy systems accounted for 10.7MW of installed capacity. In Chile, the main barriers to this market are the lack of cheap financing, as well the length of time between permits and system installation.
Chile is the world’s largest copper exporter, and the energy-intensive nature of that industry creates substantial correlation with power demand growth. In 2016, for instance, the copper industry alone accounted for 8% and 51% of Chile’s total GDP and exports respectively. In 2015, the copper industry consumed 21TWh, which represented 29% of the total power generated in the country that year. Mining operations are geographically located in the northern part of the country, mostly serviced by the SING system.
In Chile, spot prices are determined by the node of delivery, which takes into account the marginal operating costs of nodal plants as well nodal demand. Wholesale prices have shown high volatility in recent years, especially in the north of SIC system. In 2016, SIC prices slipped to zero at times during the midday, while shooting back to $60/MWh at night.
Curtailment of renewables appeared in Chile in August 2015. Since then, wind and solar power have been curtailed at an increased rate. The SIC-SING interconnection, along with a separate Cardones-Polpaico transmission project, are expected to ease the curtailment level.
Chile dropped five places on Climatescope 2017. Its score of 1.96 placed it seventh out of the 71 nations surveyed, down from second the year before. Among the 26 Latin American and Caribbean nations surveyed, it ranked behind only Brazil and Mexico. Its performance was weaker on three out of the four parameters.
On Enabling Framework Parameter I, it fell to 15th from seventh the previous year. The presence of a wholesale power market, sector unbundling and privatisation of utilities supported the score. Clean energy policies, including net metering and tax incentives, were also positive. Set against these factors was a 4.2% decline in the volume of renewable power generated in 2016.
Chile’s best performance was on Clean Energy Investment and Climate Financing Parameter II. It took 10th place, having been fifth in 2016. This partially reflected a 72% drop in the volume of financing recorded to $1,208m from $4,321m in the preceding 12 months. The country’s low average cost of debt and swap rate were supportive, as was the volume of local investment.
The only parameter on which Chile did not decline was Low-Carbon Business & Clean Energy Value Chains Parameter III. It remained in 11th place owing to the wide range of financial institutions and service providers present, as well as the 22 value chains that cover at least some aspects of all sectors.
Chile’s most dramatic decline was on Greenhouse Gas Management Activities Parameter IV, where it descended from second place last year to 16th. The score received support from the coverage, type and ambition of its Nationally Determined Contribution, but was let down by the lack of a domestic climate change policy.