Recent changes in legislation
concerning energy generation in Chile could give the
renewables market a significant boost.
In the past few years the Chilean energy market has
experienced great changes and advances that benefit the industry and boost the
development of renewable energy projects. These changes have led to a large
development of renewable energy initiatives and to the consolidation of new
companies and players in the energy sector. In 2015 almost 300 renewable
initiatives were presented for environmental evaluation and renewables
accounted for 76% of the investment in electricity generation, which
demonstrates the importance of the industry.
Chile has plentiful natural resources that are ideal for the
development of solar and wind farms. The unique radiation levels present in the
north and the favorable winds across the country allow Chile to have large
investments in this area and to gain energy independence, which it has not had
in the past because of the reliance on gas and other fossil fuels that are not
produced internally. Additionally, Chile has a large potential to become an
energy exporter for the region.
The Government has recognized the large opportunity for
investment in the renewable energy sector as well as the opportunity to clean
the energy matrix and to develop projects that have less opposition from
communities. Therefore, through the Ministry of Energy, it is pushing a variety
of initiatives that increase the competition in the energy sector and support
the integration of renewables.
The first law that was pushed by the government and passed
in congress to support the renewable energy sector states that by 2025, 20% of
the energy matrix in Chile must by composed of renewable energy. This means
that all companies that produce energy with fossil fuels need to buy a
percentage of energy from renewable sources or are obliged to produce this type
of energy themselves. It has also incentivized large industries to develop
energy contracts with renewable energy providers.
In addition, through a committee comprising multiple
stakeholders, the current government developed the energy roadmap, where the
goal is to have 70% of renewable energy in the matrix in Chile by 2050.
However, it is important to state that this also includes large hydropower.
This aims to guide the future development of the energy sector and the
development of laws that are able to support this roadmap.
The third important change was made in the distribution
tender process, where the government for the first time in 2014 established
time blocks in which energy generators could bid their energy. This greatly
favored the solar sector, since generators could now bid during the times of
day when they are producing energy and were not obligated to offer energy during
24 hours of the day. This has resulted in a much greater participation in these
tenders by the renewables sector, and where Mainstream Renewable Power has been
very successful as a company. In the last tender, Aela,
Mainstream´s joint venture with Actis, was awarded 65% of the total energy awarded, 299 MW,
via two wind projects. These projects will start construction in July 2016.
Additionally there are plans to improve the transmission
system, which will also benefit the renewable energy industry. First there is a
plan to interconnect the north and central grid system, which will allow the
energy generated from the large potential solar radiation in the north to be
distributed to the central and southern part of the country. There is also a
transmission bill currently in congress, which contemplates a more prominent
role for the State in energy planning and whose main objective is to reduce
prices by boosting competition, reducing entrance barriers, avoiding the
existing congestion, and opening the market to renewable energy. One of the
most important changes of this law is the way the transmission tolls are paid,
which are changed from the generator paying to the final client paying. This,
as well as adding transparency to the process, grants greater competitiveness
to renewable energy projects, since there will no longer be benefits for
projects that can be located near large demand centers, such as thermal
plants.
When Mainstream arrived in Chile in 2008, there were very
few renewable energy players, and the energy sector in Chile was led by three
conventional energy companies. Through the decrease of costs of renewable
energy technology and the government led energy reforms, renewable energy is
now considered a secure and competitive option. This is very positive for
Mainstream given that through its 8 years of work in Chile, it has a head start
on the development of a very broad and geographically diverse pipeline with one
wind farm in operation and two others starting construction this year. This
also facilitates the continuity of the business in the country, since
Mainstream has invested $100 million, and plans to continue with an investment
plan of $2.000 million in order to have 1.000 MW in operation by 2020.
Mainstream constructed
its first wind farm in Chile in 2013. This is a 33 MW wind farm located in the
Biobío Region. This was very innovative because it was the first wind farm to
be operational in that area of the south of Chile and in agriculture land near
houses. This wind farm helped to demonstrate to the country that it is possible
to share the land where the wind farm is placed with different activities such
as agriculture and herding. In fact, all land owners and neighbors have
continued to use their land for all activities that were underway prior to the
wind farm being constructed.
The two projects to start construction this year are Aurora
and Sarco. The first one is located in the south, specifically in the region of
Los Lagos. This is a 129 MW project, which has very similar characteristics to
the Cuel wind farm above, since it is also in agriculture land and close by to
households in the area. The second project, Sarco, which will have an installed
capacity of 170 MWs is in the northern region of Atacama. Both will inject
their energy into the national grid through the Central Interconnected
System.
Recently, Mainstream also received a favorable environmental
evaluation for the wind project Cerro Tigre, which will be located in the
northern region of Antofagasta, and considers an investment of $634 million
during construction, the installation of 80 turbines and an estimated capacity
of 264 MW.
In addition to this, Mainstream has other solar and wind
projects in the pipeline, many of which are in an advanced state and have
obtained environmental permits. For this reason, the company is happy with the
government’s decision to give the renewable energy industry the opportunity to
compete fairly with conventional energy generation. It is probable that, with
the changes that have already been made in legislation and other changes yet to
come about in support of the energy roadmap of 2050, Chile will be able to
consolidate a new industry that was nearly non-existent 8 years ago. This will
enable Chile to have greater investment opportunity and facilitate the
country’s ability to develop a clean energy matrix, thus ultimately working
towards becoming energy-independent from its neighbors and from fossil fuel
imports.
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