Solar power in 2015 accounted for less than 5% of Chile’s total electricity generation, but because of decreased demand and inadequate grid connections it’s already generating surpluses that have to be curtailed or which result in the power being sold at zero cost . Yet to meet its target of 20% renewable energy from non-hydro sources by 2025 Chile plans to install yet more intermittent solar and wind energy by 2020/21. Development of untapped dispatchable renewables such as hydro – Chile’s cheapest source of renewable energy – and geothermal, both of which Chile has in abundance, is hindered by lack of grid connections and environmental opposition.
First some hard-to-find facts on Chile’s electrical sector. Installed capacity is on the order of 20,600MW, with approximately 33% diesel /gas, 32% hydro, 22% coal, 6% solar 5% wind and 2% biomass/biogas. Peak demand is pn the order of 7,000MW, or little more than a third of total installed capacity.
So far so good, but even at the current low level of solar penetration there are problems. Figure 1, reproduced from the Chilean Ministry of Energy report Chilean Experience in Developing Electric Power Infrastructure , illustrates some of them:
Figure 1: Chile’s four “grid regions”
Chile is divided into four electrical regions based on existing grid networks (SING = Sector Interconectado del Norte Grande, SIC = Sistema Interconectado Central). The SING and SIC grids are presently not interconnected, and plans to connect them are apparently suffering delays. But while they remain unconnected the superior solar resources in SING – reportedly the best in the world – will not have access to major centers of consumption in the SIC, where all the existing solar installations are. And when they do their output will have to be transmitted up to 1,500km to reach them.
The Aysén and Magallanes regions have no grids worth speaking of but contain large amounts of untapped hydro potential and also Chile’s best wind resources. Given the nature of the terrrain in these regions it seems unlikely that major grid connections with Central Chile will ever be feasible. (How bad is the terrain? The developers of the on again/off again 640MW Hidroaysén project at the northern end of the Aysén region are/were considering shipping the power out through a submarine cable.) The best geothermal resources tend to be located in remote and inaccessible areas high in the Andes.
And at present Chile has no grid connections with its neighbors Argentina, Bolivia and Peru. To all intents and purposes it’s an island.
Chile also has an interesting electric generation history, which is summarized in Figures 2 and 3 (from the same source as Figure 1). If nothing else it highlights the dangers of relying on imported fuels:
Figure 2: Chile’s capacity growth since 1990. (Capacities are lower than those quoted elsewhere, which makes me suspect that gross capacity=derated capacity.)
The seminal event here was the progressive cutoff in gas imports from Argentina, which began in 2004 and prompted the increase in diesel and coal capacity. The impacts on price are shown in Figure 3:
Figure 3: Chile’s generation by source and generation prices since 2000.
After years of cheap hydro generation Argentinian gas imports finally decreased to zero in 2007 and the gap was filed with diesel generation. As a result electricity generation prices abruptly rose from historic levels of around $20/MWh to $260/MWh in 2007 and to $350/MWh in 2008. Since then prices have gradually declined to an average of around $100/MWh as diesel generation has been replaced with gas and coal. (Where does Chile get its gas from now? From Equatorial Guinea, Trinidad and Tobago and Qatar, not Argentina.)
Now we will take a look at solar.
Five years ago there was no solar in Chile. But since then Chile has jumped on the renewables bandwagon and passed laws to encourage renewables development which are summarized by IRENA as follows:
Chile has a target to generate 20% of its electricity from renewable sources by 2025 (excluding hydro plants larger than 20MW). This target was established in 2013 by Law 20698, better known as “Law 20/25,” and updated a previous target of 10% renewable electricity by 2024 …… The 2014-2018 Energy Programme aims at achieving a 45% renewable energy share for new electric capacity installed between 2014 and 2025.
(Why are hydro plants larger than 20MW excluded? Maybe for the same reason that California excludes pumped hydro, which it believes would limit the growth of more innovative storage technologies, or maybe because of anticipated public opposition to anything much larger than a water wheel.)
A quota obligation is Chile’s main support scheme for renewable electricity.
Under the quota obligation system Chile has put megawatts out for bid, and in the most recent 2015 auction (for 1,200MW) solar and wind swept the field :
Renewable energy technologies have made a clean sweep at Chile’s latest energy auction, with five global wind and solar companies awarded 20-year contracts to supply 1,200GWh to the Chilean electricity market from 2017. The five companies – including Abengoa, Aela Generacion, Ibereolica Cabo Leones, Amunche Solar SpA (a subsidiary of Spanish Solarpack) and First Solar (via SCB II) – offered an average bid price of $US79.3/MWh, the lowest average price per MWh for a local energy auction since 2007. The most remarkable result came in with a bid of $US97/MWh for “overnight” solar. This came from Spanish group Abengoa. It still beat all the coal and gas alternatives. All of the bids for wind projects came in at $78-$95 per MWh, and solar PV came in as low as $US65/MWh.
And now the energy ministry plans more and larger auctions:
The energy ministry said it expected similar or lower prices for the next auction in April 2016 (now delayed for 90 days), for annual supplies of 12,500GWh, (which translates roughly into 3,000-4,000MW installed) for delivery 2020 and 2021. It is hoped that this trend towards cheaper renewables could halt Chile’s increase in electricity bills within three to four years and bring a reduction thereafter.
This of course is a forlorn hope. Solar and wind auction prices are not that much lower than current generation prices and as always they make no allowance for energy storage or grid upgrades. Figure 3 clearly shows that Chile’s cheapest source of electricity is hydro. Nevertheless, the impact of the auctions on wind and especially solar growth has been spectacular. Figure 4 shows the status of renewable capacity as of May 2016, starting from zero MW in 2011:
Figure 4: Status of renewables projects in Chile
Chile now has 1,113MW of solar installed and another 2,121MW under construction. Added together these will account for 14% of Chile’s installed capacity. And then there are another 11,549MW of RCA (Resolucion de Calificacion Ambiental, or environmentally approved) projects hanging fire. What if these projects win the lion’s share of the 2016 auction, say 3,000MW? Then solar will make up over 25% of Chile’s total installed capacity.
But solar power is already being curtailed at the current low level of solar penetration:
Carlos Finat, executive director of the Chilean Renewable Energy Association (ACERA), told PV Tech that there are two major reasons for the curtailments. Firstly, the Chilean power system is weak and attempts to resolve the requirements of the transmission system have experienced major delays. The second major reason for curtailment is that for security and flexibility reasons, CDEC has to constantly run at least three units (around 75MW) from the 152MW Guacolda coal-fired power station operated by Chilean power firm AES. Finat claimed that the possibility of curtailment was very clear and public to companies looking to invest in Chile at an early stage. He added: “They were able to foresee that this would occur. The capacities are already known with the studies that they must have run. It will probably take a bit longer, but my feeling is that many companies have already considered this effect in their business plan. Of course it is not a good situation. Of course probably it will take longer than expected, but it is a manageable situation.”
But will it be manageable if Chile’s solar capacity expands by a factor of five by 2020/21? I doubt it. Chile should be pursuing hydro if it wants the lower electricity rates and energy security its consumers are clamoring for. On the other hand there is considerable environmental opposition to the construction of new hydro plants in pristine areas, which explains the on again/off again history of the Hidroaisén project. Chile clearly has to make up its mind whether it wants pristine areas or cheaper electricity, or at least strike a balance between the two.
But for the time being solar leads the field. Yet despite its low level of penetration it has already reached the point where El Hierro-type solutions to smooth out solar intermittency are being considered:
Valhalla Energia plans to build a hydroelectric power generation plant in Chile’s parch ed Atacama desert, the world’s driest, by using solar energy to pump sea water up the side of a 600 meter cliff and then have it rush back down to the Pacific Ocean below. The $400 million project will use solar energy to pump seawater to the top of a coastal cliff, where it will be stored in natural depressions. At night, electricity will be generated by releasing the water and letting gravity do the rest, the company said. Valhalla is still awaiting regulatory approval though for its 600-megawatt, $500 million Cielos de Tarapaca solar panel energy project, which will provide the energy needed to pump the seawater up the cliff wall. “We found these natural depressions that we believe were very ancient lakes, but obviously there is nothing there now, it is a desert, that will allow us to store water,” the company’s co-founder and chief executive Juan Andres Camus told Reuters. If the natural depressions are filled to capacity with seawater, the project can continuously provide hydroelectric energy for a little over nine days, Camus said. “That adds a lot of value from the point of view of system’s security.” Construction on Espejo de Tarapaca is expected to begin in the second half of 2016 and commercial operation is slated for 2020.
Figure 5: The Valhalla pumped hydro project
Hopefully it will work better than Gorona del Viento.