Chile's energy sector will press on with its carbon neutrality goals this year, as it struggles to control significant variable renewable energy (VRE) curtailment because of an electricity surplus and slow demand growth.
"The year will be challenging for the sector as problems are accumulating faster than the solutions provided," said Inodu energy analyst Jorge Moreno.
At the top of the agenda is a new electricity tariff stabilization bill to protect the most vulnerable regulated clients from significant electricity bill hikes. But the government has not yet sent its proposal to congress.
National energy commission CNE estimates that bills for clients that use up to 350kWh/month — covering 90pc of households — will rise on average by 8.21pc this year. Consumers of over 500kWh/month — covering larger households as well as small businesses — will see bills increase by 88pc on average.
The proposed legislation will also address $6bn in accumulated debt to generators from two previous stabilization mechanisms. Electricity bills have been frozen since 2019 after social protests.
"Too much time has passed to know the government's plans to stabilize tariffs," said Daniel Salazar, founder of Energie consultants. "We are compromising the normalization of tariffs until 2035."
Storage technology will start to make its mark in 2024, easing curtailment — which reached 2.4TWh in 2023 — and VRE generators' financial difficulties by allowing energy generated during the day to be distributed at night.
There is 390MW of storage in operation and almost 500MW under construction. A further 2.5GW of storage with environmental approval waits in the wings.
A proposed storage tender in the energy transition bill in the senate is not necessary to boost investment, said Moreno. "All it's done is create noise. Companies developing storage projects are waiting to see how it will affect their plans."
The government has promised to amend a bill that would make possible the launch of a $2bn storage tender, which aimed to ensure 2GW of installed storage by 2030.
Earmarked for approval in 2024, the bill also seeks to accelerate the pace of transmission infrastructure and reassign exceptional tariff revenues to VRE generators that face negative balances because of the substantial price differences to inject and withdraw energy at different nodes and times.
A 5TWh power supply tender in April risks low participation because of regulatory uncertainties and bids may fall short of the CNE's reserve price, said Salazar. "I have doubts as to whether this is the right moment for this tender."
The tender has incentives for storage and non-variable renewable energies which will be eligible for a maximum discount of $15/MWh when bids are evaluated. The auction has also been divided into three geographic zones and time blocks to reduce price decoupling risks.
Progress
Decarbonization of the grid will continue with Chilean utility Colbun's 816MW Horizonte windfarm, the largest in the region, coming online in Antofagasta region.
In April, a public-private decarbonization working group is due to announce the enabling conditions to close coal units. Chile has already closed eight coal plants for a total 1.2GW and a further 10 are scheduled to close by April 2029, representing 2.3GW. Nine units with capacity of 1.7GW capacity have no closure date.
Chile's transition to less polluting energy will be helped by the consolidation of natural gas imports from Argentina via pipelines that interconnect the two countries in the north, center and south.
In 2023, total power generation inched up by 0.6pc to 83.6TWh, said national grid coordinator CEN. Solar generation grew 13pc to 16TWh and wind by 12pc to 10TWh compared to 2022, while coal generation declined by 27pc to 14TWh.
Run-of-river and reservoir hydro contributed 24TWh, representing 28pc of the power mix, due to an El Nino-influenced rainy southern hemisphere winter, breaking a 12-year drought.
Chile's 2022 climate change law commits it to carbon neutrality by 2050.
