Fifteen years ago, when the massive investment in solar and wind energy generation projects began to replace those produced with fossil fuels, it was not anticipated that their production would be greater than the storage and transmission capacity that the country has. The consequence: today part of a valuable cargo coming from the north and south is being lost, and it is not reaching consumers, who could pay much less on their bills if they were better used.
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From being one of the most prosperous and emerging sectors of the Chilean economy five years ago, the Non-Conventional Renewable Energy (NCRE) industry today is experiencing a moment of ellipsis. This is due to a set of bottlenecks that the sector is going through in a state that some call “crisis.”
A first warning sign was in 2022, when the María Elena Solar park, located in Pozo Almonte (Tarapacá Region) and a subsidiary of the Spanish company Solarpack, declared its insolvency. Shortly after, something similar happened with the “Cabo Leones II” wind farm, owned by the Iberoamérica Renovables and CPG group, located in Huasco, in the Atacama Region. The latter, however, managed to return to the market after the company credited a guarantee note for $3.3 billion.
Although these are small companies in relation to the giants of the industry – which have investments in Chile for hundreds of millions of dollars – the matter is not a specific case, but rather a symptom of something deeper and more structural.
“Given the geography and climatic conditions, the generators at this moment are mostly in the extremes of the country. In other words, we have a lot of photovoltaic energy in the north, where there are unique irradiation conditions and, at the same time, wind plants in the south, where we have very favorable wind conditions,” explains Freddy Flores, director of the Center for Energy Transformation of the Andrés Bello University and associate researcher at the Solar Energy Research Center.
FREDDY FLORES
“The problem is that today the infrastructure is not enough to transport all the energy that is generated,” says Freddy Flores.
“The problem is that today the infrastructure is not enough to transport all the energy that is generated and in the north, for example, we have a big problem, which is dumping,” the expert makes visible. Dumping is the loss of energy generated in plants because there is no capacity to transmit it to consumption centers.
An explosive expansion
The development of NCRE in the last 15 years has been explosive. In 10 years, the Norte Grande, one of the regions best endowed with solar radiation in the world, was filled with photovoltaic parks, many of them foreign-owned. The same thing happened with wind farms in wind-rich areas.
Such was the growth that the goal proposed in 2013 by the government of reaching 20% ??of Chile’s energy matrix injected by ERNC by 2025 was reached five years earlier.
Today, according to the latest report from the National Energy Commission (CNE), 34.1% of the energy injected into the system comes from ERNC. This contribution is broken down into 45.4% photovoltaic solar energy, 39.4% wind energy, 7.6% run-of-river mini-hydraulic plants, 6.5% biomass and 1.1% geothermal energy.
The challenge to get out of the trance that the industry is experiencing is to eliminate the bottlenecks that currently limit its development. A first point is the transmission problems derived from the fact that in Chile the energy generation centers are a long distance from the consumption centers.
wind farm
According to the latest report from the National Energy Commission (CNE), 34.1% of the energy injected into the system comes from ERNC. Of that, 39.4% corresponds to wind energy.
“We need to improve the infrastructure to increase the capacities to transport it. In this sense, an iconic project that will address this problem is the Kimal-Lo Aguirre transmission line. This will allow the system to be decongested and will prevent energy loss in the north of Chile,” adds Flores.
Ana Lía Rojas, executive director of the Chilean Association of Renewable Energy and Storage (Acera), agrees with the point.
“Transmission infrastructure is a critical concern, as current capacity is often not keeping pace with the rapid growth of renewable generation, causing congestion and spillage. This underscores the urgent need for significant investments in transmission network upgrades and expansions. In that sense, Kimal-Lo Aguirre is very important,” says Rojas.
Ana Lía Rojas, executive director of the Chilean Association of Renewable Energy and Storage (Acera), agrees with the point.
“Transmission infrastructure is a critical concern, as current capacity is often not keeping pace with the rapid growth of renewable generation, causing congestion and spillage. This underscores the urgent need for significant investments in transmission network upgrades and expansions. In that sense, Kimal-Lo Aguirre is very important,” says Rojas.
“Likewise, flexibility in the electrical grid and improvements in demand management are essential to address the dumping problem. Advanced forecasting systems have been implemented for renewable generation, allowing for more precise planning and more efficient operation of the electrical system,” adds Rojas.
Another key factor for the future of the sector is storage infrastructure, that is, batteries. These allow us to address one of the great shortcomings of solar and wind energy: that they do not operate all day long.
Ana Lia Rojas ACERA
“Flexibility in the electrical network and improvements in demand management are essential to address the dumping problem,” explains Ana Lía Rojas.
“Storage systems will also help avoid energy waste, making better use of it,” explains Flores. “They are very important to manage the intermittency inherent to NCRE, guaranteeing greater stability and reliability in the energy supply,” adds Ana Lía Rojas.
According to the Acera executive, another limiting factor in the sector is regulations. “The regulatory framework requires continuous updating and adaptation to effectively support the integration of NCRE, facilitating policies that promote investment in clean technologies and eliminate barriers that may hinder the development of these projects,” she indicates.
Two other obstacles in the sector, according to Rojas, are financing and social acceptance. “Adequate and accessible financing is vital for the advancement of NCRE projects. It is crucial to ensure not only the availability of capital, but also attractive financial conditions for project developers,” she says.
“Social acceptance also plays a fundamental role, with it being essential to obtain the support and participation of local communities to avoid conflicts and delays,” she adds.
Why don’t prices lower for consumers?
One of the expectations that NCRE generated when they began their expansion in Chile was that, given that their cost is cheaper than those based on fossil fuels, prices for regulated clients, that is, homes, were going to drop.
15 years after that, these expectations have not been met. In fact, a month ago and due to the freezing of the price of electricity since October 2019, a price increase in Chile of an average of close to 20% was announced. What happened that the ERNC’s promise was not fulfilled?
Ana Lía Rojas, from Acera, explains that it is because current prices are based on old contracts, pre-NCRE boom.
“Non-conventional renewable energies, such as solar and wind, are significantly cheaper today, but this reduction in costs is not yet fully reflected in users’ electricity rates due to the coexistence of cheap renewable contracts with renewable energy contracts. old ones from other sources, which when they were put out to tender reflected a time of energy shortage,” explains Rojas.
Solar panel
Non-conventional renewable energies, such as solar and wind, are significantly cheaper, but this reduction in costs is not yet reflected in users’ electricity rates.
“These contracts, when fossil fuels were the main source of energy, set fixed prices that do not reflect current reductions in renewable energy generation costs. Additionally, energy contracts with fossil fuel plants often include clauses that guarantee certain revenues to these plants, regardless of whether or not they produce electricity, which ensures a return on investment for these generators, but also means that additional costs can be incurred. be transferred to consumers,” he adds.
According to the executive, within a decade at most the cheaper price of NCRE should be reflected in homes.
“As old contracts expire, new deals are signed at lower prices, and public policies promote infrastructure modernization and renewable energy integration, the benefits of lower renewable energy costs are likely to become more apparent.” clearly in electricity rates within the next 5 to 10 years,” he says.
By the way, as UNAB academic Freddy Flores explains, the complication of dumping influences costs. A difficulty, he says, that perhaps could have been better controlled.
“We have been dealing with the issue of dumping for some time, and we could implement storage projects to avoid these types of problems. “We could have projected the growth of renewable energy in the north and prepared in advance through infrastructure to accompany this energy as well, but this technology, both the vehicle and the new systems, is dynamic,” he says.
“Perhaps we have to go a little faster too, because a photovoltaic project in its installation and start-up can take less time than generating a line, for example Kimal-Lo Aguirre. So there you also have to be managing those types of technical elements that allow the implementation. Because one thing is politics, management, regulations, opening up spaces and then come the technical aspects as well,” explains the expert.
Two consortiums compete for a million-dollar transmission project that will be key to the development of renewable energies
“Maybe you have to go a little faster too, because a photovoltaic project in its installation and start-up can take less time than generating a line,” says Freddy Flores.
Regulatory challenges also imply environmental challenges, says Freddy Flores, and not only greater investment in infrastructure, but also greater interoperability. “If all users at some point are connected by injecting renewable energy, for example, or by connecting our car to the electrical grid, without communication, without information, it can be fatal for the system. That is interoperability, allowing people to know, understand and make decisions through information. That is also going to be super relevant,” he says.
And he adds: “So, all these aspects together are clearly going to allow renewable energy to not only be connected and injected, but also to generate a much more stable, reliable system so that we do not have problems in the future such as a blackout. Renewable energy is variable, it depends on climatic conditions, therefore it is an element that requires having all that technology, all that connection, all that interconnection developed. And here storage is clearly going to play a relevant role.”
Despite all the difficulties, Chile has positioned itself as a regional and global leader in terms of NCRE. According to the REN21 report, it is one of the countries with the highest percentage of renewable generation in its energy matrix
Now, what do we regulated clients do while solutions to the current problems of NCRE are channeled and costs are lowered?
“My advice would be to consider installing photovoltaic solar panels in homes. Although the initial investment may be high, there are various financing programs and grants available that can help. Additionally, solar panels can significantly reduce dependence on the electrical grid and, in the long term, lower electricity costs. I would also recommend evaluating energy efficiency options to reduce consumption, such as the use of efficient appliances and improving the thermal insulation of the home,” concludes Ana Lía Rojas.
