Chile preparing permitting tweak to help battery projects advance

Chile is working to ease permitting for certain types of energy storage projects.

The move comes as installed storage capacity climbs and as the renewables industry urges measures that help accelerate grid decarbonization, particularly during non-solar hours.

Via a procedural permitting rule change, battery storage projects with associated transmission links that are either less than 2km long or under 23kV in capacity will not need to enter the environmental review system.

The measure is due by the end of the year, the energy ministry’s research and policy division chief, Alex Santander, told BNamericas on the sidelines of the Energy Storage Summit Latin America conference, being held this week in Chilean capital Santiago. 

For years developers have bemoaned the complexity of Chile’s project permitting system and cite this, along with associated processing timescales and the risk of facing unexpected legal or administrartive hurdles, as a potential headwind to investment and broader development. Government bills in congress are designed to help streamline processes and generate more certainty regarding processing times. 

Installed energy storage capacity in Chile is expected to reach the 1GW mark by year-end and is on track to meet or exceed a 2026 target of 2GW.

Higher storage penetration is expected to result in a reduction in systemic costs of roughly 12% starting from around 2026-28.

“The 12% reflects total operational costs of the system, so it’s a very relevant figure,” Santander said, adding that this forecast was based on the 2GW landmark being achieved. This would be the equivalent of almost 10GWh of production.   

Lower systemic costs spell good news, particularly for nonregulated clients and for the likes of hydrogen project developers that plan to use grid power for their electrolyzers.

Systemic costs include those charged to remunerate thermoelectric generators that operate at a minimum level during daylight hours so that they can dispatch after the sun sets and when demand spikes.  

In terms of decarbonization, through 2030 storage investment is forecast to support an increase of at least 14% in renewable energy injections into the grid and enable a reduction in thermoelectric output. This would also help address curtailment, today standing at around 15% of renewable energy production.

In the early 2030s the Kimal-Lo Aguirre HVDC power line should go into service, easing a north-south transmission bottleneck and further helping to reduce curtailment and price decoupling risk faced by northern generators.  

An energy ministry planning process established a 2030 energy storage goal of 6GW, brought forward from an original target of around 2050.

The likes of increased electric vehicle and electric residential heating system penetration over the coming years should help spur demand for electricity.

“There’s still not a lot of electrification of consumption, but post-2030, more electrification will start to be seen; therefore, the curve of offer and curve of demand will start to connect in a more natural manner,” Santander said.

Opening the conference, Ana Lía Rojas, executive director of local storage and renewables association Acera, referred to the financial and environmental implications of fossil fuel consumption for Chile, a country that purchases nearly all the hydrocarbons it consumes on the international market.

“This transition is vital not just in terms of reducing greenhouse gas emissions but also reducing our dependence on, and above all the bill for, the importation of fossil fuel,” Rojas said.

“We currently spend US$15-20bn a year. This is the equivalent of 6-8% of GDP and is expenditure, not investment,” she added.    

Interest is growing in standalone systems following the introduction of capacity payment rules which, in turn, should help projects secure financing, particularly those planned by firms without deep corporate pockets. Along with injection and capacity payments, ancillary services are another revenue stream, although greater regulatory clarity is needed, the conference was told.

Regulatory groundwork, it was heard, is also needed in the sphere of grid-forming technology, a control technique which permits the likes of solar PV and wind plants to act like traditional synchronous generators. 

Seen as the last chunky part of the energy storage regulatory jigsaw puzzle needed for now, operational programming rules are due by year-end, the event heard. 

PMGD

International lenders, notwithstanding those exposed to the PMGD distributed generation segment, are “comfortable” with the storage capacity payment regime, the conference was told by an investment banker.

The cryptic message, along with some warnings of the importance of protecting legal certainty, comes as lawmakers this week debate a government subsidy bill that includes a revenue-raising pillar hotly contested by the PMGD segment and their financiers, which see the proposal as a unilateral change to the rules of the game. PMGD plants have mushroomed, helping create construction jobs and increase generation capacity close to centers of demand. 

PMGD plants, which involve distributed generation systems of up to 9MW, have a stabilized price regime itself branded tantamount to a juicy subsidy and a source of upward pressure on systemic costs. Larger generators shoulder these charges, which typically trickle down to nonregulated clients. 

An estimated US$217mn, or roughly 20% of systemic costs last year, corresponded to these charges, which have been trending up and are expected to hit the US$300mn mark this year. At the end of last quarter, PMGD capacity stood at around 3GW of Chile’s non-conventional renewable energy park of 18GW. Capacity could reach nearly 5GW in 2026 amid strong growth in the number of projects being built. 

This week the government published updated stabilized PMGD prices and associated indexation formulas.

Storage capacity state of play

In terms of standalone energy storage capacity, Chile has 54MW in operation, 1MW in the construction phase, 326MW with an environmental permit and 2.41GW in the environmental review phase, according to August data from Acera.

Regarding systems incorporated into renewables plants, Chile has 417MW operating, 401MW in the testing phase, 1.42GW under construction, 4.68GW with an environmental license and 5.66GW under review. 

Lithium-ion systems account for almost all storage capacity built or planned. Space is seen emerging for other technologies more geared to longer-duration injection, such as pumped storage, carbon dioxide batteries, flow batteries and molten salt.

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