Chile's 5 biggest power projects coming online in 2020

Next year will see Chile’s renewable capacity grow significantly as two embattled run of river hydro projects come online.

The Alto Maipo hydro and Cerro Dominador solar projects, Chile’s two biggest generators currently under construction, are advancing rapidly and are expected to come online in 2020, while two big wind farms, San Gabriel and Cabo Leones II, are also expected to start injecting power next year.

Renewables concentrate most of the new investment amid a push to achieve carbon neutrality by 2050. 

While some regulatory and social challenges have emerged since widespread unrest erupted in October, Chile’s electricity market remains one of the most robust in Latin America.

However, as the risk of financing PPA-backed projects rises and prices in the regulated system come down, more projects financed through business to business supply deals in the unregulated segment are expected to be seen.

An upcoming flexibility bill could also provide a boost for the sector, as it is expected to define a new remuneration scheme for complementary generation needed in a system where renewables acount for more than 20% of capacity, and so has high degree of variability. Another aspect the law could regulate is a remuneration scheme for renewable generators with battery capacity, a type of project that is expected to be more common in the coming years. 

Protests fallout and social environment

Chile’s prolonged social unrest will hurt investor sentiment and has already hit the economy, which contracted 3.4% in October on an annual basis, prompting the government to announce a US$5.5bn stmiulus package. Since power demand is tied closely to GDP, lower growth will mean a tighter market. Some social discontent has also been directed at power distributors, which are the most exposed to the public among sector companies.

Chile’s environmental activism and judicial oversight remain as strong as ever, and large-scale coal-fired projects, hydroelectric dams and transmission lines, especially those passing through indigenous lands, are always liable to face significant opposition – including legal challenges – from local communities.

However, Chile’s power sector is growing faster than the overall economy, and this is expected to remain so for as long as its robust regulatory framework is in place. While a stabilization mechanism protecting customers against sudden rises in their bills faced some resistance from the industry, it was designed in such a way that lost revenues will be recovered later.

But the fact the regulatory framework was intervened in response to protests about the high cost of living hints at possible further changes. If the trend continues, investor sentiment could start to erode over time.

Below, are Chile’s five biggest projects expected to come online next year.

Alto Maipo

AES Gener’s embattled Alto Maipo hydroelectric project has seen its costs balloon to US$3.05bn. The 531MW plant on the Maipo river near Santiago involves a complicated tunnel structure but is finally nearing completion. AES told BNamericas last month the project was 82% complete and on track to start operations next year.

Cerro Dominador

EIG's Cerro Dominador project in northern Antofagasta region is as much a generator as a technological showcase, as it combines photovoltaic and concentrated solar power together with high battery capacity to ensure steady supply 24/7. 

The US$1.4bn projecct will have capacity of 210MW, highlighting the high cost of concentrated solar power in Chile.

Los Cóndores

Enel Generación is building the US$957mn Los Cóndores hydroelectric project near the south-central city of Concepción. The project will use water from the Maule lagoon, channeling it through a 16km tunnel structure. It will have capacity of 150MW.

San Gabriel

Acciona’s US$360mn wind farm being built near Concepción will have capacity of 183MW. The project is expected to start operating this month or early 2020. 

Cabo Leones II

Ibereólica’s US$360mn, 204MW Cabo Leones II wind farm is being built in northern Atacama region. The turbines are being supplied by Senvion and construction is being carried out by Global Power Generation.

The farm is expected to start operating at the end of next year. It was involved in a legal dispute after Ibereólica was accused of fractioning a larger US$930mn project into several parts to make environmental approval easier. However, the company was cleared.