Solek is 'happy to remain in Chile'

Czech Republic-based renewable power developer Solek remains confident in its Chilean investments as it seeks to increase output of utility-scale renewable projects while exploring the potential of hydrogen production.

The firm, which during seven years in Chile has grown from a three-person local operation into a company with over 150 employees in two offices in Santiago, plans to more than double its capacity deliveries in 2022 from this year.

This would involve deploying over 60 new projects below 9MW in the country throughout the year. The firm, focusing on small and medium-sized generation units, plans to more than quadruple its current installed capacity of 108MW in Chile, which it has been building since 2018, to reach over 500MW of solar capacity by 2023.

One such project, the 3MW Marambio solar park, near the rural town of Melipilla in the Santiago metropolitan region, was inaugurated on Tuesday with local authorities and the company’s top executives.

Solek began operations in 2010, boosted by the European solar subsidy boom, Solek Group CEO Zdeněk Sobotka told BNamericas at the inauguration. “When countries in Europe decided retroactively to cut out those subsidies, that had a big impact for everyone in the business,” he said.

Solek regrouped and surveyed the globe for new opportunities, studied the likes of Japan and South American and ultimately landed in Chile.

“Chile [attracted us] because of its great [solar] irradiance, the best environment in the world from that point of view, and also because it provided no subsidies” to the industry, ensuring the company would be protected from policy reversals like those it had seen in the Czech Republic, Slovakia and Romania.

Another crucial point is Chile’s investment-grade rating, which makes it easier to raise capital for projects than in some other countries in the region. With a strict focus on Chile’s special price scheme for small and medium-sized generators, known as PMGD, which accesses a stabilized price regime that helps a project get financing by ensuring stable returns over time, Solek began to make inroads with an unusual strategy.

While other international players look to build large projects with strong economies of scale, generally found in Chile’s far north or south, where the best resources are located and far away from the country’s main consumption hubs, Solek chose to build several smaller projects peppered around the most populated and energy-intensive regions. 

These include central Metropolitan, Valparaíso, O’Higgins, Maule and Coquimbo regions. Its northernmost project is near the town of Vallenar, in Atacama, and the southernmost in the city of Chillán, in Maule region.

 “It’s unbelievable how much we’ve grown,” said Sobotka, “and we are so happy to remain here.”

Solek also plans to look into energy storage and transport solutions, including the deployment of lithium-ion batteries throughout its portfolio and development of green hydrogen. The firm is also looking to branch into wind production, which could help its foray into green hydrogen output by providing a more stable generation platform that better gels with the flat energy consumption of large-scale electrolyzers.

The company recently struck a deal with the public port of San Antonio in Valparaíso region, including the port’s private concessionaires, to study the deployment of a series of pilot hydrogen production units powered by upcoming US$96mn Leyda, its only utility-scale project so far and located some 22km from the port, with support from unspecified wind assets.

Solek believes this could become the first step towards reducing the emissions of Chilean shipping, as San Antonio – the country's largest port which has plans to double in size over the next 30 years – intends to set an example for other shipping hubs.

These projects, which involve careful studies to understand how the port could adapt some activities to use hydrogen instead of conventional fuels and the deployment of self-contained hydrogen production units that can cover this demand, are preparing the firm for when electrolyzer costs reach the appropriate price level to allow for utility-scale production, which is expected to happen over the next decade.

“Hydrogen attracts us greatly,” Sobotka said. “It is a real future, although it’s not yet economically feasible [at scale]. However, we are close … It has a big advantage in terms of usage: it can be used in trucks, shipping, and other industries where batteries may not be the most appropriate tool.”

If it comes to pass, Solek’s first foray into green hydrogen would again have an unusual location: while most projects in the study phase so far have focused either on Chile’s northern solar resources and especially the strong winds of far south Magallanes region, this project would leverage a combination of wind and solar and the right location in the center of the country to make up for a less-stellar capacity factor than what can be accessed in other regions.

According to Sobotka, Leyda won’t be the last utility-scale project in the pipeline. Recent adjustments to the PMGD stabilized price regime, which are expected to tighten the market by making only the best projects commercially viable once they come into effect, are likely to make the company change its investment focus.

“This is the reason we are expanding our focus into utility-scale projects,” Sobotka said. “That’s the future. When you calculate how much solar is necessary to build to cover [Chile’s] demand, and you include the upcoming curtailment of coal power plants, I think this space is huge and ripe for growth.” 

Chile plans to retire its coal-fired capacity by 2040, but there are strong pressures to do so by 2030.

Other markets

Regarding expansion into other regions, Solek is already present in Colombia and looks at Peru as a possible next step.

“At some point over the past few years we were very interested in Argentina, mainly due to the new policy towards renewables enacted by the last administration [the RenovAr tenders between 2016 and 2018]. When that policy was abandoned, the investment stopped, as Argentina went back to where it was 10 years ago [with restriction on capital movements and no new renewables tenders],” Sobotka said.

“There are other countries that could be good for us. One of them is Colombia, because it is a larger country with higher electricity demand, and which holds the interest of US capital. The second one is Peru, which is interesting. In both we have opened subsidiaries, in both we are working on new pipelines. But [our] Colombia [operation] is still far from the success we’ve had in Chile,” he said.