The sectors ripe for increased electrification in Chile

An eventual distribution reform bill in Chile would need a section dedicated to electromobility, a key part of efforts to slash carbon emissions, spur electrification and ease reliance on imported fossil fuels, and also helping shield citizens from price volatility.

That was among the takeaways from an event hosted by local renewables storage chamber Acera and law firm Guerrero Olivos, where boosting electrification of heavy industry and the residential sector were also outlined as opportunities.

In terms of electric buses, Chile is a regional and global leader, but boosting penetration in the light vehicle segment is needed to make a bigger dent in national emissions and fuel consumption.  

Areas that need tackling are charging infrastructure and the offer of lower-priced vehicles, given that today the bulk have premium price tags, the event heard. 

According to the energy ministry, the transport sector is responsible for 26% of greenhouse gas emissions in Chile, which is aiming to achieve carbon neutrality by 2050. 

In Chile, distribution reform is widely seen as a legislative priority to help incentivize penetration of distributed assets and make the grid more resilient, illustrated by the mass power outages resulting from this month's brutal windstorm.

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As things stand, electricity demand growth is relatively sluggish in a context of untapped opportunity for electrification: 22% of the energy matrix corresponds to electricity, with fossil fuels accounting for 64% and biomass 14%.

Acera executive director Ana Lía Rojas told BNamericas: “We need to ask ourselves which are the sectors where it is evidently possible to increase electrification.

“Undoubtedly, in theory, electrification of heating and mobility in terms of residential clients is an opportunity, as is the electrification of industrial processes, in terms of large miners and other large energy consumers.”

Work is required to accelerate electrification, with one key area being implementation of time-of-use electricity rates, to make the most of Chile’s abundant renewable energy output, which soars in the daytime.

Rojas said: “For this to happen, demand-side stimulus is needed in terms of both regulation and technical feasibility, and the most important, evidently, are electricity rates; rates, for example, that reflect greater availability of cheap renewable generation in solar hours. For that you need hourly or flexible rates.”

Bolstering the distribution network to support extensive electrification and the requisite service standards is also seen as a part of the jigsaw puzzle and one linked to a future distribution reform.

Rewarding users who shift energy usage – proposed to BNamericas last year by a local energy trading platform as a way to help SMEs manage consumption – could also take some of the sting out of recent bill increases linked to the unfreezing of rates in the regulated segment.  

Demand outlook, electromobility

In terms of power output, generation growth was around 0.6% last year, while grid coordinator CEN’s 2023-43 forecast report, published in January, estimates that demand rose 2.2% last year to 78.0TWh under a medium demand scenario.

Through 2028, demand – linked to GDP growth – is expected to climb by an average of 3.5% per year, driven by the start of operations of mining, datacenter and desalination projects, among others. 

In terms of electromobility, this is forecast to result in additional annual consumption of 10.5TWh by 2043, with 3.5TWh corresponding to electric buses and 7.0TWh to light electric vehicles. 

From 2036, power demand from light vehicles is forecast to outstrip that from buses.

Light vehicles sold from 2035 must be zero-emission.

As things stand, the government’s energy storage and electromobility law dangles a road tax reduction carrot and opens the door for electric vehicles to operate as distributed energy storage assets that draw from and inject into the grid.

An industry survey produced by Swedish carmarker Volvo and Chilean consultancy Almabrands found that, along with addressing the issue of price and autonomy concerns, educating consumers was vital, citing a correlation between awareness and willingness to purchase. 

Adoption of zero- and low-emission vehicles is accelerating in Chile but still accounts for only a fraction of sales.

Motor trade chamber Anac reported that 7,268 units were sold in January-June, up 106% year-on-year. Of the tally, around 5,000 were hybrids or mild hybrids, with the balance electric units and hybrids that can be plugged in.

Meanwhile, overall sales of light and midsized vehicles over the period were down 10.5% to 142,486 units.