‘Coal generation is the smoking gun’

Chile has advanced rapidly along the generation sector decarbonization highway but is hitting a few speed bumps, chiefly in the form of limited grid flexibility. 

A task for Chile today is substituting the grid stability services provided by the country’s fleet of coal-fired power stations, which are being gradually withdrawn from the system. 

Finland-headquartered global energy market solutions company Wärtsilä has analyzed the situation and last year laid out its bespoke solution, which involves storage and flexible gas-fired plants.

BNamericas caught up with company officials to see what’s been happening on this front, and more. 

This is against a backdrop where power sector stakeholders are mulling and advocating various options, including battery storage and pumped storage systems, concentrated solar and advanced grid technology.

This, in turn, is in line with a national policy goal of completing the transition to a 100% emissions-free power sector by 2050.

ALSO READ: Chile electricity stakeholders unveil joint decarbonization regulatory proposals

BNamericas: Since our last chat, what have you been up to? Can you just recap why you conducted the study?

Alex Espejo, market development manager: We've been busy. We've been tracking changes in regulation and policy as well as following announcements of new capacity, conversions, and retirements and updating our modeling since last year.

We conducted the study last year to understand what was underlying the emerging financial challenges experienced by renewables, especially solar PV. We were able to isolate and demonstrate how inflexible coal baseload plants are contributing to the market and balancing challenges of [grid coordinator] CEN.

Now, we are working to understand the emerging duck curve in Chile and its potential implications for existing generators and Chile's readiness to manage the net load ramp.

BNamericas: In terms of decarbonizing Chile’s grid, from your perspective, there are some issues that warrant much greater public discussion. Can you tell us a little more?

Jussi Heikkinen, director – growth and development: Chile has reached the power system flexibility limit, which has introduced several challenges and currently almost stopped the journey towards decarbonization. We define the flexibility limit as the point at which the existing conventional power system can no longer accommodate more renewable power without introducing additional curtailment. 

In Chile, coal generation is the smoking gun.

Today, generation from coal is only needed during nighttime, but because of its inability to shut down in the morning, and restart in the afternoon, it must operate continuously. This situation has resulted in curtailment of all new solar energy by 30%, causing financial struggles for renewable investors who have spent time and resources to put projects in the Chilean market.

Additionally, increasing side payments, much of which for the coal fuel needed during daytime, have led to higher costs for ratepayers and existing generators. Consequently, there is a risk that CO2 emissions may not decline as rapidly as needed, posing a significant threat to the decarbonization efforts.

In other words, Chile has made itself a leader in the energy transition, but as for all pioneers, new problems emerge that need innovative solutions – we at Wärtsilä suggest making a renewable integration plan. 

BNamericas: As things stand, how feasible is phasing out coal completely? What are some of the tangible consequences?

Silvia Zumarraga, general manager – market development: Coal is today responsible for around 80% of the Chilean carbon emissions from electricity generation. Finding ways to retire coal plants will provide instant results in carbon reduction. Retiring 2.5GW of coal plants would solve the problem.

But it's not possible to just close the coal plants as the existing power system alone – as it is today – cannot handle the load reliably. We have presented in our study how much new battery storage and flexible gas power plants need to be installed to ensure security of supply after coal plants are retired. Installing these plants will solve the problem; however, it will take some years so there is no instant easy way out of the crisis. 

After 2.5GW of coal closures, the road is open for adding more solar and wind power plants without major curtailment. Flexible gas power plants can be stopped for the day – when the sun is shining – and be restarted in the evening to ensure security of supply through the nights, along with battery storage. 

BNamericas: What other steps can be taken to prepare for this transition? What could Chile do differently?

Zumarraga: While raising the power system flexibility limit, one must ensure that the system can provide security of supply through the nights, high load periods and unusual weather patterns – without the coal plants.

In our view, there is a 2-step approach:

Step 1: Increase the flexibility of the system by decommissioning 2.5GW of coal, so more renewables can be added. To enable the 2.5GW coal closures, the system will need 17GWh of new energy storage to shift the energy from days to nights, and at least 240MW of new flexible firm gas generation capacity to ensure security of supply through the nights and during unusual weather patterns. Chile also needs to install synchronous condensers to ensure frequency and voltage stability after closure of large coal power plants.

While adding more storage and flexible gas power plants, coal power plants can be gradually retired, one by one. This will raise the power system flexibility limit to enable further growth of renewables. The smartest way to do this would be to repower existing coal power plant sites with flexible gas power plants – this provides a dramatic reduction in local emissions due to cleaner fuel and limited running hours while also solving the national power system flexibility-limit issues.

Step 2: After the above actions, the power system is robust enough to continue increasing renewables and energy storage while systematically closing the rest of the inflexible coal plants. To replace all remaining 3.5GW of coal power plants plus the 3.2GW of diesel oil plants, an additional 9.5GW of renewables, 12.3GWh of battery storage, and 2.6GW flexible firm gas power plants will be needed. In addition, an optimum quantity of synchronous condensers will be needed. This quantity will be determined by local transmission and distribution conditions that emerge and vary greatly depending on demand and supply-side growth.

The flexible gas power plants will play a key role during the transition, but also after it. When the power plants are converted to sustainable hydrogen-derived fuels, they become carbon neutral and continue in the same key role of ensuring security of supply during all-weather patterns.

BNamericas: You don’t advocate relying solely on battery storage as an enabler of the transition. Why is that?

Espejo: Batteries handle all intra-day functions perfectly. They can maintain stable frequency and voltage, they can balance fast variations in wind and solar outputs, and they can shift solar energy from day to night. Flexible gas power plants can handle much of the intra-day balancing as well, but batteries do not require fuel and have faster response times.

What batteries cannot do is to provide firm power, which means you can start it when you need, and run it as long as you need. Batteries always have time limitations. This is why batteries cannot offer an economically viable solution for weather management over longer periods of time – e.g. low wind and solar generation due to cloudy or rainy periods, winter, etc. Such battery storage would have to be enormously large and would be used very seldom. Battery storage does not scale to week-long 168 hour timescales – which is a requirement of long-term energy storage.

Flexible gas generation can be operated by the system operator to ensure security of supply. But having such capacity available allows also for radical reduction of the size of the battery storage – batteries are optimal to handle the intra-day tasks and the rarer balancing of unusual weather patterns – low wind and solar generation – are left to the gas power plants.

BNamericas: What role does gas play currently, and what role do you see it playing in the future?

Zumarraga: We must be realistic and recognize gas is the cleanest transition fuel. The real difference is in the application. What will happen, if planned properly, and flexibility is prioritized, flexible gas power plants will work as balancers to variable renewables.

They will only run at low-capacity factors. Perhaps a little bit more at the beginning, but as we increase the storage capacity and more renewables come into the system, the capacity factor of these plants will be less (5-10%). However, depending on water conditions and a changing climate, thermal generators may need to run more. That is why, in addition to a generator’s operational parameters, it is also important to account for efficiency in an open cycle.

BNamericas: You have a proposal for a flexible gas solution. Could you elaborate on what flexible gas capacity entails and its purpose?

Zumarraga: Flexible gas power generation/capacity has excellent dynamic capabilities.

Simply put, flexibility refers to a power plant’s ability to start, stop, and adjust its output according to the electrical grid’s demand, hence allowing to fully utilize all the renewable generation available in the system quickly and easily. They play a complementary role to power systems – of which the drumbeat is increasingly set by variable solar and wind generation. 

BNamericas: But surely proposing new gas capacity could face political and environmental headwinds, given the country’s decarbonization push and status as a net hydrocarbons importer?

Espejo: Using natural gas in Chile's power system is a compromise. In an ideal world, Chile would build a pipeline composed only of solar, wind, batteries and pumped hydro. Unfortunately, the realities of cost, permitting, construction, and land use make that reality an infeasible one. Gas is the lowest-emission fuel available at scale with reliable, diversified fuel supply chains. It can be burned efficiently and flexibly to provide a less emissive backbone to the Chilean power system.

We are proposing gas as a transitional fuel until sustainable fuels are available when these assets will switch. The application or how these assets will be utilized is what we should concentrate on: to balance the intermittency. These flexible assets operate in pulses and emissions still decrease because the quantity of fuel burned decreases.

BNamericas: So new flexible gas capacity would be ready for sustainable fuel usage? What capacity factor would these assets have, given that the cost of sustainable fuels, at least initially, could be higher than that of natural gas?

Zumarraga: Our study considered gas as transition fuel, and once sustainable fuels are available, some of the assets will be converted. Chile has set its targets for when that may happen and Wärtsilä just announced its “100% hydrogen readiness power plant concept.”  

Based on our modeling, flexible gas capacity would operate at annual capacity factors of <10%.

BNamericas: How are stakeholders reacting to this proposal, and what might be the next steps?

Espejo: There’s great interest from all types of stakeholders. Everyone in Chile recognizes the importance of decarbonization and is energized by the proposal.

In addition, the increase in energy rates presents a real problem that, if not addressed, can lead to bigger issues, such as a compromise of the system's reliability. We conducted multiple meetings with both the government authorities as well as the private sector, where we shared our analysis and proposal. We received very positive feedback and were encouraged to further development and contribution.

For example, most coal generators already have plans to retire their assets before the 2040 deadline. What really attracts stakeholders to our proposal is that it uses existing, proven technologies that are not capex-intensive and can be easily modeled, accredited and permitted without significant regulatory intervention.  

Next, we're working to understand the emerging duck curve in Chile and the net load ramping possibilities of the power system. Both today and in the next two or three years. We hope to share our study this fall.