‘The Chilean electricity market is in crisis’

Curtailment continues to climb in Chile, where pure-play renewables generators in the country’s north are feeling the pain. 

In 2023, 2,667GWh of solar and wind output was curtailed, up 62% on 2022. In January-July of this year, curtailment was up 150% y-o-y. 

Limited system flexibility, sluggish demand growth amid expanding capacity, and transmission dispatch limitations are some factors driving the trend. For many hours during the day, marginal costs are zero, impacting revenue.  

Energy storage systems are being built and could be a part of the solution among nations experiencing fallout from rapid renewables buildouts and lagging infrastructure development. This is because they can be developed and deployed faster than transmission lines.  

To get a generator’s view of the situation, BNamericas conducted an email interview with Lutz Kindermann, Chile CEO of German renewables player wpd.

BNamericas: Could you give us your view on the Chilean renewable energy market? For example, what are the main challenges and opportunities today?

Kindermann: The Chilean electricity market is in crisis. We are in a stage of the energy transition where, like other countries, renewable energies are not being properly valued. 

Today, half of the electricity produced simply does not receive any remuneration.

Curtailment continues to grow because of a lack of infrastructure. For instance, this year it has doubled. This happens because the current regulations are designed for hydropower and fossil fuel sources, causing electricity from renewable sources like wind and solar to be remunerated at US$0 for many hours of the day. 

Opportunities do exist. We are a country globally recognized for our climatic conditions for developing clean energy, but these opportunities are being missed. 

Therefore, the greatest challenge today is for the relevant authorities to understand the need to advance regulations that reverse this scenario, to attract more investment. This way, we can prevent the curtailment of non-conventional renewable energies and enable progress in sustainable development.

BNamericas: What role do you foresee for wpd in the coming years in Chile? In other words, can you tell us a bit about your service portfolio and strategy?

Kindermann: We currently have three wind farms in the south of the country: Lomas de Duqueco and Parque Negrete in Biobío region, and Parque Malleco, one of the largest in Chile, in La Araucanía region. 

We have a significant investment portfolio, with over 1,000MW in wind, solar, and storage projects, in addition to some green hydrogen initiatives in the southern region of Chile. However, the realization of these investments depends on regulatory updates that the country may make. Building projects just to then curtail output makes no sense.

BNamericas: What are some of the drivers behind this approach?

Kindermann: The entire company, both globally and locally, is committed to a sustainable future. Therefore, our focus is to continue seeking, proposing, and adjusting solutions to transform Chile’s and the world's energy matrix to 100% renewable energy.

BNamericas: Originally, wpd was known in Chile primarily for developing wind projects. Is wind energy still a key part of your strategy?

Kindermann: Our origins are in wind energy, as it is our greatest capability. However, we are now developing and operating solar and storage projects as well. wpd’s mission is to transform the energy matrix of the countries where we operate, and Chile is no exception. As a company, we remain convinced that this is the path forward.

BNamericas: wpd also shows interest in future opportunities in the hydrogen sector. Could you expand on this?

Kindermann: Green hydrogen is a great opportunity for Chile. Therefore, it is one of the technologies we are developing and where we are diversifying our investment. However, we are cautious with expectations, so we are currently advancing with two initiatives of this type.

BNamericas: Any final thoughts or comments?

Kindermann: I would like to emphasize that the current situation is critical, as the transition to a green future is more difficult than expected and requires foresight and clear regulation.

Without urgent changes, we will see the energy transition, which provides the country with greater independence, lower prices, and increased competitiveness, come to a halt.