Wärtsilä’s solution to Chile’s renewable energy growth challenges

Chile’s renewable energy park has grown apace over the past decade. Like other countries working to decarbonize their power grids, it is facing the challenge of supporting the continued integration of more wind and solar PV capacity.  

An associated task is substituting the grid stability services provided today by the country’s fleet of coal-fired power stations, which are gradually withdrawn from the system. Stakeholders have mulled various options, incorporating different technologies, including flexible gas power plants, battery storage and pumped storage systems, and concentrated solar plants.

Finland-headquartered global energy market solutions company Wärtsilä recently analyzed the situation – and laid out its bespoke solution – during a forum hosted in partnership with the Finnish embassy in Chile and attended by senior officials from national energy commission CNE and the energy ministry, along with local consultants and other market participants. 

Wärtsilä’s solution centers on the incorporation of two key grid components: battery energy storage systems and flexible gas balancing plants, which could eventually use sustainable fuels instead of natural gas. Chile has multiple green hydrogen and green hydrogen derivatives projects under development targeting the domestic market. 

To find out more, BNamericas conducted an email interview with Wärtsilä officials involved in the study.

BNamericas: What was the purpose of your study? What questions did you try to answer? 

Silvia Zumarraga, general manager, market development: To show how Chile can optimally decarbonize the power system. 

Chile has been at the forefront with renewable capacity additions and leading the world with over 37% of annual generation coming from solar and wind energy, but is still utilizing substantial amounts of coal, which produces over 80 % of all carbon. 

What can be done in the short term to close down coal and provide more space for wind and solar expansion? Additionally, how can Chile approach the current price decoupling and curtailment challenge? 

Utilizing Plexos, a sophisticated dispatch optimization software, we conducted a long-term expansion study for Chile where we analyzed the technology mix that Chile would need to build to accelerate the retirement of coal and enable faster integration of renewables into the grid. 

BNamericas: What is your general diagnosis of the current situation in the Chilean electric power sector? What are its strengths and the big challenges over the coming years?

Zumarraga: The electricity market is falling short of the nation’s expectations. The major curtailment of new solar capacity; renewable projects are struggling financially; the trend of declining prices has had the unintended consequence of discouraging much-needed investments in the sector. Transmission expansions are slow. Inflexible coal plants are ‘must-run’ plants, producing energy at times when they should not be needed, causing extra side payments, producing carbon emissions, and preventing the incorporation of more renewables due to their long ramp times. 

Chile has decided to add renewables but is missing an integration plan to fully decarbonize the sector. There is a technical limitation: lack of operational flexibility in dispatchable assets. Coal currently provides firm and dispatchable capacity, night-time energy, inertia, frequency and voltage control and short circuit capacity.

BNamericas: Based on that, what actions could be taken today to address the issues you just mentioned?

Ananya Saraf, power systems analyst: Immediate actions to open the way for additional renewables (2023 through 2026):

- Address energy storage revenue clarity for feasibility of storage projects. 

- Rapidly add 3.4GW/17GWh of battery storage, 240MW of new flexible gas balancing capacity, the correct number of synchronous condensers in selected locations to provide system stability, based on system stability study. These capacity additions enable retirement of 2.6GW of coal plants. 

- Secure process and payment structure for ancillary service assets

This would bring a reduction in carbon emissions, lowering the generation costs, and would open the road for additional expansion of renewable assets. At this point, the system is robust and can retake the decarbonization path.

Medium-term actions:

- Construct adequate quantity of synchronous condensers to provide zero-emission inertia and short-circuit capacity in key areas. 

- Incentivize flexible thermal generation to provide capacity in key hours while remaining on standby with no emissions when not needed. These assets have the capability to provide firm power (start & stop at any time, unlimited operation time). They are extremely flexible with multiple fast starts and stops during the day, no minimum down- and up-time, have the highest possible open-cycle efficiency and are capable of converting to sustainable fuels.

Long-term actions:

After 2026, the system will be prepared to push to a 100% renewable electricity grid by as early as 2032. In 2032, the capacity mix would include 19.3GW renewables, 30GWh of battery storage and 2.6GW of flexible firm balancing capacity, which would, at the end of 2032, be converted to sustainable fuels. Thereby, Chilean electricity would be 100% decarbonized, probably as the first country in the world. Remaining coal and diesel assets would be closed already in 2030.

BNamericas: Would the power system stability be compromised? Do your solutions consider other components, such as synchronous condensers?

Stefan Schleech, general manager, power systems: With the increased share of variable renewables, different challenges related to power system stability will arise. 

There are certain stabilizing features with synchronous generators that have been taken for granted in a conventional power system, such as provision of firm dispatchable power, inertia, and short circuit capacity. When the variable renewables are entering the market, these features must be provided in other ways. We have written a whitepaper outlining modern solutions to bridge these stability challenges arising in a power system with high amounts of variable renewable energy.

In our proposed solution, we have considered the power system stability, and additional supportive devices will be needed to ensure high stability and reliability of the power system. One identified key player will be synchronous condensers. Modern balancer power plants can be designed to act as synchronous condensers. By adding a clutch between the power source and the generator, it is possible to utilize a balancing power plant fully by providing power when the variable renewables are low and act as a synchronous condenser when the variable renewables are high. 

BNamericas: What is the role of these flexible firm gas assets? Your study considers the addition of 2.6GW of them together with 30GWh of storage.

Jussi Heikkinen, director, growth & development: Firm flexible power enables closure of inflexible assets such as coal; they provide capacity and energy during nights and unexpected weather patterns, security of supply (dispatchable power) and ancillary services. Hence, they enable efficient integration and act as a reliable partner to renewables.

In addition, they are following the variability of wind and solar by starting fast when more capacity is needed and by shutting down quickly to avoid fuel use, reducing emissions to the system. The incorporation of flexible assets enables reduction of decarbonized power system capacity by 17% in comparison with a power system with only storage.

BNamericas: Given that Chile aims to have an emissions-free power grid by 2050, is the idea to eventually use sustainable fuels at the gas plants? 

Alex Espejo, senior market analyst: This is the final push. When more than 80% of power is generated by solar, wind, hydro, geothermal, etc., the flexible gas capacity can be converted to sustainable fuels to provide the grid with dispatchable, zero-emission energy during hours of low renewable availability. Doing this reduces the required overbuild of renewables by up to 10GW and capital cost by US$10bn, according to our Plexos modeling. 

BNamericas: Have you explored what mechanisms could potentially be used to get these projects auctioned and built? For example, would a special type of supply auction be required?

Espejo: Good question. We mentioned at the top that storage would be essential and there is already a process underway for storage to receive capacity payments in the upcoming capacity auction. A different process is underway to procure synchronous condensers. There is no schedule for flexible capacity. If we look at Brazil, flexible capacity auctions are specifically designed to purchase balancing capacity which rewards high efficiency, dynamic capabilities, and dispatchability.

BNamericas: What may happen if such solutions are not implemented in Chile?

Alejandro McDonough, managing director, Wärtsilä Chile: The primary risk comes from operating coal assets in a way they were not designed to operate. Minimum load operation and daily ramps are expensive and increase wear on the components of a coal facility, not to mention how the inflexible coal plants must run all the time, causing curtailment and effectively stopping the growth of renewables. 

The additional costs of this operation mode are taken by generators, compensated through side-payments, and is eventually passed on to consumers. 

Relying on coal to provide flexibility and essential grid services is not a long-term strategy, especially after considering emissions reduction targets set in Paris – 80% of current carbon emissions are coming from coal. When paired with batteries, flexible gas has lower emissions during operation, allows more renewable generation during daylight hours, and provides much-needed dispatchable capacity.

BNamericas: What are the next steps? For example, presenting the findings to government officials in Chile? 

McDonough: We will continue to advocate for flexibility: 

- Gas as a source of available, proven flexibility. 

- The value position of flexibility as enabler of renewable development.

- To make room for renewables, reduce curtailment, and the retirement of inflexible assets (coal), we must recognize the indispensable role of firm flexible capacity alongside energy storage.

Pictured, from left, Wärtsilä Chile managing director Alejandro McDonough, Wärtsilä general manager of power systems Stefan Schleeh, Wärtsilä senior market analyst Alex Espejo, Finland’s ambassador to Chile Johanna Kotkajärvi, Wärtsilä growth and development director Jussi Heikkinen, Wärtsilä power systems analyst Ananya Saraf, Wärtsilä Americas-South Cone marketing and energy business assistant María Carolina Chico, Wärtsilä LatAm general manager Silvia Zumarraga,  Wärtsilä energy storage business development manager Paulo Castro and Wärtsilä senior sales engineer for the Americas Guillermo Vásquez.