What's next in Chile's energy storage regulations push

Chile is building and adapting a regulatory framework surrounding energy storage systems.

A major milestone was hit this month when the government published regulations concerning capacity transfer, rules that will provide greater certainty over associated revenue flows. A second big chunk of regulation – concerning system coordination and operation – is in the pipeline. This regulatory work will help further accelerate investment, especially in systems that aim to use a project finance model.

To find out more, BNamericas spoke to energy and projects lawyer Teresita Vial from Chilean legal firm ACU Abogados. 

According to April data from Chile’s energy storage and renewables association Acera, 372MW of storage capacity was operating and 232MW was in the testing phase. On top of this, 1.05GW was under construction, 2.79GW held an environmental green light and 6.06GW was in the environmental review phase.

BNamericas: What aspects or parts of the regulation were the most awaited or anticipated?

Vial: Until a few weeks ago, the modification of the capacity transfer regulation, which regulates agents' participation in the capacity market, was the most anticipated as it introduced the necessary rules to calculate and remunerate the contribution of capacity sufficiency of storage systems.

Now, work is underway on amendments to the coordination and operation regulations, which govern the participation of agents in the energy market, to, among other aspects, fine-tune the regulations applicable to the operation of storage systems, and there is a lot of interest in this regard.

After that, the respective technical rules for coordination and operation and capacity transfers are the next step, as they determine the technical details of the scheduling, operation, and remuneration of these systems – and of generation plants in general.

With these steps, the regulation applicable to storage systems would be fully established, at least for now, in both the standalone configuration and as a complement to renewables plants.

BNamericas: Do you think regulation could trigger more investment in standalone projects given that there will be more certainty regarding revenue flows?

Vial: Undoubtedly, regulatory certainty is a key factor in determining investments, so it is expected that investment in storage will increase. 

This is because regulation allows, among other things, projection of potential revenue, which ultimately determines the viability of financing using project finance structures, thus providing investors with confidence regarding project returns.

BNamericas: Even without this regulation, Chile currently has around 2GW of storage capacity built, in the testing phase, or confirmed. What factors could explain this figure or trend?

Vial: Much was said about the lack of applicable regulation for storage systems in their various forms. However, Chile has had such regulation since 2016, explaining why there are already operational projects and many nearing the operational phase. This is in addition to the fact that, due to technological advances, changes in some conditions of the electrical system, and the importance Chile wants and must give to storage, existing regulation is being refined and supplemented to allow more operational flexibility for this technology and a greater revenue stream to facilitate project financing.

BNamericas: Are you seeing any emerging trends in the storage segment? For example, regarding system duration or technologies, location?

Vial: Today, all renewables plants under development in Chile are considering storage, and for those in operation, many aim to complement them with this technology in the short term. Regarding standalone projects, the greatest need is in northern Chile, where projects are currently concentrated, mainly for long-duration storage. In the central and southern parts of the country, standalone projects with a duration of 4-6 hours are mainly being developed.

BNamericas: The coordination and operation regulation is still pending and is in the process of modification. What are some of the main pillars of this regulation, and do we know roughly when it could be ready?

Vial: According to the energy ministry, the objective of modifying the regulation related to storage is to simplify and harmonize the set of rules associated with storage systems to provide certainty to system actors, ensure certainty in the way storage systems will operate, and modernize the operation of the electrical system and market. It is estimated that this modification could be in effect by April of next year.

BNamericas: Finally, a battery manufacturer told us that the reduction in lithium battery prices has sparked interest in PMGD [distributed generation] projects with a solar PV-battery configuration. Does the regulatory framework for PMGD include storage, or is there a need for tweaks, for example?

Vial: Currently, there is legal authorization for PMGD with a solar PV-battery configuration. Work is now underway to modify the regulation, DS 88, to refine and adjust the regulation for this new modality.

Additionally, earlier this year, the new technical standard for coordination and operation of PMGDs was published, containing the regulations applicable to the connection process for such projects. Currently, the national energy commission [CNE] is working on the operational chapter of this technical standard, which will include the operational rules for these projects and is expected to be published by the end of this year.