Chile energy storage association ‘deeply values’ renewables stress alleviation measure

Chile’s renewables and energy storage association Acera welcomed a proposed government measure aimed at supporting generators impacted by grid congestion fallout – and called for further action. 

The measure is in an energy transition bill, due to be published shortly, and involves amending a tariff income assignment mechanism established in an existing electricity law.

Against a backdrop of rapid growth in solar and wind capacity that has outpaced grid expansion over the past decade – and amid oversupply during solar hours – some generators, chiefly smaller, 100% renewables players, are suffering financial stress stemming from curtailment and price decoupling. 

Acera has been pressing authorities for rapid solutions as officials work on a package of associated measures that support the country’s energy transition. 

On the government proposal, which involves channeling rate income to adversely affected generators, the chamber said: “As Acera, an association that brings together the entire value chain of the renewable energy and storage industry, we deeply value the executive's proposal, which presents an additional measure to those previously announced to balance the delicate situation of renewable generation companies.

“We highlight the announcement of this additional measure because, in our opinion, it recognizes the serious difficulties that as a renewable energy and storage association we have been noticing in the renewables generator segment in the last year and a half, especially due to congestion in the transmission networks, price decoupling and zero-price valuation of renewable energy.”

The announcement came on Monday, when energy ministry officials met with local power sector stakeholders as well as diplomats from Europe and Japan, whose investors are among those impacted.

Rate income is generated from differences in marginal costs at the end points of a stretch of transmission line.

Acera indicated the measure may have limited impact: “However, and despite the fact that the announcement of this measure represents a positive effort, we must also point out that, with the estimates and information that we have to date, in some cases of stressed generators, this measure will only account for less than 10% of the total financial imbalance.

“Therefore, it is urgent not only to implement it in the short term but also to continue exploring other measures aimed at correcting the market distortions that have caused the financial effects of renewable generators.”

Building out energy storage infrastructure is seen as a way of easing dispatch issues faster than constructing transmission lines – often a lengthy, complex process.

The energy transition bill is also due to lay the legal foundations of a planned 2024 auction of US$2bn of energy storage systems in the country’s sundrenched north, so that power can be stored during the daytime and injected in non-solar hours. 

Energy minister Diego Pardow told stakeholders: “The energy sector is key to achieving carbon neutrality in our country. And this bill, presented today to ambassadors, associations and multilateral organizations, gives an account of that objective. For this reason, as a government today we wanted to explain and give details of the bill in order to provide certainty to current and future investments for the energy decarbonization process, promoting urgent and precise actions to promote this second phase of the energy transition.”

Among other measures, officials have amended rules of an upcoming regulated power supply auction and launched an open season for the development of urgent transmission infrastructure.  

“It is estimated that energy consumption will grow by about 3% per year in the next 10 years, to which we must add the renewable generation necessary to replace the coal plants that will be closed,” Carlos Barría, founder and director of Grid & Zero Energy Consulting and former head of the energy ministry's research and policy division, says in the BNamericas Intelligence Series report Chile’s Energy Growing Pains. 

Replacing Chile’s coal-fired capacity of around 5GW will require, alone, around 15GW of new renewables and storage capacity. Under a public-private pact, the sector is working to retire its fleet by 2040 at the latest.