Snapshot: Hydrogen, renewables measures in Chile’s fiscal pact

After a major government tax reform bill aimed at raising revenue to fund spending plans was rejected by Chile's congress earlier this year, officials began dialogue with various stakeholders in a bid to build a consensus. 

Following the process, the government presented a series of measures aimed at boosting transparency, modernizing the State and spurring investment, productivity and growth.

In terms of tax, the pact proposes different bills, one aimed at combating tax evasion and avoidance and another containing incentives to spur formal employment and benefits for the middle class.

During a seminar hosted by the Americas Society/Council of the Americas on Wednesday in capital Santiago, finance minister Mario Marcel outlined the pillars of the pact, which also contains measures geared to the green hydrogen and renewable energy sectors.

GREEN HYDROGEN

In terms of hydrogen, Chile is working to attract investment and, according to a fiscal pact presentation, aims to have 10-12 projects in development by the end of 2026. 

The presentation cites a hydrogen action plan/roadmap currently being finalized, state development agency Corfo’s US$1bn facility, a government land auction scheme, measures to simplify the environmental review system and a tax credit mechanism.

RENEWABLES

Regarding renewables, the goal is to have a power matrix comprising around 66% renewables by the end of 2026, the presentation states. Currently, around 37% of Chile’s installed capacity of 31.7GW is non-conventional renewables, chiefly wind and solar. Including hydropower, that proportion climbs to 62.1%. 

Objectives under the pact are implementation of tax credits and measures to help tackle energy curtailment and price decoupling being experienced by generators in the country’s north. 

An energy transition bill presented to congress includes a proposal to reallocate tariff-based income and an auction of energy storage systems to support load shifting. Tariff-based income is received by transmission firms as part of the spot market payments made by generation companies in the system. 

The current legislation allows grid coordinator CEN to return part of the tariff-based income if generation companies are facing unusually high spot market costs due to delays in planned transmission projects. 

The new bill would broaden the definition, allowing this reassignment in any circumstance that creates a high mismatch between injection and withdrawal costs in the system, when compared with a forecast based on past averages.