Energy storage market deemed among the most promising by Wärtsilä

Global marine and energy market solutions company Wärtsilä is sharpening its focus on Chile’s energy storage opportunities, BNamericas was told.

The energy storage market in the country is already growing and is expected to shift into the fast lane once some regulatory uncertainty is resolved, chiefly surrounding remuneration. 

The country’s solar PV and wind capacity has increased rapidly over the past decade, outpacing transmission expansion, and brought into sharp relief the need for grid solutions that can be deployed relatively quickly to help mitigate their intermittency and associated grid fallout, such as curtailment and price decoupling.  

Wärtsilä is leveraging its local presence and networks to ride the growing wave, with the independent power producer (IPP) segment a central focus. Wärtsilä is looking to partner with IPPs, developers and utilities that are participating in upcoming regional auctions, including an auction where storage-based power flow control project Parinas-Lo Aguirre is being offered.

“When we look at the state of the grid and the opportunities ahead of us, we think this is actually one of the most promising markets globally,” said Andrew Tang (pictured), Wärtsilä’s VP of energy storage & optimization. “And then of course we have the added feature that we have a local team that is very well versed in the issues.”

Wärtsilä, which has established Chile as one of its core markets globally, provides operating software and physical enclosures, procures batteries and integrates systems. Globally the company has 3.5GW of contracted and deployed capacity, with more than half corresponding to standalone systems.

Present in Chile since 1992 and involved in storage locally since 2017, Wärtsilä is currently commissioning an 8MW/32MWh system for local generator Colbún at the latter's 230MW Diego de Almagro solar PV farm in Atacama region, and is working on two more contracted projects, each 60MW/120MWh.

Alluding to Chile’s plan to withdraw all coal-fired generation by 2040 at the latest, Alejandro McDonough, managing director of Wärtsilä Chile, underscored the key role of storage. Up to some 20GW of renewables and storage could be needed to replace the roughly 5GW of coal-fired capacity.

“Without storage I don’t think there will be the big expansion that we need and are expecting in renewables,” McDonough said. “If we don’t have the market conditions, flexibility, storage, these projects won’t come and coal will remain in our grid.”  

Tang mentioned the challenge of ensuring that renewables plants are profitable.

“Who would invest more money in a solar plant if they know they’re going to have that many hours of zero marginal costs? You’d never get any financial approval from anyone other than a two-year-old,” Tang said. “You’re kind of at a standstill unless you pair it with storage so that you can at least build a case that you’re going to shift it and so you don’t have to inject at zero-cost hours.” 

Colbún and Chile’s other big power producers, with capacity to shoulder risk and finance projects, have formed the local energy storage vanguard. 

As the market steadily grows, energy sector stakeholders are waiting on a series of regulatory changes that should reduce uncertainty and fill gaps. All eyes are on rule amendments concerning remuneration, as revenue projection clarity should help ease access to finance. Work mostly surrounds standalone storage, as the framework for systems incorporated into power plants is more advanced. 

“The market will continue to grow but I think that when you get the regulatory structures in place, the market will explode,” Tang said, adding that Wärtsilä would expand its storage system maintenance and repair teams in tandem.

In parallel, a regulated power supply auction underway contains incentives for projects that incorporate storage, while the government is also planning to auction systems. An associated bill in congress, if approved, would lead to studies to establish what is actually required in terms of storage systems and the preparation of bidding rules. 

As things stand, winning bidders – which could be a generator or a transmission firm – would receive a fixed payment from consumers that recognizes capex and opex, from which revenue obtained from load shifting, capacity and complementary services would be deducted. 

While the one-off initiative is generally seen in a positive light, work needs to be carried out carefully “without haste but without pause” and officials should ensure the project doesn’t hamper private initiatives or create problems further down the road, energy storage and hydrogen conference RENMAD Chile was told recently.

The government has previously indicated that some US$2bn in investment would be required for the systems, planned to be brought into service in the country’s sun-drenched north by the end of 2026.

Conference panelists underscored the hefty challenge of auctioning, permitting and bringing online such projects within the time frame.  

Teresita Vial, an energy and project lawyer at Chilean legal firm ACU Abogados, suggested that the auction be carried out in tranches.