Chile Has So Much Solar Energy It’s Giving It Away for Free
https://www.bloomberg.com/news/articles/2016-06-01/chile-has-so-much-solar-energy-it-s-giving-it-away-for-free
by
Vanessa Dezem
and
Javiera Quiroga
Spot prices reached zero for 113 days this year through April
Solar power on Chile’s central grid quadrupled since 2013
Chile’s solar industry has expanded so quickly that it’s giving electricity away for free.
Spot
prices reached zero in parts of the country on 113 days through April, a
number that’s on track to beat last year’s total of 192 days, according
to Chile’s central grid operator. While that may be good for consumers,
it’s bad news for companies that own power plants struggling to
generate revenue and developers seeking financing for new facilities.
Chile’s
increasing energy demand, pushed by booming mining production and
economic growth, has helped spur development of 29 solar farms supplying
the central grid, with another 15 planned. Further north, in the heart
of the mining district, even more have been built. Now, economic growth
is slowing as copper output stagnates amid a global glut, energy prices
are slumping and those power plants are oversupplying regions that lack
transmission lines to distribute the electricity elsewhere.
“Investors are losing money,” said Rafael Mateo, chief executive officer of Acciona SA’s energy unit, which is investing $343
million in a 247-megawatt project in the region that will be one of
Latin America’s largest. “Growth was disordered. You can’t have so many
developers in the same place.”
A
key issue is that Chile has two main power networks, the central grid
and the northern grid, which aren’t connected to each other. There are
also areas within the grids that lack adequate transmission capacity.
That
means one region can have too much power, driving down prices because
the surplus can’t be delivered to other parts of the country, according
to Carlos Barria, former chief of the government’s renewable-energy
division and a professor at Pontifical Catholic University of Chile, in
Santiago.
"Michelle Bachelet’s government has set the energy
sector as a priority,” said Carlos Finat, president of the country’s
renewable association, known as Acera. “But planning has been focused in
the short term when it is necessary to have long term plans to solve
these type of issues."
Inadequate Infrastructure
The government is working to address this issue, with plans to build a 3,000-kilometer (1,865-mile) transmission line to link the the two grids by 2017. It’s also developing a
753-kilometer line to address congestion on the northern parts of the
central grid, the region where power surpluses are driving prices to
zero.
“Chile has at least seven or eight points in the transmission
lines that are collapsed and blocked, and we have an enormous challenge
to bypass the choke points,” Energy Minister Maximo Pacheco said in an
interview in Santiago. “When you embark on a path of growth and
development like the one we’ve had, you obviously can see issues
arising.”
Solar Growth
Solar capacity
on Chile’s central power grid, known as SIC, has more than quadrupled
to 770 megawatts since 2013. Much of that comes from the grid’s northern
sections, the Atacama region that’s home to the copper industry. Total
installed capacity increased 5 percent in the past year, with half
coming from solar farms, according to the grid operator, Cdecsic. SIC supplies power to the regions where 90 percent of the country’s residential demand is located.
The
country is expected to install almost 1.4 gigawatts of solar power this
year, up from 371 megawatts in 2015, according to Bloomberg New Energy
Finance.
When power companies aren’t giving away electricity, it’s
cheap. At the Diego de Almagro substation in the Atacama region, for
example, prices didn’t exceed $60 a megawatt-hour for most of March.
That’s less than the $70 minimum price for companies that won long-term
contracts to sell solar power in Chile’s energy auctions in October and March.
The
issue may limit future development because the uncertain revenue means
banks will be reluctant to finance new power plants, according to
Rodrigo Violic, head of project finance at the Chilean lender Banco
Bice. “It’s a big problem,” he said.
Solar ‘Surprise’
Salvatore Bernabei, head of Enel Green Power SpA’s
operations in Chile, has 170 megawatts of capacity in operation and 300
megawatts under construction in the country. He wouldn’t say if his
company has surplus power.
Bernabei, however, is adamant that
change is needed. “The rapid development of renewables was a surprise
and now we have to react quickly,” he said.
Until this is
resolved, low prices will plague companies that own power plants,
according to Jose Ignacio Escobar, general manager for Acciona’s Chile
unit.
“Energy prices in Chile will keep declining until there is a solution
for the infrastructure problem,” Escobar said in an interview in
Santiago. “This situation was expected, but new regulatory measures
weren’t taken, infrastructure wasn’t built.”
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