Utility-Scale Solar Photovoltaics Cheaper Than Fossil Fuels in Chile

With energy demand rising and energy imports meeting as much as 70 percent of its needs, Chile has put itself on the “fast track” when it comes to developing an abundance of clean, renewable energy resources. Recent changes in energy market regulations are proving to be keys to unlocking Chile's distributed renewable energy potential, and more broadly speaking, its sustainable development.

The same confluence of market regulatory changes, lower costs and technological advances is driving rapid renewable energy growth in the U.S. The birthplace of solar photovoltaic (PV) technology, U.S. solar energy technology and project developers are venturing overseas in efforts to expand their businesses. Given the changes recently made to the market regulations governing its energy sector, Chile has become a “hotspot” for solar and renewable energy project developers.

Case in point: SunEdison on Dec. 15 was awarded 15-year power purchase agreements to supply 570 gigawatt-hours of electricity to Chile's National Electricity Commission. Highlighting just how fast solar has become competitive with fossil-fuels in Chile, this solar energy will come at a lower cost than electricity generated by fossil-fuel combustion – and that's without subsidies or incentives.

A $700-million investment in Chilean solar PV

In a press release, SunEdison said it will invest a projected $700 million to develop 350-MW of utility-scale solar photovoltaic (PV) power plants across Chile in order to fulfill the contract's terms and conditions. SunEdison highlights just how affordable utility-scale solar PV has become in Chile:

“Electricity generated by SunEdison's solar photovoltaic (PV) power plants is now 10 to 25 percent lower cost – without subsidies or incentives of any kind – than electricity generated by fossil fuels in Chile,” the U.S.-based solar PV manufacturer and project developer states.

Recently instituted climate change and energy market regulatory changes supportive of developing distributed solar and renewable energy generation capacity are “turbocharging” Chile's energy sector. This trend is attracting long-term direct investment, creating well-paying “green” jobs and paving the pathway to sustainable development.

Last May, the Chilean Environmental Service's Evaluation and Review Committee unanimously approved construction of Cerro Dominador, a 110-MW concentrating solar power plant and energy storage system by Spain's Abengoa. Under construction in Chile's northern Atacama region, where much of the nation's mineral wealth is mined, Cerro Dominador will generate renewable electricity 24/7 thanks to a molten-salts energy storage system capable of storing the equivalent of 18 hours of electricity production.

Use of solar PV and other types of renewable energy technology “is poised to play a substantial role in fulfilling the need for increased power generation capacity” throughout the Latin America-Caribbean region, according to an NPD Solarbuzz market research report released Sept. 29.

Regulatory reform key to solar, renewable energy growth

Chile's parliament in late 2013 unanimously passed legislation raising the percentage of electricity generated from renewable energy resources nationwide from 10 percent to 20 percent by 2025. As defined in the bill, that excludes large hydropower plants with generation capacity over 40 MW. More than 3.1 gigawatts GWs of solar energy projects were approved in Chile from 2012 through November of this year. Another 908 MW were awaiting final approval.

In its press release, SunEdison emphasized the key role recent market regulatory changes are playing in fostering development of Chile's abundant renewable energy resources and enabling the Andean nation to enhance economic, social and environmental sustainability:

“The National Energy Commission in Chile recently changed the bidding process used to award electricity supply contracts for the regulated market to create a more level playing field across different kinds of energy. With these changes, SunEdison was able to bid on and win supply contracts for 570 gigawatt-hours of solar energy."

Added Jose Perez, president of SunEdison for Europe, Middle East, Africa and Latin America: "This project demonstrates SunEdison's ability to provide innovative energy solutions and compete on equal footing in the Chilean regulated market ...

“This bid represents a portfolio of strategic projects for SunEdison that will help diversify the energy mix of the Chilean grid and will help resolve the country's energy supply deficit using clean, sustainable renewable energy at competitive electricity prices."

U.S. investors will be able to participate in SunEdison's Chilean utility-scale PV projects and international expansion by buying shares in its its yield company, or “yieldco,” TerraForm Power. “The plants will be added to the call-right list of TerraForm Power, Inc., a global owner and operator renewable energy power plants,” SunEdison states.

Image credit: Intercambio Climatico