Genera Latinoamerica 2013 opens in Santiago, Chile, revealing broad potential of Chilean PV market

Genera Latinoamérica 2013 opened Wednesday in Santiago, Chile – the first time the well-known Spanish renewables show Genera has ventured overseas.

The first-ever edition of Genera Latinoamérica 2013 is being joint-hosted by Chilean partner Ferias & Congresos Internacionales (Fisa) and Madrid-based organizer IFEMA Feria de Madrid, who decided to integrate Genera Latinoamérica 2013 into the broader AmbientAL 2013 exhibition. The show will cover various forms of renewable energy, as well as water treatment, recycling and other environmental technologies.

For the renewable energy sector in Chile, this Monday, October 14th, marked an important day – the day Chilean President Sebastian Piñera signed into law a bill requiring utilities to source 20% of their electricity from non-conventional renewable energy, including PV, by the year 2025.

As Carlos Finat, Director General of Asociación Chilena de Energias Renovables (ACERA) explained to pv magazine during yesterday’s conference devoted to the integration of renewables into Chile’s power grid, "ACERA’s goal had been to get a target of 20/20, meaning 20% renewables by 2020, and not five years later."

But even 20/25 is an ambitious framework for driving the further development of Chile’s renewable energy sector, particularly the PV market. A look at the solar energy pipeline shows the impressive ramp-up the Chilean market is experiencing: only 5.7 MW is currently in operation, but 175 MW is under construction. Compared to wind power – the other major renewable energy source in Chile – these figures appear insignificant: the wind power sector boasts 302 MW of operational systems with a further 490 MW under construction. But as Finat points out: "solar power has a potential in Chile of 10 gigawatts GW versus 4 GW for wind power."

Blown away by PV

While wind power projects largely fit the conventional power generation paradigm of large-scale centralized power plants, PV installations in Chile are covering an increasingly wide range of applications.

While the number of PV exhibitors at this inaugural edition of Genera Latinoamérica was small (with about a dozen foreign and domestic exhibitors), Genera Latinoamérica 2013 already showed the range of PV applications possible in a country blessed with some of the best irradiation values in the world.

At yesterday’s conference, Jose Carlos Garcia Caballero, General Manager of Solar del Valle Chile SpA, highlighted the more-than 3,000 off-grid installations his company has constructed so far. One of his competitors, and fellow Genera Latinoamérica 2013 exhibitor, ienergia Group, also showcased their off-grid expertise and track record of more than 1,000 off-grid installations in Chile. Many of these projects involve PV power systems used to drive water pumps. This is a huge market in Chile, where the need for irrigation, coupled with the abundant sunshine, make for ideal conditions for this kind of application.

However, the top dog in Chile’s electricity market remains its mining sector, which as Finat explains, is the biggest exporter and tax payer in Chile. Given this sector’s appetite for power, the right application for this customer base are large-scale PV power plants, mainly in northern Chile, where irradiation levels are particularly high and most mining takes place. Long-term power purchase agreements with large mining companies as off-takers drive this market, and on the financing side this has been the favorite business model for investors and lenders.

Spot market and rooftop

But other attractive markets are just on the horizon. During the conference it became clear that projects based on spot market sales of PV electricity can also provide handsome returns of 20% or more on the invested capital. With spot market prices in the range of US$ 200 per MWh in some parts of Chile, this might even provide a better opportunity than PPA-based projects catering to the mining industry.

Then there is the rooftop market, which so far has not made any meaningful market impact in Chile. But this might change in a big way once a net metering bill emerges from the Chilean Congress, where it has been stuck for over one year.

As Finat describes the legislative process to pv magazine, a recent motion in Congress is trying to ensure that a true net metering rule is established, whereby excess PV power is compensated at the same retail rate the consumer pays for their electricity. Chile’s powerful Energy Ministry has not yet come out in support of this principle, but it does seem that some kind of incentive to promote residential and commercial rooftop PV will emerge fairly soon.

It seems likely that the net metering incentive will cover installations up to 10 kW and that a net billing mechanism will cover larger installations of up to 200 KW (or even 300 KW in the best-case scenario). As explained by José Miguel González of the Chilean solar developer Terra Solar, "Net billing would pay PV system owners a wholesale electricity rate and not the higher retail rate they are paying the power utility for the electricity they consume."

We can only hope that the net metering and billing regime, once adopted, will spawn another large PV market segment so that attractive roof-top, off-grid and large-scale markets will flourish side by side to contribute a large part of the 20/25 goal President Piñera just signed into law.

ACERA’s Finat is confident that Chile will hit this mark, and he would not be surprised if 20/20 actually turned out to be the case in 2020.