Solar wins substantial contracts in Chile's energy supply auction

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Chile may be a view into the future of solar. More than 2 gigawatts of solar PV and CSP are currently under construction in the nation, which could push it to a higher level of demand met with solar than Germany, Italy, or any medium-sized to large nation.

More critically, Chile is deploying massive volumes of solar PV without any subsidies or government incentives. And while the nation’s power needs and extremely high natural solar potential are drivers, Chile has taken steps to reform its electricity market to accommodate solar.

Chiefly, Chilean authorities restructured the nation’s energy supply auctions so that generators could bid into slots which correspond to times during the day and the night, which is widely credited with opening up these auctions to solar projects for the daytime segments.

Last Friday Chile held its second energy supply auctions for 2015, in which renewable energy swept the bidding and won all the available contracts, with no contracts awarded for fossil fuel generation. And while wind projects won 3/4 of the available blocks, at least three developers won contracts for solar projects to supply a combined total of 237 gigawatt-hours (GWh) annually.

This includes First Solar, which through project company SCB II SpA 2 won 20-year contracts to supply 88 GWh annually, and Solarpack which won 110 GWh as Amunche Solar SpA.

First Solar’s bids came in at US$67-68 per MWh, and Solarpack’s at $65/MWh. Solarpack has announced that it will build a 55 MW project to meet its obligations, and First Solar has stated that it is reviewing its options in terms of how it will supply energy.

But most surprising was a winning bid by Abengoa to supply a total of 39 GWh power during the two overnight blocks. While Abengoa also did not respond to requests for comment, it is clear that in order to supply electricity during these hours the company will need to incorporate some form of energy storage, which means either a concentrating solar power (CSP) project with molten salt storage or battery backup.

There is a precedent for this. Abengoa won 950 GWh in a Chilean energy supply auction last December, under the portion of the auction for 24-hour electricity supply. The company is building a combination of PV and CSP to meet its obligations.

Abengoa placed the highest winning bid in the most recent auction at $97/MWh. All of the bids for wind projects came in at $78-$95 per MWh.

This article includes research by Blanca Diaz Lopez. Her article on the auction in Spanish is available on the pv magazine Latinoamérica website.

This article was modified at 2 PM Eastern Time (U.S.) to incorporate a statement by First Solar.