Renewables sweep Chile’s electricity market and set historic low prices

“With pride we are able to say that we reached a historic price”. Chilean Energy Minister Máximo Pacheco could not contain his joy in presenting the results of the supply auction convened by the National Energy Commission (CNE).

The 12,430 gigawatt-hours awarded, which will be provided starting in 2021, obtained a median price of US$47.59 per megawatt-hour (MWh). With this, the cost of electricity has been reduced by 63% from the the first large auction held in 2013 ($129/MWh), and 40% from the auction in October 2015, where renewables came in at a median price of $79.30 per megawatt-hour.

But greater pride came from renewables corresponding to more than half of the capacity auctioned. The great winner in terms of awarded volume was wind, with around 40% of the capacity in the five blocks auctioned, for which there was a grand total of 84 bids.

However, without a doubt the technology which set the final price was solar. At an incredible price of $29.10/MWh, a project by Solarpack was the only solar project to win contracts in the 2B block. The remaining 1 terawatt-hour (TWh) awarded in the supply block from 8:00 to 18:00, the time slot in which solar mostly competes, was awarded to wind projects. Bids from solar projects in this slot revolved around $0.03/kWh for supplying the grid.

Part of the 6 TWh which were awarded to Endesa could also go to solar projects, specifically those of Enel Green Power. Both companies are subsidiaries of Italian energy giant Enel Green Power. In previous auctions, Enel took over supply contracts which were awarded to Endesa.

Despite the absence of exact information about projects awarded, it is unlikely that there are many more contracts which involve solar PV. Spain’s Acciona, which also won projects, in this case only bet on wind for 506 GWh which was awarded in the 24 hour blocks, according to a press release. Other solar businesses and other technologies were rejected in the auction due to incomplete bids, according to CNE.

As indicated by Minister Pacheco in a post-auction press conference, half of the contracts awarded were for new projects. This could mean investments of around $3 billion. Full of pride, the minister also stated that this had approached the target set to reduce consumer electricity prices by 25% in the next decade.

According to Pacheco, the results of the auction will “allow a reduction in the price of power by 20% by 2021”.

The results of the supply auction mark the beginning of a new age in Chile. Energy Minister Pacheco openly stated that Chile had gone from being a nation in the middle of an energy crisis to a country where the energy sector is “the main engine of the nation”.

Translated by/Traducido por Christian Roselund. Para leer el original en Español, por favor visite el sitio del web pv magazine Latinoamérica.

* Correction: There was a mistake in this article. It stated that the $29.10/MWh solar project was the SunEdison’s María Elena, but this is a project is by Solarpack. In the table with the results of the auction it is stated as winner María Elena Solar. This is an affiliate of Solarpack which will build the project Granja Solar. We apologize for the error.