Mini series: LatAm’s early PV leader, with enormous DG potential

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From August pv magazine

pv magazine: What’s your opinion of the current state of Chile’s PV market?

Marcela Puntí Martín: Chile’s market is undoubtedly one of the most dynamic at the moment, not only because Chile receives more solar radiation than any other country in the world, but also because for years we had an enormous energy deficit – which meant that electricity prices were extremely high. This scenario changed with the emergence of renewables, above all PV, and we’ve now got legislation and policies in place that support them, particularly since the government’s commitment to being carbon neutral by 2050.

Broadly speaking, not only do we have a solid legal framework and economic and political stability, we’ve also built the power grid we needed and plan to deploy new powerlines in the near future. Centralized PV generation is set to keep growing, although we do need to look for alternatives to offset the variability and to use hybrid systems to keep supply constant.

Just a few days ago, Enel Green Power announced construction of a new 400 MW photovoltaic plant costing $400 million. It’ll be the biggest in South America.

Marcela Puntí Martín: “I believe Chile is at the top of the list, and not just because of its solar irradiation.”

Image: ACESOL

What about in the rooftop segment?

The greatest difficulties are found in the distributed or decentralized generation (DG) segment. With DG, we have regulations in place, though these have been amended, which has created some uncertainty in the market and among investors. Firstly, in the net billing law, for plants up to 300 kW, the feed-in limit was raised but surpluses are very rarely paid for, because the government restricted the sale of surplus production – preferring self consumption. Secondly, small and medium-sized systems, which feed everything they produce into the distribution system, suffered a setback when the continuance of the current payment, known as the “stable price,” was undermined – it’s currently being discussed with the Ministry of Energy. This segment relates to arrays with capacities of up to 9 MW and had been growing strongly.

Would you describe Chile as Latin America’s most mature market?

I believe Chile is at the top of the list, and not just because of its solar irradiation, but also because it’s a politically and economically stable country. We’ve also got highly qualified industry professionals and clear legislation. That said, Mexico and Brazil also stand out in the region.

It’s been two years since the last big solar project auctions were held in Chile. Do you believe the government is likely to hold another similar tender in the foreseeable future?

The National Energy Commission plans to announce a major tender at the end of the year for 3,570 GWh per annum, and that volume will have to reach end users by 2025. The tender specifications will be made available on Nov. 13 and the awardees will be announced on Dec. 6. This figure is 1,570 GWh more than in 2017, when the government put 2,000 GWh/year out to tender.

The new features announced include a reduction in the variable component of the supply block from 10% to 5%, a decrease in the term of the supply contract from 20 to 16 years, and an increase in some of the requirements that awardees must meet.

Competitive tenders are vital for major generators, as they result in long-term supply contracts, or PPAs, and so allow them to access funding. Nonetheless, at ACESOL we believe that distributed generation could make a bigger contribution instead of focusing solely on a centralized system, as occurs with tenders.

How are solar companies adapting to these changes?

There’s some uncertainty, especially among small and medium-sized [system developers and owners]. Despite that, we’re confident that we’ll see a good term of at least 16 to 18 years and that the stable [remuneration] price band will be maintained.

As I said, the small and medium-sized segment has grown significantly in the last two years. Of the almost 1,000 MW in operation, close to 400 MW have come online in that time. This has led to a shift away from large-scale generation projects for the same volume but, even more importantly, it has required less transmission infrastructure and electricity losses have fallen substantially. Even though distributed generation’s market penetration in Chile remains low, a study conducted by the Energy Center at the University of Chile estimated that the net income produced by direct generation now stands at almost $150 million.

In our opinion, market penetration is still too low to change the rules governing small and medium-sized systems and we have serious doubts that the change the government is proposing will incentivize the segment.

Are ACESOL members also adopting net billing under the distributed generation model? Do you believe that the recent policy improvements have produced any tangible results?

Many companies belonging to ACESOL are working in the net billing segment – over 60 at present. The segment could be described as well established, even though surpluses are no longer paid for, except in the case of residential systems and not-for-profit organizations. We believe that net billing should be inverted, even more so now that the limit has been raised to 300 kW and in light of the changes brought by the new law, which creates a new category – virtual net billing. In other words, small self-consumption plants set up to supply a building’s residents that could be located anywhere, not necessarily on the rooftop. The only thing missing now is a set of financial instruments for private individuals. ACESOL has long been suggesting the government adopt the PACE program and its possible implementation is under study in Chile.