The decision not to develop more coal-fired plants in Chile marked the beginning of 2018 for the energy sector. A measure celebrated by broad sectors, which could mark a turning point for the industry, by reorienting the course, giving greater prominence to clean generation sources.

Towards the decarbonization of the matrix and the promotion of NCREs

If 2016 is remembered as a successful year for the energy sector, 2017 was also a successful year thanks to the implementation of policies and measures that deepened the good moment the industry has been experiencing in recent times.

Thus, last year a new bidding process was carried out, which continued to show positive results both in terms of price and participants, thus consolidating the increase in the participation of NCRE in the country’s generation matrix.

He also highlighted the start-up of the interconnection between the SIC and the SING, whose objective is to decongest the northern area of the SIC while awaiting the start-up of the 500 kV system between Polpaico and Cardones.

However, there were also negative aspects that highlighted the weakness of the national electricity system, “particularly in the distribution segment”, says the general manager of the consulting firm Systep, Rodrigo Jiménez, alluding to the natural phenomena that affected the system, such as the forest fires of the summer, or the storms and unexpected snowfalls of the winter.

Another matter that remained pending for the coming years -in the executive’s opinion- is the discussion of a reform to the distribution segment and the publication of part of the regulations associated with the 2016 Transmission Law.

THE END OF COAL-FIRED PLANTS

2018, meanwhile, began with an event that could mark a turning point for the industry. This is the announcement made by the government together with the Association of Generators to put an end to new coal-fired plant developments. This news shook the market, as coal-fired power generation is now the main source of electricity generation in the country, accounting for nearly 40% of the electricity generation matrix.

The reason for this decision is based on the “visualization of an increasingly renewable future”. In this way, thermoelectric generation will cease to be the main source of energy, giving way to hydroelectricity, in addition to other renewable technologies and storage, which should be the protagonists of this new direction that the industry will take.

To materialize this measure, a working group will be created to analyze, in the context of the objectives of the Energy Policy 2050, the technological, environmental, social, economic, safety and sufficiency elements of each plant and the electricity system as a whole, among other factors.

With this analysis, a schedule and conditions will be established for the programmed and gradual cessation of the operation of coal-fired plants that do not have carbon capture and storage systems or other equivalent technologies.

ERNC, GAINING GREATER PROMINENCE

As has been the trend in previous years, NCRE will continue to play an important role in the national energy scene.

If in 2012 NCRE had an installed capacity of 952 MW, as of December 2017 it reached 4,895 MW, following an explosive growth trend that will extend over the next few years.

Without going any further, the Chilean Renewable Energy Association (Acera) estimates that at least 1,000 MW of additional NCRE will be installed this year alone, mainly wind and solar photovoltaic plants.

“We must promote all technologies, such as battery storage, Concentrating Solar Power (CSP), geothermal, tidal, and all those that have had a slower development, but that we must promote so that they complement the technologies that are currently more mature,” said the president of the guild, José Ignacio Escobar, during a press conference that analyzed the achievements of this sector.

One of these new technologies that made its debut in Chile during 2017 was geothermal energy, settling a debt that the country had with this type of energy, which despite its high potential and multiple attempts, had not been able to be developed in the national territory.

However, this history of unsuccessful attempts came to an end last September with the official inauguration of the Cerro Pabellón project. The 48 MW plant, located in the mountainous area of the Ollagüe district in the Antofagasta Region, became not only a milestone for Chile, but also for South America, as it was the first plant of its kind in the region.

This new project, as well as the long list of NCRE initiatives that were inaugurated during 2017, is in line with one of the most ambitious goals set by Acera: to meet the goal of 100% renewable energy by 2040.

“We believe that this is a totally attainable and achievable goal, but for which it is necessary to define the action plan to achieve the goal, a rational and coherent plan with the decarbonization of the matrix,” said the representative of the renewable energy association.
This roadmap is also shared by the consulting firm Systep, as they see that the process of consolidation of tenders and the corresponding penetration of intermittent renewable energies bode well for a sustained increase in these technologies.

According to Rodrigo Jiménez, the national electricity system has shown flexibility to incorporate NCRE, but he warns that it will require additional flexibility to adopt greater volumes of intermittent energy.

According to the expert, a fundamental contribution in this regard was the regulation of complementary services, currently before the Comptroller’s Office, which will impose the challenge of seeing how the industry as a whole responds to this new market.

“How will the coordinator determine the requirements of each service? Who will be the counterpart to these decisions? Will new players be able to appear to deliver these services? Will it be possible for large customers or even distributors to add security and flexibility to the system? This year we will begin to see which of these questions we can answer,” says Systep’s general manager.

CHALLENGES IN MIND

The industry agrees that the energy sector has been one of the most important economic drivers of recent times. And it will continue to be so, although the challenges are more strategic. This is stated by Claudio Seebach, executive vice-president of Generadoras de Chile, who says that one of the topics that will dominate the discussion this year will be the strengthening of electrification.

According to the executive, this aspect will continue to accelerate in most areas of daily life and fundamentally in the areas of transportation with electromobility in public and private transport, and in industrial processes that currently use fossil fuels.

“This will be a significant contribution to having more sustainable and less polluted cities. And to this end, a process of updating the National Energy Policy (PEN) with objectives and actions aimed at moving towards a more electric and energy-efficient society must be initiated”, the union leader points out.

Regarding distribution emergencies, the industry agrees on the need to be better prepared to receive natural events in order to minimize the energy not supplied to the communities.

To this end,” says Rodrigo Jiménez, “advantage should be taken of the discussion that is taking place in the distribution segment to incorporate key concepts such as resilience, low probability and high impact events, and how to design remuneration schemes for distributors, so that they have the necessary resources and make efficient use of them in the event of these emergencies.

“What level of resilience are we willing to pay for? How to remunerate distributors for this service? Who can provide these additional levels of security? How can new distributed technologies contribute to a more reliable system? These are some of the questions that remain unanswered,” adds the Systep expert.

Another challenge that will focus attention this year will be the need to promote transparent market signals regarding investment and operations. This, for an adequate insertion of storage systems in the local electricity market.

“It also highlights the challenge of constituting a broad and transversal group to reach a consensus on a roadmap and a long-term national water resources policy that is shared and participatory. In addition to continuing to make progress in legitimizing the environmental and social performance of sustainable hydroelectricity as a substantial contribution to a more renewable electricity generation matrix”, concludes Claudio Seebach, executive vice-president of Generadoras de Chile.