Chile promises to phase out coal by 2040 and achieve 100% clean energy power generation by 2050

(PV-Tech News) Parts of Chile have the most abundant sunlight on the planet. For example, the Atacama desert in the north of the country has been sunny for almost 356 days. In addition, Chile's high irradiance and low humidity make it one of the most suitable regions for solar photovoltaic power generation in the world.

José Ignacio Escobar, Acciona’s South American energy director, said the country was “lucky” to have a lot of sunshine.

"Chile has a healthy and stable long-term investment environment and the demand for electricity continues to grow. Chile relies heavily on imported fossil fuels and has set ambitious decarbonization targets. For these reasons, Chile is leading the clean energy revolution in Latin America."

In order to diversify the energy industry, promote low carbon and improve safety, Chile began to move away from hydropower and thermal power at the beginning of this century. In 2008, the government proposed that by 2010, at least 5% of the solar power generation of energy companies needs to come from unconventional renewable energy sources.

It turns out that the first step was successful. In 2012, 7% of Chile’s electricity came from renewable sources. From this point of view, the development of renewable energy in Chile is booming. The Chilean government subsequently set a target of 20% of renewable energy by 2025.

According to the Chilean Renewable Energy Industry Association (ACERA) data, as of now, Chile has achieved this goal. Wind power, solar energy, biomass energy, geothermal energy and river runoff power generation accounted for an average of 20% of the total power generation. It is worth mentioning that, driven by the booming solar industry, at certain times of the year, the proportion of renewable energy can reach a peak of 45%.

Chile’s current goal is to achieve 100% renewable energy generation by 2050, but challenges remain, especially in ensuring that energy can reach demand areas.

Cost reduction, resource wealth and power purchase agreements

According to ACERA data, Chile developed the first solar power plant in 2012 with an installed capacity of 3MW. In just 8 years, the photovoltaic projects in operation in Chile reached 2945MW, and another 2845MW projects are under construction.

This increase was due to a sharp fall in prices. Atlas Renewable Energy’s general manager in charge of Chile’s Alfredo solar project explained that, based on his experience, the Chilean solar industry had just started almost a decade ago, when the levelized cost of electricity (LCOE) was $100/MWh. This price has now dropped to nearly $20/MWh, which is only one-fifth of the price at that time.

The latest analysis of Bloomberg New Energy Finance also confirmed this conclusion. The analysis found that in the past 6 months, the LCOE of the cheapest photovoltaic project reached US$23-29/MWh. The report also pointed out that in the world's best solar market, Chile is tied with the Middle East and China. Before 2030, the price of the Chilean project will approach US$20/MWh or less.

ACERA Research Director Dario Morales said that solar energy prices are declining all over the world, and northern Chile has "the world's most outstanding solar energy resources," which has contributed to a sharp drop in prices.

"According to the estimates of the Chilean Ministry of Energy and the German international cooperation company GIZ (Gesellschaft für Internationale Zusammenarbeit), Chile’s solar energy potential is 1,300GW. This potential, combined with the reduction in solar technology investment costs, makes photovoltaic technology the most competitive in Chile today. One of the (energy) technologies."

Since all energy technologies are not subsidized, the Chilean market is different from solar hotbeds in other parts of Europe. A level playing field has led to a high degree of competition in the solar industry. Solar technology has become the cheapest form of power generation.

At present, most projects rely on power purchase agreements with major customers and distribution companies, which helps to avoid the price erosion to date. In order to obtain an off-take agreement, solar energy companies are targeting large-scale industries where mining companies are located.

Morales added that due to the competitiveness of solar energy, from 2021, solar energy will begin to occupy an increasingly high share of the power structure, pushing down the cost of electricity prices.

Chile is currently committed to completely phase out coal power generation by 2040 and further encourage solar power generation.