Renewable energy in Chile gets more attractive with its major capacity build-up

According to GlobalData, the Chilean renewables market stands to reap the benefits of the capacity of its renewables and its purpose to lower the customers’ electricity bills.

The country has made huge efforts to foster renewable expansion to contribute to its decarbonization plan and achieve the goal of achieving carbon neutrality by 2050.

The renewable capacity of Chile, like hydropower, currently contributes to about 47 percent of the energy mix, while the remaining 53 percent is dominated by fossil fuel. Chile’s capacity mix is projected to see a significant upturn by 2030, with renewables (including hydropower) accounting for over 70 percent of the power mix.

“The country is firmly planning to retire its coal power generation fleet and to prioritize renewable energy (RE) sources that would not require damming or diverting water resources impacting the environment. Due to Chile’s vulnerability to future changes in climatic conditions, GlobalData estimates that during 2019-2030, almost 30GW of new power generation capacity will be built. Out of this, 90% of the new capacity will be renewable in nature. Solar PV and Wind will lead the renewable capacity built together contributing more than 70% of the capacity.

“GlobalData’s projects database defines the robust market attractive with more than 8.9GW of wind projects and 21.9GW of solar PV projects under various stages of development.”

Somik Das, senior power analyst at GlobalData.

Chile has a plan for phasing out coal-fired power plants by 2040, and achieving carbon neutrality by 2050. To provide investors with an uncluttered route to a smooth transition and risk-free climate, an existing supply chain, policy support and continuous market visibility will be required.

During H1 2020, the renewable sector in the country has already witnessed a large number of financial deals for M&A and ‘Asset Transaction’ compared to the same duration last year. Solar PV technology saw three times more financial deals amounting to $4 billion, followed by wind at $1.2 billion and hydropower at $0.3 billion.

“Chile has been particular about the environment and its resources, in the generation front, it is trying to reduce coal-based power generation which formed as high as 45.6% in 2013 to 5-15% of the generation blend, in 2030. The current Chilean energy transition vision and trajectory towards an increasingly clean and efficient matrix has provided the investors with the confidence of a stable and lasting market with good returns.”

Somik Das, senior power analyst at GlobalData.