Latin American Countries Can Learn from Chile’s Energy Transition, Renewables Expert Says

Stable regulatory frameworks, the promotion of public-private partnerships, and environmental commitments have allowed Chile to become one of the leaders in Latin America’s transition to cleaner energy production.

However, the unequal distribution of such sources’ input to the national grid throughout the day remains a challenge that must be addressed, according to the executive director of the Chilean Association of Renewable Energy and Storage (ACERA), Ana Lía Rojas.

In Chile, the development of non-traditional renewable energy resources has been significant over the past few years. In the first quarter of 2024, these resources accounted for 40.7% of the country’s total electricity consumption.

When the hydroelectric contribution (which, it should be noted, is not classified as non-conventional) is added to the mix, the penetration of renewable energy sources rises to 66%, “a record both for Chile as well as the region,” Rojas said in an interview conducted at the seventh Renewable Latam Meeting and Fair, held in the Caribbean city of Barranquilla.

Chile, along with Brazil, is currently among the most attractive Latin American country for investments in renewable energies, according to the latest Climatescope model of BloombergNEF. The region’s renewable energy market is also estimated to have grown from around US$17 billion in 2020 to US$30 billion just two years later.

The executive attributes Chile’s progress in energy transformation to:

• The consistent vision of government entities regarding the transformation of the electricity sector. She also highlights the stability of the regulatory framework across different administrations and the continuity of policies. “There is a general consensus that this is the way forward,” she said.
• Chile’s natural openness to foreign trade and a globalized economy have allowed it to “learn first and adopt later.”
• A country that is open to technology and innovation with different business models that can then be translated into flexible regulation. “Our relationship with innovation and technology supplier countries, traditionally the U.S. hub, Europe, and the impact of the Chinese technology industry, is going to be key.”
• Public-private partnerships and environmental commitments.

However, the executive director of ACERA notes that Chile’s challenge lies in the unequal distribution of this renewable energy throughout the day.

“In Chile, we have a very high contribution of renewable energies during solar hours, in quotation marks, due to the large number of solar parks,” she said. “The issue we must address is how to distribute this large percentage of renewable penetration in the rest of the hours of the day, what we call the queues.”

The executive director of ACERA stated that between 60% and 75% of the renewable penetration occurs between 9 a.m. and approximately 6 p.m. Conversely, from 7 p.m. to 8 a.m. the following day, the penetration is much lower.

“This forces us to use other fuels, other technologies, and there we enter again into the use of fossil fuels that have emissions associated with their generation,” she said.

Rojas also referred to the high discharges of non-conventional renewable energy, which is why he considers it “nonsense” to “be able to produce clean, cheap and emission-free electricity and not be able to integrate it into the grid” due to aspects such as transmission limitations.

Chile’s learnings from times of drought

Rojas believes that Latin America must pursue energy diversification in the face of the pressures generated by droughts in markets highly dependent on hydroelectric power, amidst the challenges faced by countries such as Colombia and Chile due to the El Niño phenomenon.

“In Chile, between 95% and 98% of all projects being built and being evaluated are non-conventional renewable energy and storage.” There are no current plans to build a hydroelectric plant, let alone a dam hydroelectric plant, or a new gas plant. Instead, there are plans to convert existing facilities.

He went on to say that there are no prospects for new hydroelectric infrastructure because of the realization that water resources will become scarcer.

The executive stated that Latin America must prioritize diversification based on non-conventional renewable energies and enhance storage and transmission capabilities to optimize grid utilization. Ana Lía Rojas believes that the adoption of renewable energies, modernization of electricity infrastructure, and promotion of sustainable technologies are essential for advancing toward a cleaner energy future.

She noted that Chile has made progress in these areas following the 1998-1999 mega-drought, which led to electricity rationing and further exacerbated by a lack of investment in transmission.

“It was a prudent decision to diversify our energy sources,” he said.

During the crisis, Chile sought to rely on Argentina, which had gas resources, but “for political, technical, and economic reasons,” that supply was cut. After a couple of years with these three sources, thermoelectric, coal, and hydroelectricity, renewables began to emerge at the end of 2005-2006.

At the time, she noted that the alternative was more expensive and that the market was not betting on it. However, there was a sharp drop in the cost of renewable energy technology, especially solar and wind.

She explained that the decision was driven by necessity, given the experience of electricity rationing due to drought. She noted that the country experiences 14-year drought cycles and that there is always the threat of how the electricity supply will be affected.

Facing the challenges of the energy transition

To address the challenges of the energy transition, he said that a comprehensive transformation of the system is required, including not only generation, but also energy transmission, distribution and storage.

In this regard, Rojas underscores the significance of modernizing electricity infrastructure, as well as promoting distributed generation and self-supply.

The executive director of ACERA believes that it is important for Latin American countries to move towards the concept of decentralization in the installation of new renewable generation. This will result in the widespread adoption of solar panels and batteries for self-sufficiency in the near future.

In this sense, he considers that it is key to continue developing intelligent technologies for the management and monitoring of energy consumption.

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Advancing the energy transition with public policies

Rojas recognizes that other countries in the region may face unique challenges. Colombia, for instance, is a major hydrocarbon producer, and its energy transition may be influenced by economic and political factors.

However, she emphasizes the importance of establishing public policies that promote diversification of the energy matrix and reduction of greenhouse gas emissions.

She referenced the United Kingdom’s experience in using fiscal policies to influence behavior and promote the adoption of cleaner energy through the implementation of a carbon tax.

“This is a corrective tax. The United Kingdom is reducing its reliance on fossil fuels to such an extent that the use of coal is almost negligible. In that sense, it is a policy that is implemented with the awareness of the importance of a hydrocarbon within the economy, of the national accounts, of the generation of employment that produces an industry that was traditional in a country. However, it is balanced with collection tools, and it also has a corrective aspect, as the carbon tax, which is accelerating the renewable penetration”, she added.

For Ana Lía Rojas, it is strategic for countries to implement public policies in the short term to support those individuals and industries that are not prepared to assume the costs of the energy transition. This is because the equipment to generate the adjustments to the transmission and distribution system, and to offer the conditions of grid balance for intermittent generation, has a significant price.