Renewables in Chile: 'Not all that glitters is gold'

Chile has emerged as a renewable energy success story, as demonstrated by the results of the country's last three electricity auctions.

Power-purchase agreement prices obtained through tenders in 2014, 2015 and 2016 averaged US$108.4, US$79.3 and US$47.5/MWh, respectively, with intense competition from ever-cheaper wind and solar power driving the decline.

Nonetheless, important changes are still needed for renewables to maintain their current pace of growth, a panel of local experts agreed Tuesday at the Cirec Week renewable energy conference in capital Santiago.

Of the nearly 4GW of new renewable energy projects awarded through the last three auctions, only "a low percentage" have secured the necessary financing, said Dax Energy CEO Fernando Ferreyra.

While securing a long-term PPA is an important step toward obtaining financial backing, "not all that glitters is gold," he said.

Ferreyra explained that the design of Chile's power auction system forces developers to assume an inordinate amount of risk once the generation asset enters operation, causing would-be financiers to balk.

In other words, obtaining a PPA does not necessarily guarantee that a renewable project in Chile will obtain financing or be completed on time.

This assessment is in line with an August report from local energy consultancy firm Systep, which said that approximately 200MW of renewable projects awarded in recent auctions that were supposed to enter commercial operation in January 2016 still had not come online.

Speaking on the same panel, Acciona Energía Chile CEO José Ignacio Escobar and Enel Green Power's head of business development for Chile, Liliana Schnaidt, said that the renewable segment must improve dialogue with large-scale, free market offtakers in order to secure PPA opportunities beyond the national tenders, which supply regulated-market power distributors.

Based in Santiago, Dax Energy develops and invests in renewable energy projects, with a focus on securing bankable power-purchase agreements for large-scale end-users with 24/7 operations.