OUTLOOK: Chile must balance renewables with transmission, baseload capacity

Wednesday, December 31, 2014

Although Chile had added more than 800MW of non-conventional renewable energy (NCRE) capacity in 2014 as of October 31, it will mean little without the transmission infrastructure and baseload generation to match.

Transmission "represents the spine of energy development," the government's 2014-18 energy agenda said.

The agenda was designed to reduce electricity prices and emissions and to facilitate the entrance of new, diverse power generation sources to the national mix.

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"The trunk system of the central interconnected system (SIC) has shown failures and restrictions that put at risk the supply to some zones of the country and make final electricity prices more expensive," the document said.

The energy ministry has said that despite the existence of 3.6GW of available capacity south of the Charrúa substation in central-southern Biobío region (VIII), only 1.5GW can be transported to capital Santiago due to transmission congestion.

The bottleneck is especially pronounced on the grid's northern section, where Colombian transmission firm Interconexión Eléctrica (ISA) is planning the 753km Cardones-Polpaico high-tension line project.

The US$1bn project is meant to widen the corridor in order to stabilize both regulated and spot market electricity prices. 

The project, part of a larger plan to connect the SIC with Chile's northern SING grid, is still pending approval from environmental authority SEA and has faced opposition from politicians and residents in the zones where it will be built.

Concerns about a project of this magnitude should be expected. But they serve as a reminder that the agenda's success will essentially hinge on two factors – one, whether the industry and the public can find common ground on power projects, and two, whether the government can make the environmental approval process more efficient and predictable.

Energy Minister Máximo Pacheco has stressed the importance of adding transmission capacity.CREDIT:AFP

"The final structure of the energy matrix is still under discussion," Fitch Ratings said in its 2015 power generation outlook for Chile. "Environmental conflicts, growing opposition to power plants and projects stuck in the approval process have been the principal obstacles to expansion in recent years."

The results of the latest power supply auction for the SIC were encouraging. National energy commission CNE and Chile's power distributors awarded baseload supply blocks of 5,040GWh/y and 3,800GWh/y to E-CL and Central El Campesino, respectively. Both are newcomers to the grid.

The agenda called for the replacement of coal-fired plants with those that use the cleaner combined cycle gas process.

But adhering to this mandate proved difficult for UK-based generator Rurelec, which has been trying to convert a 40MW heavy fuel oil project on the coal-dominated northern SING grid from heavy fuel oil to light diesel and, eventually, combined cycle gas.

SEA initially approved the upgrade, then rescinded that approval on orders from the supreme court stemming from local opposition to the project.

"It's not encouraging to foreign investors," Rurelec's Tom Bouwens told BNamericas. "Chile is supposed to be a country where you can get things done and where there are established environmental procedures."

Chile's energy agenda called for new combined cycle gas plants, like this one in Argentina.
(CREDIT: Rurelec)

In a country that imports almost all of its fossil fuel resources, hydroelectricity will be crucial as well.

Energy minister Máximo Pacheco has cited the example of Germany, which boasts 7,500 mini-hydro plants compared with Chile's 57, despite the latter country's considerable hydro resources.

"Chile can't feel comfortable with such a low participation ... from such a clean and abundant resource in our country," Pacheco said at the inauguration of the San Andrés run-of-the-river plant.

The ministry is conducting a study evaluating 15 of the country's river basins between regions O'Higgins (VI) and Aysén (XI), with the goal of determining which six have the most power generation potential.

The ministry will have submitted 11 energy bills to the national congress by 2016, including reforms to the regulated market power auction process, a transmission bill to facilitate projects like the SIC-SING interconnection and a bill to promote energy efficiency.

The agenda is comprehensive and includes measurable goals across the generation, transmission, distribution and hydrocarbon segments. The question now is whether Chilean society as a whole will sign off on the plan.