Contents

Intro

Chile's energy sector has come a long way in the last four years. When Michelle Bachelet assumed the presidency of Chile in March 2014, the energy industry was plagued by soaring energy prices, a lack of competition, and investor wariness due to a series of prolonged social conflicts over proposed energy projects.

Amid this challenging scenario, Bachelet's government, led by then-energy minister Máximo Pacheco and national energy commission (CNE) executive director Andrés Romero, undertook what would become arguably the most successful reforms of Bachelet's presidency. The energy reforms - namely overhauls of the laws governing public electricity auctions and the transmission segment - led to a flood of investment in generation, mainly in renewables, even as economic growth slowed to a crawl.

After skyrocketing to US$130/MWh in 2013, prices awarded through Chile's last three public energy auctions have progressively declined, averaging US$107/MWh, US$79.3/MWh and US$47.6/MWh, respectively, amid fierce competition from wind and solar developers and falling costs for the two technologies. Chile's energy sector has attracted US$17billion in investment since Bachelet took office, more than any other industry, according to current energy minister Andrés Rebolledo.

However, the initial wave of investment has already crested, and the frenetic pace of wind and solar farm construction has slowed considerably. Electricity supply in Chile has gone from precarious and expensive to abundant and cheap, with some local experts now forecasting a drought of investment in generation projects after 2023.

Still, Chile's energy transformation is only just beginning, and will require sustained investment after Bachelet's term ends in March 2018, especially in areas such as transmission, distributed generation and battery storage. What's more, analysts are forecasting accelerated economic growth after the presidential election in November.

This report looks at the technologies, trends and regulations that will drive investment in the local power sector under Chile's next government.

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