Chile storage law ‘very likely’ to trigger investment as sector awaits secondary legislation

Chile may witness a flurry of standalone energy storage projects breaking ground over the next several years, given that new associated capacity is needed to support goals under the government’s long-term energy policy.

An energy storage and electromobility law recently entered the statute books, opening the door for injection and capacity remuneration for these pure storage projects.

Chile is building out its renewable energy park and retiring its fleet of coal-fired power stations, driving the need for transmission grid and storage investment to accompany and support growth.

Hitting a 2023-27 energy plan goal would involve installing 1GW-2GW of storage system capacity. Currently 70MW of storage capacity is available, which means up to 30 times as much could be needed, lawyers Cristóbal Illanes and Alejandro Covarrubias, from Chilean firm Grupo Evans, told BNamericas in an emailed interview.

Given the scenario, “it is very likely” that the legislation triggers or incentivizes development of this type of project by the private sector, they said. Associated capacity of 275MW has the environmental green light or awaiting approval, while 60MW is under construction.

Illanes and Covarrubias added that the secondary legislation that will govern the implementation of the law was vital and would provide signposts for investors, and likely outline areas such as tender procedures. Officials have a year from the date of publication of the law – 21 November 2022 – to introduce the secondary legislation.

Chile is aiming to become carbon neutral by 2050. A chief power sector target is obtaining 80% of electricity from clean sources by 2030. In November, non-conventional renewable energy plants accounted for 2.42TWh (35.6%) of the 6.78TWh generated that month, up 2.3% year-on-year, local renewables and storage association Acera said in a report.

Conventional hydropower accounted for 33.3%, and thermoelectric plants accounted for 31.1%. Replacing just the roughly 5GW of coal capacity – a process already underway – would require some 15GW of wind and solar capacity.   

In terms of storage, achieving a 2030 coal exit would require several gigawatts of battery and long-duration solutions, such as pumped storage, according to a recent report commissioned by Acera. The current retirement goal is 2040. 

Partner Illanes and associate Covarrubias said that wider, coordinated action by the different sector stakeholders was needed to facilitate the energy transition. 

The full interview will be published in the first week of January.