Chile’s Green Power Surge Strains the Electric Network

The green energy eruption in Chile unveils endless ecological and fiscal prospects, ranging from much-anticipated decarbonization to a substantial influx of inexpensive electricity, poised to shift the foundation of whole industries and nations. Nevertheless, this burgeoning renewable renaissance, likened to the scale of the Industrial Revolution, calls for synchronized efforts on various fronts to prevent any stagnation or deceleration of this transformative process.

For instance, Aurora Energy, a Spanish consultancy firm, cautions that the imminent expansion of the electrical network falls short of meeting the demands of newly generated renewable electricity. A similar predicament plagues Chile, the frontrunner in green energy growth across the Americas. Renowned environmentalist and former US Vice President Al Gore once lauded this South American nation as a global inspiration.

Presently, Chilean renewable energy enterprises urge authorities to expedite investments in electric distribution networks and implement immediate market reforms, ensuring fair compensation for the daily electricity sales. Rich in resources and a regional trailblazer in solar and wind energy installation and production, Chile witnessed renewable energy outpacing coal in electricity generation during a 12-month period last year. With a goal of 70% green energy consumption by 2030, Chile stands as a paragon in the imminent energy metamorphosis to green hydrogen.

However, the fruition of this verdant miracle hinges on the crucial advancement of electric distribution networks, enabling effective distribution of green energy projects while reducing energy waste—a widespread issue in countries witnessing a renewable energy surge. Miguel Arrarás, the Chilean director of Acciona Energía, a renewable energy solutions firm, highlights the inadequacy of the current electrical system, designed four decades ago for the dominance of hydroelectricity and coal, and ill-equipped to handle today’s abundance of renewable energy. Insufficient remuneration further compounds the problem.

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Recently, Chile initiated a $2 billion transmission line project connecting the northern city of Antofagasta to the capital, Santiago, set for completion in 2029. Meanwhile, the Chilean Ministry of Energy proposes urgent developments for the transmission system and regulatory adjustments to offer “more [energy] certainty.” Arrarás identifies three priorities for renewable energy expansion: network expansion, improved management of existing infrastructure, and an urgent pricing mechanism overhaul. Failure to address these concerns risks a high likelihood of bankruptcy within the green energy sector.

Several renewable energy companies have filed for bankruptcy, and nine firms penned a letter to the Ministry of Energy, urging amendments to renewable energy regulations to mitigate financial insolvency risks. The Generadoras de Chile, the country’s employers’ association, has a five-year $23 billion investment plan for renewable energy, encompassing solar, wind, storage, and green hydrogen. Claudio Seebach, the association’s executive president, underscores the necessity of green energy storage investments. The Ministry of Energy assures the industry of President Gabriel Boric’s swift implementation of the Storage Law and other measures promoting energy storage technology. Seebach also calls on the National Electrical Coordinator (CEN) to optimize the network’s efficiency, reduce waste, and expedite environmental impact study approvals to achieve a coherent regulatory framework.