Despite the difficult moments we are going through due to the health crisis caused by the coronavirus, climate change as a threat to the development of humanity remains an unsolved problem which, sooner rather than later, the countries’ economies will have to resume.
In Chile, the government has considered in its economic reactivation plan a significant impulse to renewable energies, which, moreover, will allow mitigating the effects of climate change that show themselves fiercely through the drought that large parts of the country’s territory are facing.
For several years, Chile has been placed among the right places to invest in renewable energies. This has been confirmed by the latest report of the Renewable Energy Country Attractiveness Index (RECAI), which ranks the country as number 13 among 40 nations, a list headed by China and the United States.
This public policy on renewable energies does not have implications in the energy sector only, it has an effect on the entire economy, since global investment funds are interested in investing in projects that focus on a sustainable production matrix capable of mitigating the risks of climate change.
An important instrument is the Task Force on Climate-related Financial Disclosures (TCFD), which has become a paramount referent when submitting reports analysing the financial information related to the opportunities and threats associated with climate change. This report was established in 2015 by the Financial Stability Council (FSB) and acknowledges climate change as a risk to the stability of economic, social, and geopolitical systems around the world. The TCFD implemented a shift of focus from the impact companies have on the environment to the impact of climate change on organizations.
Chile’s potential in Non-Conventional Renewable Energies (NCRE)
In 2008 Law 20257 was passed, which establishes that conventional energy generators with an installed capacity greater than 200 MW must accredit that 10% of that energy comes from NCRE sources or hydroelectric power stations. The regulation stipulates a fine of 0,4 UTM (monthly tax unit) for each non-complying MWh.
The result of this measure was that large energy generators had to be supplied with green energy produced by renewable energy plants, which established long-term contracts and gave the sector a strong boost. The modification of the law in 2013 increased the goal for the year 2025 to 20% of renewable energy contribution to the power system, a goal that was reached last year. The number, at June 2020, represents 23.1% with 5,607 MW of a total of 24,304 MW. Now, the Chilean government, in conjunction with 10 other countries in the region, has proposed to set the goal for 2030 at 70% of energy coming from NCRE sources.
In parallel, and in connection to this target, Chile aims at being a carbon-neutral country by 2050. The plan to shut down coal plants, which currently represent 40%, heads in that direction, and by 2040 the 28 coal plants should be closed.
This regulatory framework implemented by Chile has awoken investors’ interest to place their bets on Chile in terms of NCRE. Moreover, the country has an unmatched position because of its geography, the north being an area with extremely high solar radiation indexes, and many other places ideal for wind and geothermal energy. The country’s potential in this kind of energy is, according to the Chilean authorities, up to 70 times the current consumption. This creates enormous perspectives for investors.
The NCRE boom in Chile is manifested by the number of projects under construction, with a total capacity of 6,219 MW distributed over 71 stations and with an estimated investment of 11.316 billion USD. Data from the Ministry of Energy at June 2020 indicate that the main contribution from these 71 stations comes from solar stations (48%) with 3000 MW and wind farms (28%) with 1722 MW.
One of the most outstanding projects is Cerro Denominador, the first Concentrating Solar Power (CSP) thermosolar plant in Latin America, which functions with salts melted by solar collectors and can generate energy 24 hours per day. The plant is located in the commune of María Elena, in the Antofagasta Region. With an amount of 1,4 billion USD and a 220 MW capacity, divided into 100 MW generated by a photovoltaic plant and 110 MW supplied by the CSP plant, on its own, it represents over 12% of the current investment in NCRE.