S O L A R
F A C T S
&
F I G U R E S
C H I L E
1. General Overview
a. Solarplaza PV Trade Mission “1-5 June 2015” b. Introduction
c. Summary “Strengths and Weaknesses”
2. Facts and Figures
a. Economic Figures b. The Energy Mix
c. Installed Solar PV Projects d. Announced Solar PV Projects
e. Largest Solar PV and Conventional Power Generators f. Geomodel Irradiation Map
3. Regulatory and Institutional Framework 4. Interconnection SING and SIC
5. Business Case for Chilean Solar Projects
a. Merchant Solar
b. Solar / Diesel - Renewables and Mining c. Residential and Commercial Scale Solar d. Financing at Different Scales
6. Further Reading
1. General
Contents
Following the success of the previous fi ve trade missions organized in Latin America, So-larplaza returns to Chile with the PV Trade Mission Chile, taking place in Santiago on 1-5 June 2015. The 5-day trade mission gathers a group of 25+ international solar develop-ers, investors, consultants and manufacturers eager to expand their solar business in Chile, South America’s sunniest country, which is now emerging as the most attractive market for solar investments. In preparation for this tour Solarplaza has formulated this report to give an impression of the Chilean market.
• Meet key-stakeholders and govern-ment representatives in interactive sessions exclusive for the solar tour participants.
• Build and expand your Chilean net-work with over 100 local key players in the solar market during the second edition of “El Futuro Solar Chile” con-ference and exhibition.
• Meet with leading banks and inves-tors to get a complete overview of the opportunities and challenges for fi nancing in the solar energy sector. • Get a complete overview of the
op-portunities and challenges for fi nanc-ing in the solar energy sector in Chile from the leading experts in the fi eld. • Socialize with future partners and
investors during exclusive network meetings and meals.
Saskia Vat Project Manager saskia@solarplaza.com Borja Gutierrez Project Manager borja@solarplaza.com Solarplaza International BV P.O. Box 2299
“The most effi cient way to explore project development, fi nancing
and investment opportunities in the Chilean solar PV market”
What to expect: Jurriën de Bruijn Project Assistent jurrien@solarplaza.com Hugo Uijlenbroek Account manager hugo@solarplaza.com 3000CG Rotterdam The Netherlands Telephone: +31 10 280 9198 E-mail: info@solarplaza.com Meet amongst others:
Introduction
With this Solar Facts & Figures Chile report, Solarplaza provides an overview of Chile’s energy challenges, the solar energy market opportunities, and all required basic infor-mation to start business in this fl ourishing country.
As the economy continues to grow, Chile’s electricity demand is anticipating growth as well. Currently, it primarily relies on conventional energy sources: 92% of the electric-ity generated in Chile is derived from large hydroelectric power plants and fossil fuels. By 2025, the Chilean government desires to have 20% of their energy produced by renewables.
We discuss the market in the following way: First, we summarize the strengths and weaknesses of the Chilean solar PV market. Next, Section 2 provides essential infor-mation from the market in Chile, such as economic trivia, the energy mix, and projects currently under construction. Section 3 continues with a description of the regulatory framework and a list of key institutions to become acquainted with before entering the Chilean market. Section 4 discusses the developments in the SIC and SING transmis-sion lines. Finally, Section 5 distinguishes the opportunities in distinctive solar PV seg-ments, such as residential, solar/diesel, and merchant fi nancing.
Summary “Strength and Weaknesses”
Strength & Opportunites
• High irradiation levels: Regions in northern Chile have some of the world’s highest • irradiation levels, with average daily Global Horizontal Irradiance at 6-7.5 kWh/m2. • Moderate to high electricity prices, among the highest in Latin America.
• Net-Billing since 2014 opened potential for residential sector.
• The SIC-SING transmission line, planned to connect the two major grids in the country in 2017, will open sizeable untapped market potential.
• Chile is home to the world’s largest copper and iodine mines. Solar leads to substan-tial cost savings for this sector.
Weaknesses & Challenges
• No interconnection yet between the SING and SIC grid. This creates an issue due to the discrepancy between solar project potential (SING) and level of energy con-sumption (SIC)
• Questions arise about the technical issues concerning maximum solar grid penetra-tion. How much peak load can be supplied by solar in the electricity grid, and will this limitation be tackled?
• Recently, local banks have entered the energy market as permanent partners. How-ever, it is still diffi cult to fi nd fi nancing for 9-20 MWp projects, since the amount of work is equal to larger projects.
2. Facts and Figures
Economic fi gures
Chile has a market-oriented economy characterized by a high level of foreign trade and a reputation for strong fi nancial institutions and sound policy that have given it the strongest sovereign bond rating in South America. Copper alone provides 19% of gov-ernment revenue. From 2003 through 2013, real growth averaged almost 5% per year. In May 2010, Chile became the fi rst South American country to join the OECD, and it has 22 trade agreements covering 60 countries.
Source: Energy Agenda
Economic Figures
Population 17,363,894 (July 2014 est.)
Currency (exchange rate 1/Apr/‘15) 1 USD = 624 Chilean Peso GDP per capita 2013 (world ranking) $ 19,100 (73)
Unemployment rate 2013 6%
Infl ation rate 2013 1.7%
Real interest rate 2013 7.4%
Credit rating Feb/’15 AA- (S&P), Aa3 (Moody’s), A+ (Fitch) Corruptions perception index 21 (out of 175)
Projected electricity sales
(Sources: The World Factbook, World Bank, Transparency)
Year SING (GWh) Growth (%) SIC (GWh) Growth (%)
2014 16.591 5,9% 50.973 5,6% 2015 17.695 6,7% 53.543 5,0% 2016 18.832 6,4% 56.074 4,7% 2017 20.009 6,3% 58.553 4,4% 2018 21.248 6,2% 61.062 4,3% 2019 22.509 5,9% 63.638 4,2% 2020 23.831 5,9% 66.241 4,1% 2021 25.211 5,8% 68.896 4,0% 2022 26.640 5,7% 71.579 3,9% 2023 28.130 5,6% 74.289 3,8%
Installed capacity by source March 2015
Type % in mix
Hydro 33.9%
Coal 21.8%
Gas 21.2%
Diesel (Fuel oil) 14.6%
Wind 4.4%
Biomasa 2.1%
Solar 1.4%
Other 0.6%
100%
Source Comisión Nacional de Energía, March 2015
Chile PV demand in MWp - Cumulative (Annual)
2012 2013 2014 2015 2016 2017 2018
3 (3) 11 (8) 507 (494) 1,457 (945) 1,866 (402) 2,329 (453) 2,795 (454)
Source: Latin America PV Playbook - GTM Research
Solar PV segments
Most of the projects installed so far (March 2015) are utility scale projects with either
Merchant or PPA fi nancing. The growing potential in other PV segments will be
dis-cussed in more detail in Section 5.
Merchant 201 MWp
PPA: 340 MWp
Biggest solar PV projects in Chile
In 2014, the Chilean solar market fl ourished as developers in the region witnessed many of their large-scale solar PV constructions become installed and connected to the grid. With a record-setting fi rst quarter of 2015, Chile is evolving into a world-class player in terms of cumulative installations.
Read the full article on the website:
www. pvtrademissionchile.com/news-source/2015/3/2/top-10-biggest-solar-pv-projects-in-chile
Name Size (MWp) Connec-tion Finance Developer Region Year Amanecer
Solar 100.0 SIC PPA SunEdison Atacama 2014
Parque FV
Maria Elena 72.8 SING Merchant SunEdison Antofagasta 2015 PV Salvador 68.0 SIC Merchant Etrion/Total/Solventus/
SunPower Atacama 2015
And more..
Biggest announced solar PV projects in Chile
We compiled a list of projects from offi cial sources at the Comisión Nacional de En-ergía de Chile. This enabled us to identify projects currently under construction with government approval, as it is highly unlikely that the entirety of the current pipeline of 16 GWp will be installed. The fi rst quarter of 2015 has already been record-setting, but even more projects coming down the pipeline this year can be anticipated.
Read the full article on the website
www.pvtrademissionchile.com/news-source/2015/4/2/top-25-biggest-announced-solar-pv-projects-in-chile
Name Size (MWp) Connection Lead company Region
Bolero 146.0 SING Ingenostrum
(Helio Atacama) Antofagasta
PFV Olmue 144.0 SIC SunEdison Valparaiso
Luz del Norte 141.0 SIC First Solar Atacama
Finis Terrae 138.0 SING Enel Green Power Antofagasta
Largest solar PV developers in Chile based on existing & announced
projects
Developer MWp
SunEdison 432,8
Enel Green Power 387,3
Ingenostrum (Helio Atacama) 321,6
Austrian Solar 198 First Solar 141 RIJN Capital 131 Pattern Energy 108 Abengoa 100 Gestamp Solar 100
Parque Eólico Quillagua 100
SunPower 68
CGS Renovables (Valleland) 67,4
Schwager Energy (Central Solar Desierto) 50
Sky Solar 40
Solarpack 25
AES Gener 21
Largest owners of current generating facilities (all forms of power)
Endesa Colbún E-CL Aes GasAtacama Guacolda Duke EnergyGovernment policy to encourage renewable energy
An Energy Agenda has been published by the government in 2014, which envisages a series of actions and measures aimed at unlocking investment in the electricity in-dustry and improve its operation. It revolves around the following core ideas and goals:
• Boost the development of Non Conventional Renewable Energy to fulfi ll the 20% goal for 2025
• Develop an Energy Development Strategy in 2015 (for 2035 and 2050) validated by the Chilean society
• Allow NCRE facilities < 20 MWp to sell output at spot market without tolls to transmission companies
• Allow net billing for PV systems under 100 kWp (Since 2014, see Section 5) • Carry out an annual public tender for renewables
• Increase investments to improve the transmission system
• Reduce marginal electricity costs and promote energy effi ciency • Improve land management and encourage active civic engagement
Institutions Regulatory
Ministerio de Energía
• Ministry in charge of planning and coordinating the energy policies for the devel-opment and functioning of the energy system; supervising the compliance with the energy regulations, and assisting the government in all matters pertaining to the energy sector.
• CIFES is the institution within the ministry that strengthens the efforts of Chile to develop NCRE. It is supported by CORFO, the institution improving Chile’s competitiveness by encouraging investment, innovation and entrepreneurship,
La Superintendencia de Electricidad y Combustibles (SEC)
• Supervises the compliance with the laws and regulations on generation, produc-tion, storage, transport and distribution of fuels (liquids, gas and electricity), and it controls the quality of services provided to fi nal customers.
La Comisión Nacional de Energía (CNE)
• The technical public entity in charge of reviewing the tariffs and technical rules to which all energy business concerned shall be subject (including generation, transport and distribution of energy), with the purpose of securing that the ser-vices are suffi cient, reliable and affordable.
CDEC-SIC and CDEC-SING
• Two private economic dispatch centres, which are independent, primarily techni-cal entities, composed by representatives from the Chilean generator companies to discuss, regulate and coordinate operations and economic transactions. Also
ACERA ACESOL Prochile ACHEE Fundacion Chile
Transmission companies
SIC SINGOwner Capacity (MVA) Owner Capacity (MVA)
Chilectra 55,227 E-CL 5,978
Transelec 53,017 Minera Escondida 3,296
Transnet 15,158 Transelec Norte 2,584
Colbun 10,871 Codelco Norte 2,178
AES Gener 9,013 AES Gener 2,106
Regulations in the energy sector
• To construct and operate generation facilities, usually electricity concessions are obtained to protect investment. Also, the Environmental, Planning, and Mu-nicipality law may demand that an authorisation is obtained.
• With respect to interconnection of generation to the transmission grid, subject to a toll payment to the the transmission company.
• With respect to rates and terms in the distribution and sales of power, Chilean law distinguishes three different types of power sales:
• power sale in the spot market that is determined in accordance with the marginal costs of energy and the capacity price;
• direct negotiation contract, for high-use consumers (with an energy de-mand exceeding 2,000kW) the rate and terms can be freely negotiated; • and regulated contracts.
Obligations for foreign companies
• To obtain an electricity concession, the foreign body must do so via a subsidiary
incorporated in Chile. The electricity concession is preferable as it legally grants the right of way and facilitates the work of establishing and developing the power project.
• To acquire an equity interest in a Chilean electricity company, no specifi c require-ment is needed. It will have to comply with the general regulation as any other company in Chile, whether local or foreign.
Existing Transmission lines:
4. Interconnection SING and SIC
There are 4 electricity systems in Chile:
• The Northern Interconnected System (SING), is a major system that supplies the northern zone of Chile – represents 28 % of Chile’s installed capacity;
• The Central Interconnected System (SIC), is a major system that supplies the central zone of Chile – represents 71 % of Chile’s installed capacity;
• The Aysén electricity system and Magallenes electricity system, consists of me-dium-sized systems located in the southern zone of the country – whose joint capacity represents 1 % of Chile’s installed capacity.
Plans to interconnect SING to SIC
In 2014, the government announced that studies and promotion will be done to the interconnection option between SING and SIC. This will allow transferring the surpluses produced in the northern part of Chile to its central zones. President Mi-chelle Bachelet announced the goal to realize the interconnection in June 2017, one year earlier than was originally planned. The Minister of Energy, Maximo Pacheco, reported that after a series of analyzes concluded that the best alternative to inter-connect the systems would line Transmisora Eléctrica del Norte (TEN), developed by E-CL, the principal electricity generator in the north of Chile.
The transmission line
In 2014, E-CL acquired TEN for $ 13.7 million from E.CL’s main shareholder, GDF Suez Energy Andino, for the purpose of developing a double circuit, 500 kV, an alter-native current transmission line connecting Mejillones (SING) to Copiapó (SIC). Total CAPEX of the project is estimated at $ 721 million, E-CL plans to engage a partner to take a 50% stake in the project. The transmission line will open sizeable untapped markets for E-CL. It is a private initiative with potential to become a trunk line. Two additional lines in alternating current were also recommended by minister Pa-checo. The fi rst one will have a length of 3 kilometers and go from Kapatur to Los Changos substation, also located in the vicinity of Mejillones. The second, 140 km, will go from Los Changos to Nueva Crucero Encuentro (near Tocopilla). Both con-sider an investment of around $ 200 million. Minister Pacheco said these initiatives will be tendered in a process that will take place this year.
Merchant Solar
A major trend visible in the Chilean projects is the choice for merchant solar constructions, instead of PPA’s. Merchant solar is typically fi nanced by inves-tors and sold into competitive wholesale markets at the prevailing spot price, making the project more volatile to volume and price risks. The Chilean region is able to offer solar PV on the spot market thanks to a combination of rising demand, high spot prices in parts of the grid, open spaces, and having the high-est insolation rates in the entire world. A general factor is the overall decline of solar power’s cost. Furthermore, solar power has been said to be in synch with the spot market because the period of peak production coincides with some points of peak demand. This trend demonstrates the future potential and competitive advantage of solar PV over other traditional energy sources in the region.
Name Size (MWp) Developer Region
Maria Elena 72.8 SunEdison Antofagasta
Project Salvador 70 Etron/ Total/ Solventus/ SunPower Atacama
San Adrés 50.7 SunEdison Atacama
Largest existing merchant installations:
Solar / Diesel - Renewables and Mining
The global demand for copper is increasing, and so is the need for power at Chilean mines. Mines are naturally interested in having lower operation and maintenance costs, where energy can be between 15-40% of its operating budget. Chile imports most of its fossil fuels and pays the highest power rates in Latin America. Five years of drought have depleted reservoirs at hydroelec-tric dams, making Chile more dependent on solar and diesel to run elechydroelec-tricity plants. As explained under the Merchant Solar section, renewable energy in the remote and sunniest Atacama desert is now cheaper than electricity sold on the spot market.
Two challenges to tackle at the moment are the intermittency problem and the “mismatch” between the life of the mine and the number of years necessary for developers to recoup their capital investments. Firstly, a mine does not stop running at night, and so it needs a constant, fi rm source of power. Many ex-perts believe that improvements within Solar / Diesel and storage technology
5. Business case for Chilean solar projects
However, the potential cost savings are too great to ignore. LCOE value for solar in Santiago ranges between 9¢ and 18¢ a kWh. In Northern regions with higher irradi-ance values, this LCOE is even substantially lower. These values are very close or even signifi cantly lower than the actual electricity retail price of around 16¢ a kWh (Cáceres et al, 2014).
Largest existing Solar / Diesel projects:
Name project Size(MWp) Mine
% of electricity
demand mine Developer
Amanecer 100 Grupo CAP (Iron ore) 15% SunEdison
Pozo Almonte 25 Doña Inés de Collahuasi
(copper) 13% Solarpack
Javiera 69.5 Los Pelambres
Antofa-gasta (copper) 10% SunEdison
Residential and Commercial scale solar
Due to grid overload issues, market potential in the utility scale sector is not fully guaranteed. However, thanks to high electricity prices, irradiation values and the net-billing law, the market has a great potential to move on to projects <10 MWp in Central Chile.
Tariff rates
Chile has moderate to high electricity rates, among the highest in Latin America. To access detailed information on electricity rates in Chile, please have a look at the
website of the CNE.
Net-Billing
Since October 2014, owners of PV systems under 100 kWp will be paid for surplus electricity, which will be sold to the country’s national grid for approximately 50% of the fi xed net tariff. The law for small-scale residential and commercial generators was promulgated in March 2012 but its implementation was delayed by modifi ca-tions concerning safety and other rules for connection to the grid. The law is greatly benefi cial to residential and commercial PV plant owners.
The authorization of the SEC is required for all PV installations to participate. SMA was the fi rst inverter supplier to qualify for the scheme in November, which will en-able the company to offer its Chilean clients its range of inverters.
In a recent study, David Watts (2015) found payback periods for residential systems in Chile to be low, between 6 years in northern areas and 13 years in other areas (with lower radiation and retail rates).
Financing at different scales
We noticed from our conversations with experienced agents in the Chilean market, that it does not take much time to arrange fi nancing for and install a small project (< 3 MWp).
For 9 - 20 MWp projects, it becomes diffi cult to arrange fi nancing, because the amount of work is equal to a much larger scale project. However, there is plenty of potential in this segment of the market.
For large-scale projects most fi nancial arrangements have been provided by interna-tional development banks such as OPIC, and the IFC. The IADB has also been very active and has the potential to surpass the other two in 2015. Recently, local banks have also entered the energy market as permanent partners. For example, the 69.5 MWp Javiera plant has been fi nanced by CorpBanca and BBVA.
Finally, in its 2014 Energy Agenda, the Ministerio de Energía has committed itself to allow annual tender processes for solar photovoltaic and other NCRE generation projects. The next one can be expected at the end of 2015, which opens enough op-portunities to win rights to supply energy to the grid at a fi xed price per MWh.
Title Organisation Date Link National Energy
Strat-egy 2012-2030 Chilean Government February 2012 Link Energy Agenda 2014-2025 Chilean
Government May 2014 FullSummary
The Chilean photovol-taic market: Self-Con-sumption
Büro F November
2014 Link
Second half of 2014 Chile solar market Out-look report
Focal Solar January 2015 Link
Status of NCRE in Chile CIFES Monthly Link
Reports on fi nance +
energy in Chile Antuko Weekly weekly@antuko.com
Disclaimer
This document was prepared in preparation of the Solar PV Trade Mission Chile 2015 to serve as a basis for discussion purposes only and does not create any obligations on the part of Solarplaza International BV (“Solarplaza”). While reasonable care has been taken to ensure that the information contained herein is fair and reasonable as at the date hereof, Solarplaza makes no warranty that the information contained herein is complete or error free. Any projections, estimates or assumptions in this document are provisional only and for indicative purposes only. This document does not constitute any valuation, appraisal or advice and there can be no guarantee that any projected results will be achieved. Further-more, Solarplaza has done reasonable effort to avoid quoting articles subject to copyright or publish content without consulting the rightful owner. The information contained in this document is subject to change without notice.
