Just months before hosting the annual United Nations climate conference, Chile’s President Sebastián Piñera expanded his proposal to reduce dependence on coal.
Chile is taking a bold step towards renewable energy production. In mid 2019, President Piñera unveiled a plan toclose all 28 of the country’s coal-fired power plants by 2040 and achieve carbon neutrality by 2050. This plan follows a previous announcement to close eight of the country’s oldest and least efficient coal plants by 2024. Under the new proposal, the country will progressively close plants until none remain in use by 2040.
Coal currently makes up about 40 percent of the country’s energy matrix and is mostly imported from Colombia, the United States and Australia. But government officials and energy experts believe that a combination of renewable resources and natural gas can fill the gap that will be left by coal while meeting Chile’s growing energy needs.
At a seminar in Santiago last year, Wärtsilä presented a white paper outlining exactly how Chile could reach its goal of carbon neutrality.
“Chile is special. It has plentiful natural resources, such as solar and wind,” says Antti Alahäivälä, Wärtsilä’s Business Development Manager. “It also has hydroelectric reserves and available gas. In addition, renewables are quite cheap there.
And the fact that Chile is already well-connected makes distribution of renewables across the country’s power grid, a possibility. According to Wärtsilä’s white paper, which was well received by the Environment Minister Carolina Schmidt, Chile will need to begin building both wind turbines and solar panels immediately in order to meet its self-imposed deadline.
“Chile needs to build quite a lot,” says Alahäivälä. “While hydro is already there in the system, and they also have some wind and solar infrastructure installed, a lot of capacity needs to be added for both.”
Solar, wind and hydroelectric power currently account for about 40 percent of the country’s energy matrix. By 2030, Wärtsilä estimates this number to increase to 74 percent and by 2050 renewables could make up 100 percent of the energy matrix.
Alahäivälä predicts that the costs of the investments to meet these targets will not be significantly more than the existing costs of maintaining the power grid. He believes market forces are likely to drive down the prices of renewables and batteries.
“Now if Chile starts to phase coal out and replace it with renewables, there will be some added costs, but in the process, Chile gets rid of the emissions,” says Alahäivälä. “After that, when the power grid is mostly run by renewables, Chile will not need to import fuels and the operation of the system will get cheaper.”
Chile could eventually reach a point where it is completely energy self-sufficient and even capable of exporting power to neighbouring Argentina.
In addition to panels and turbines, additional infrastructure will also need to be added in order to ensure there is flexibility on the grid, meaning that power can be provided constantly even when solar panels and wind turbines are not producing energy.
“The flexibility will come from three sources,” says Alahäivälä. “One is batteries. There is a lot of solar coming in, and Chile will need to be able to shift that energy between day and night-time usage. Another is the existing hydro. It is also a long-term balancing solution, as Chile has huge reservoirs,” he continues.
“Third, is some sort of thermal capacity, which will likely be flexible gas to support these batteries and hydro,” he adds. Flexible gas generally comes in the form of gas engines, which can provide additional power to the grid within minutes.
Even though natural gas is not considered green energy, it emits about half as much carbon dioxide as burning coal. The majority of Chile’s gas is currently imported from overseas, but local energy experts believe Argentina soon will be able to provide a cheaper and more reliable source.
Wärtsilä predicts Chile can entirely phase natural gas out of its power grid as battery and synthetic fuel technologies improve.
Perhaps the biggest challenge facing Chile will be adjusting the way in which flexibility is rewarded in the electricity markets.
“That's the billion-dollar question and something we need to consider next,” says Alahäivälä.
In order for a completely renewable energy-based power grid to work, Chile will need to figure out how to get private energy providers on board with a completely different set of norms. They will have to abandon the current framework for creating profits.
“The big challenge is the required change in the market is dramatic,” says Alejandro McDonough, Managing Director of Wärtsilä Chile. “The power providers are paid by two streams of revenue: how much energy they sell and how much capacity they offer. They are not asked for efficiency or to be ready to switch power sources in a short amount of time. This is the reality of the market from more than 30 years ago.”
The Chilean government is in the process of introducing two pieces of legislation that will help adjust these ancillary services. One law will provide payments to power service providers that are flexible and help keep the grid balanced. The other law will define what technical requirements are necessary to balance the grid as well as lay out a plan for paying for these services.
Despite the numerous challenges facing Chile in its quest to achieve carbon neutrality, and eventually zero emissions, McDonough is confident that his country will be able to do so.
“I think it could happen by 2030,” he says. “I believe it could happen because there are forces in the market. Mining companies and other big energy consumers are looking for green and 100 percent renewable energy sources today.”
“This is a driver for coal's retirement because if all the big consumers want to have renewables, there is no place left for coal,” he concludes.
