Chilean tender awards contracts for 600 MW of new clean capacity
Thursday, Nov 09, 2017
The Chilean government has awarded contracts worth around 600 MW in its latest renewable power tender.

Contracts were awarded at an average price of US$32.50 per MWh, the Ministry of Energy said in a press statement – roughly a third lower than the US$47.30 per MWh price awarded in the previous tender.

The price was lower because of greater competition following a change in the rules, according to Chilean Energy Minister Andres Rebolledo. The average price this year represented a 75% drop from the peak US$130 per MWh price reached in 2013, he added.

The contracts, the majority of which were awarded for wind and solar power projects, have a 20-year term starting in 2014, the ministry noted.
The Chilean subsidiary of Italian power group Enel, Enel Generacion Chile, won the most capacity at the auction, securing a total of 242 MW in contracted projects. This accounted for more than 50% of the demand on offer in the auction.

The other winners in the auction included Verano Capital, Atacama Solar, Cox Energia and Atacama Energy Holdings. A total of 24 companies made bids in the auction.

Verano Capital, an US project developer headquartered in Santiago, won its bid for output from a 47-MW wind-solar project it has developed. It was selected with a bid of US$25.38 per MWh – which it says is “the lowest 24/7 block price combining solar and wind ever recorded” in energy tenders.

Commenting on the hybrid plant, CEO Dylan Rudney said: “These are the lowest renewable energy prices we have ever seen on a 24/7 energy auction anywhere in the world. This will be most directly beneficial to Chilean energy consumers, but it also underpins the changing trend in the energy industry, where conventional energy sources are no longer able to compete with increasingly low renewable energy costs.”

The government was originally planning to tender 4.2 TWh of capacity a year from 2023 but has reduced its target to 2.2 TWh because forecasted demand in the Latin American country has decreased. Coupled with the interconnection of the country’s two previously separate electricity grids, less capacity will be needed over the medium term.

Chilean President Michelle Bachelet has set a target for 70% of her country’s total energy generation to come from renewables by 2050. Last year, around 12% of the country’s energy came from renewables sources.

The Latin American nation’s renewables market has boomed in recent years, with international developers like SunEdison and SunPower keen to take advantage of the country’s sunny, windy climate and strong economy.

However, analysts have long warned that the boom in solar construction in Chile, in particular, is leading to market overcapacity and a crash in spot market prices, and could begin to slow new developments.

According to some estimates, Chile’s maximum electricity demand is 14 GW, which some experts say gives the country fairly limited capacity for new renewables projects given that there is already thought to be around 9-10 GW of new solar capacity under construction or in the pipeline in the country. Nevertheless, the low bids seen in this recent auction prove there are still interested developers keen to take advantage of falling equipment prices and the country’s ideal conditions.

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