Energy in Chile Future Trends Analysis¶
Future Trends¶
The Chilean energy value chain is poised for significant transformation in the near future (2024-2025), driven by a confluence of technological advancements, regulatory developments, and the imperative of the energy transition. The main trends shaping this landscape are the accelerated growth of renewable energy and energy storage, critical investments in transmission infrastructure, the evolution of the regulatory framework, the emergence of green hydrogen, increasing electrification of demand, and the persistent influence of legacy energy contracts.
The Accelerated Growth of Renewable Energy (Solar and Wind) remains a central trend. Chile's abundant solar and wind resources, coupled with decreasing technology costs and ambitious decarbonization targets (70% renewable energy consumption by 2030 and carbon neutrality by 2050), are driving a rapid increase in installed capacity and a higher penetration of variable renewable energy (VRE) in the grid. In 2024, renewables already accounted for 68% of electricity generation. This trend is expected to deepen, with projections indicating the potential to reach 60% renewable energy production by 2030 and significant instantaneous participation. This growth is fueled by both established players and specialized renewable energy producers.
Closely linked to the growth of intermittent renewables is the Increased Deployment of Energy Storage Systems (BESS). Recognizing the need for grid stability and flexibility to manage the variability of solar and wind power, significant investments and projects are underway in BESS. The Storage Law of 2022 has incentivized this development, leading to a substantial pipeline of storage projects in various stages of qualification, approval, and construction. Experts highlight the critical role of BESS in reducing curtailment and providing essential grid services. Recommendations suggest the need for several GW of long-duration BESS in the coming years to support VRE expansion and mitigate congestion.
A critical and urgent trend is the Focus on Transmission Network Expansion and Modernization. The rapid build-out of generation capacity, particularly in the north, has outpaced transmission development, resulting in significant congestion and curtailment of renewable energy. The government and the Coordinador Eléctrico Nacional (CEN) have recognized this bottleneck, with the recently promulgated Energy Transition Law (Ley de Transición Energética) in December 2024 aiming to accelerate transmission development. Significant investment plans for transmission expansion have been approved, highlighting the imperative to reinforce the grid to integrate new generation and ensure reliable supply to demand centers. Modernization and digitalization of the grid are also part of this trend to enhance efficiency and management of a more complex system.
The Evolution of the Regulatory Framework is an ongoing trend as regulators adapt to the changing energy landscape. This includes updating regulations for transmission planning, market operation, and the integration and remuneration of new technologies like energy storage and green hydrogen. The regulatory agenda for 2025 reflects this focus. While proactive, the pace of regulatory change and potential uncertainty can still influence investment decisions.
The Growth of Green Hydrogen Development is an emerging but significant trend. Leveraging its vast renewable energy potential, Chile aims to become a world leader in green hydrogen production. The National Green Hydrogen Plan targets significant electrolysis capacity by 2025, with numerous announced projects and substantial potential investment. Pilot projects are expected to begin operation by 2025. This trend opens opportunities for new industrial applications and export markets.
The Electrification of End-Use Sectors is contributing to a projected increase in electricity demand in the near future. This trend is driven by the adoption of electric vehicles, electrification of heating and industrial processes, and the growth of energy-intensive sectors like mining and data centers, particularly in the northern region. This growing demand necessitates further expansion of generation and network infrastructure.
Finally, the Impact of Legacy Energy Contracts continues to be a relevant factor influencing the market, particularly for regulated customers. These contracts, often indexed to fossil fuel prices, contribute to higher regulated tariffs despite the decreasing costs of new renewable generation. Addressing the financial burden and market distortions caused by these contracts remains a challenge.
Table of potential impact of the trends¶
| Trend | Potential Impact on Generation | Potential Impact on Transmission | Potential Impact on Distribution |
|---|---|---|---|
| Accelerated Growth of Renewable Energy | Increased installed capacity and output from solar and wind. Reduced reliance on thermal generation. Increased competition in the generation market. Potential for continued curtailment if transmission lags. | Increased power flows from renewable-rich areas to demand centers. Increased stress on existing lines, exacerbating congestion. Greater need for real-time grid management and stability services. | Potential for lower energy purchase costs over time (if transmission constraints are addressed). Need to manage distributed generation connecting at the distribution level. |
| Increased Deployment of Energy Storage Systems | Enhanced ability to firm and dispatch renewable energy. New revenue streams from providing grid services and energy arbitrage. Improved financial viability of renewable projects. | Provision of ancillary services for grid stability and flexibility. Potential to alleviate congestion through optimized dispatch. Reduced need for certain traditional grid support from thermal plants. | Improved reliability and power quality for end-users. Potential for localized grid support and management. |
| Focus on Transmission Network Expansion & Modernization | Reduced curtailment of renewable energy. Improved market access and revenue for generators, especially in remote areas. Enabled development of new, large-scale renewable projects. | Increased capacity to transport power across regions. Reduced congestion and bottlenecks. Improved grid reliability and security. Enabled integration of higher levels of VRE. | More reliable and potentially lower-cost energy supply from diverse sources. Potential for improved service quality due to a more robust network. |
| Evolution of the Regulatory Framework | Clarity and incentives for investment in new technologies (storage, green hydrogen). Potential changes in market participation rules and remuneration. Impact on PPA structures. | New methodologies for transmission planning and cost allocation. Rules for integrating storage and other non-traditional assets. Can accelerate or delay infrastructure development based on effectiveness. | Changes in tariff structures and components. Rules for distributed energy resources and customer participation. Impact on business models of distribution companies. |
| Growth of Green Hydrogen Development | New source of significant electricity demand (for electrolysis). Opportunities for direct supply of renewable energy for hydrogen production. Potential for co-location of generation and hydrogen facilities. | Increased demand for transmission capacity to transport electricity to hydrogen production sites. Potential need for dedicated transmission infrastructure. | Limited direct impact in the near term, primarily affecting large industrial users involved in hydrogen production. |
| Electrification of End-Use Sectors | Increased overall demand for electricity, requiring more generation capacity. Opportunities for new power supply contracts. | Increased load on the transmission network, particularly in areas with high electrification growth (e.g., urban centers, mining). Need for grid reinforcement. | Increased load on the distribution network. Need for local network upgrades and management of charging infrastructure (EVs). Potential for new services related to energy management at the customer level. |
| Impact of Legacy Energy Contracts | Continued influence on the average cost of energy sold to regulated customers. Potential for market distortions compared to current low spot prices. | Limited direct impact on transmission operations or infrastructure. | Contribution to higher regulated electricity tariffs. Financial pressure on distribution companies related to energy purchase costs. Affects affordability for end-users. |
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