Chile has set a target of providing carbon neutral electricity by 2050 and aims to retire its 28 installed coal projects with a cumulative capacity of over 5,529 MW by 2040. To support the country’s decarbonisation plans, the government is currently working on two bills—one that prohibits the installation and operation of coal-fired thermoelectric power plants (that are less than 30 years old as on December 31, 2025), and another that prohibits the injection of electricity from fossil fuels into the country’s national electric system from 2030.
The recently released preliminary Planificación Energética de Largo Plazo (PELP) 2023-2027 or long-term energy planning document of the Ministerio de Energia or Ministry of Energy has identified four pillars to achieve the 2050 energy transition target. These are: (i) addition of renewable energy capacity; (ii) expansion of the transmission infrastructure; (iii) modernisation of the grid; and (iv) digitisation and automation of the grid.
As per PELP, 81.6 GW of new generation capacity will be added during 2022–50, entirely based on renewables, including 6.6 GW of storage capacity. However, the withdrawal of coal-fired plants and insertion of renewables bring several challenges for the grid. Thus, it suggests advance planning of transmission infrastructure expansion (since its start-up requires several years); adoption of technologies that allow taking advantage of the existing transmission based on power electronics and digital control systems (like short-term storage, dynamic capacity of lines, etc.); operation of a system with less inertia and less short-circuit level; and adoption of the short-term electricity market.
Further, for transmission network expansion, Chile’s national energy commission, Comisión Nacional de Energía (CNE), published Informe Técnico Final Plan de Expansión Anual de Transmisión Año 2021 or Final Technical Report Annual Transmission Expansion Plan Year 2021 in March 2022, identifying the development or augmentation of 44 national and zonal transmission projects with a cumulative investment requirement of USD538 million.
Installed electricity capacity by technology, 2021 (%)
Decarbonisation plans
In June 2019, Chile announced the Plan for Decarbonization and Closure of Coal-Fired Power Plants in Chile. The programme establishes three main commitments: closure of eight coal-fired thermal power plants (1,047 MW) by 2025; closure of the remaining 20 coal-fired plants (over 4 GW) by 2040; and achievement of carbon neutrality by 2050.
During 2020 and 2021, some of the coal plants were shut down resulting in reduction in installed coal-based capacity from 5,192MW in December 2019 to 5,041 MW as of June 2022. The government is also planning to prepone the shutting of the existing 28 coal plants by 2030, instead of 2040. However, as per industry experts, the country’s electricity system is not ready to close all coal plants even by 2040. Faced with energy shortages, CNE recently postponed the withdrawal of the Bocamina II coal-fired power plant of 370 MW until September 2022, which was earlier scheduled in May 2022.
In January 2022, a voluntary agreement was reached between the Government of Chile and the member companies of the Asociación de Generadoras de Chile (AGC) or Association of Generators of Chile—AES Gener S.A., Colbún Energia, Enel S.p.A., and ENGIE S.A.—to not develop any new coal-fired projects that do not have a carbon capture and storage (CCS) system or other equivalent technologies. Further, the energy ministry will establish and coordinate a working group to study the existing coal-fired projects (that do not have a CCS system or other equivalent technologies) and schedule their retirements.
The country is also promoting natural gas plants as an alternative to coal. In April 2022, the government approved the environmental licences for gas-based generation projects aggregating 2,330 MW, which will mainly operate on imported gas from Argentina.
Planificación Energética de Largo Plazo (PELP) 2023–27
The energy ministry publishes PELP every five years as per the process defined by articles 83° to 86° of the General Law of Electric Services and regulated by Decree No. 134 of October 2016, which approves the Long-Term Energy Planning Regulations, to project the country’s energy future over a 30-year horizon. The first PELP was published for the period 2018–22 with an aim to increase investment in renewable projects. The recently published preliminary PELP supports the government’s target to achieve carbon neutral electricity by 2050. It highlights that Chile has 2.4 TW of renewable potential, about 80 times the current installed capacity.
The priority actions for energy transition highlighted in PELP include:
- Electrification of energy uses requires a resilient electrical system to strengthen the quality of service
- Energy efficiency and smart demand management
- New optimisation and reinforcement work for electric transmission
- Developing a portfolio of transmission structural works to achieve carbon neutrality and install development poles in the provinces of Tocopilla and Antofagasta
- Incorporating renewable sources on a large scale and at a distributed level
- Supporting investment in storage systems
- Implementing state-of-the-art grid technologies for the future network dominated by power electronics equipment like inverters, controlling system based on digital algorithms etc.
- Managing electricity demand, especially for air conditioning and electromobility
- Climate adaptation and resilience implies that dry hydrology must be considered for all purposes
- Developing intensive thermal insulation plans to accommodate electrification of heating in homes
Under PELP 2023–27, the energy ministry plans to add 34.8 GW of wind, 32 GW of solar photovoltaic (PV), 7.8 GW of concentrated solar power (CSP), 6.6 GW of storage, 300 MW of natural gas and 200 MW of biofuel capacity during 2022–50. Given the water scarcity faced by the country recently, no hydro capacity has been planned for the period. The energy ministry has also proposed the use of green hydrogen to meet the energy requirements of the mining industry as an indirect electrification solution.
Figure 1: Fuel-wise planned generation capacity under PELP 2023–27 during 2022–50 (%)
As of May 2022, 82 generation projects with a cumulative capacity of 4,729 MW were under construction in the country, entailing a total investment of USD6,368 million. Majority of this capacity is based on solar (54 per cent) and wind (36 per cent). These also include 80.5 MW of thermal projects.
Given the longer time required for the development, processing and construction of new transmission projects, for the decade 2020–30, the structural transmission system will be expanded only through technological optimisation and grid reinforcements along with implementation of storage systems that allow a more efficient operation in the short term. From 2030 onwards, the possibility of developing transmission projects with higher capacity can be considered.
PELP also suggests reviewing the requirements of the planned Chile–Peru and Chile–Argentina interconnections, in accordance with the changing energy requirements of the country.
Figure 2: Criteria for electrical transmission expansion under PELP 2023–2027
Presently, the energy ministry is receiving comments on the preliminary PELP till August 2022.
Power network expansion plans
As per the analysis of Global Transmission Report, about 4,000 km of line length and over 6,000 MVA of substation capacity are likely to be added in the country during the period 2022–31 at 110 kV and above voltage levels. These include under construction projects, under development projects and announced/proposed projects. Some of the key upcoming projects are the ±600 kV Kimal–Lo Aguirre high voltage dorect current (HVDC) line; the 500 kV Pichirropulli–Puerto Montt line (energised at 220 kV); the 500 kV Los Changos–Kimal line; the new 500 kV Changos–Nueva Crucero Encuentro and associated transmission network project; and the 2×220 kV Mataquito–Nueva Nirivilo–Nueva Cauquenes–Dichato–Hualqui line.
As of May 2022, 21 national and zonal transmission projects were under construction with a total investment of USD664 million and 644 km of line length. Of these, 78 per cent were line projects (USD520 million) and 22 per cent were substation projects (USD144 million). Majority of these projects are located in Metropolitana – O’Higgins, Los Lagos – Los Ríos and Atacama – Coquimbo regions.
Further, as of May 2022, 27 transmission projects with a total line length of 771 km and an investment value of USD761 million were in the process of receiving environmental clearance from Sistema de Evaluación de Impacto Ambiental (SEIA).
In the recently published Informe Técnico Final Plan de Expansión Anual de Transmisión Año 2021 or Final Technical Report Annual Transmission Expansion Plan Year 2021 of CNE, 44 transmission projects have been announced/proposed with a total investment requirement of USD538 million for the period 2026–31. This includes 11 national projects entailing a total investment of USD290 million. Of this, eight are expansions of existing facilities, requiring approximately USD39 million, and three correspond to new works, requiring approximately USD251 million.
Regarding zonal transmission systems, 33 expansion works are presented, entailing a cumulative investment of USD248 million. Of these, 23 are expansions of existing facilities, for an amount of approximately USD98 million, and 10 correspond to new works, for a total of approximately USD151 million.
It is estimated that the works contained in the 2021 plan report will begin construction in the first half of 2024.
Figure 3: Proposed transmission projects and investment under CNE’s 2021 transmission plan
Outlook
As per the energy ministry’s analysis, currently, electricity contributes close to 25 per cent of the total energy supply only. However, projections show that its share will exceed 50 per cent in 2050, in line with the growth in electricity demand—which will be mainly driven by electrification of transport, heating, air conditioning and thermal processes, among others. As per the estimates of CNE, the power demand in Chile will grow (under the medium growth scenario) at a compound annual growth rate (CAGR) of 2.75 per cent from 77.7 TWh in 2022 to 130 TWh in 2041.
Given this growth rate, achieving the 2050 energy transition target looks very optimistic.
However, as per industry experts, the country’s electricity system will not be ready by 2025 to allow the withdrawal of coal-fired power plants as the traditional structure of the existing power grid limits the accommodation of high level of intermittent generation from renewable projects. Therefore, it is suggested that legislators place decarbonisation in a time horizon that allows the safe operation of the electrical system as decarbonisation cannot simply be achieved by establishing goals and leaving the market to adapt to the demands of the electrical system. Thus, the government must also take charge of making this immense challenge feasible.
