With an aim to support the country’s decarbonisation plans, Chile has enacted a new Law 21505 to promote electrical energy storage and electromobility. It is based on the Proyecto de Ley Sobre Promoción del Almacenamiento y La Electromovilidad or the Electricity Storage and Electromobility Promotion Bill, which received approval from the Senate in October 2022 and has recently been enacted into law. It highlights the following measures: participation of pure storage systems in the electricity market, enabling the connection of infrastructure that combines generation and consumption, temporarily lowering the annual tax for electric and clean vehicle permits, and authorising new business models for electromobility.
The energy sector reportedly contributes about 77 per cent of the country’s greenhouse gas (GHG) emissions, the majority (70 per cent) of which come from fossil fuels, which are imported. Considering this, cleaning the electricity generation matrix and promoting electromobility and energy efficiency are among the thematic areas identified by the country to achieve carbon neutrality by 2050. Chile has 2,400 GW of renewable energy potential, about 80 times its current installed capacity, offering promising opportunity to increase clean energy generation in the country. The large-scale integration of renewable energy into the grid requires the establishment of utility-scale energy storage systems considering its intermittent generation nature and the conventional structure of the existing grid. Energy storage allows management of the variability of solar and wind power, and will also help the country to retire its coal-fired power plants as scheduled.
As per the estimates of Balance Nacional de Energía (BNE) or National Energy Balance (BNE), the transport sector accounts for one third of the final energy consumption in Chile, and of this, 99 per cent of the energy is based on petroleum derivatives, which produce close to a quarter of the country’s GHG emissions and have a significant impact on pollution in urban concentrations. This raises the urgent need to implement public policies aimed at the efficient use of energy in the transport sector to reduce the environmental impact and Chile’s dependence on imported fossil fuels. Keeping this in mind, the country aims to have 60 per cent of the private and commercial fleet electric by 2050. Presently, the high cost of electric vehicles (EVs) affects their popularity among users. In 2020, only 236 EVs, or 0.09 per cent of total car sales, were sold in Chile.
In addition, the country is working on combining electromobility and energy storage technologies to improve the efficiency of the grid. Batteries of EVs can be used to store electricity and inject power into the grid as and when required.
Electricity Storage and Electromobility Promotion Law
The bill proposal was submitted by the Ministry of Energy in December 2021 with the aim to expand the participation of renewable energies in the electrical matrix by promoting technologies for their storage. This will allow the acceleration of the retirement of coal-fired power plants, providing greater security to the electrical system and supporting the decarbonisation of the energy matrix. It also aims to enable the efficient connection of renewable generation and consumption systems to the electricity system, and promote the sale of electric and clean vehicles.
It amends various articles of the ley General de Servicios Eléctricos or General Law of Electricity Services to allow pure storage systems (not associated with power plants) to sell power in the short-term electricity market of the national electric system.
It amends the definition of generation-consumption in Article 25 of the General Law of Electricity Services. Under this, any manufacturing facility (such as hydrogen production or water desalination) with its own power generation plant based on renewables will be charged for their net power consumption from the grid. The power project should be connected to the electrical system through a single connection point for power withdrawal and injection into the grid. It aims to offer greater transparency for the development of infrastructure that has its own generation capacity.
With regard to electromobility, the law offers monetary incentives to electric and hybrid vehicles with external electric recharging as well as for others qualified as zero emission vehicles by the exempt resolution of the Ministry of Energy, whose year of manufacture corresponds to the publication of the law, to subsequent years, or to the year prior to it. The following incentives are proposed for these vehicles:
- Temporary reduction in the annual tax for circulation permits
The annual tax for circulation permits depends on the valuation of the vehicles. Given that the valuation of these vehicles is on an average double that of internal combustion engine vehicles, their tax liability is around 65 per cent higher than that of conventional vehicles. For this reason, a transitory reduction in their annual tax liability has been introduced under the new law to keep their cost similar to that of equivalent conventional vehicles. The rebate percentage applies for a period of eight years.
For the first two years, there is a total exemption from the annual tax (counted from February 1, 2023), and then, for the next six years there will be a gradual increase in the annual tax: 25 per cent during the third and fourth years; 50 per cent for the next two years, 75 per cent for the next two years and 100 per cent from ninth year onwards.
- Enabling new business models for electromobility
The initiative enables EVs to participate in the electricity market as storage equipment, receiving remuneration for injecting energy into the grid, and the use of their batteries as stationary storage equipment for the same purpose. This will increase the profitability of EVs.
Chile is also working on other legislations as part of its strategy to achieve carbon neutrality by 2050. These include 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. Chile’s multidirectional approach to achieve its decarbonisation target has been appreciated by the various stakeholders.