Chile has been formulating policies and a legal framework to achieve its 2030 target of meeting 70 per cent of its energy consumption from renewable energy sources (RES) and the 2050 carbon neutrality goal. The latter is a legally binding target under the Ley Marco de Cambio Climático, or the Framework Law on Climate Change of 2022. The country’s Energy Efficiency Law (Law 21.305/2021) aims at reducing energy consumption across the power, transport, buildings and industry sectors, and includes a coal phase-out plan by 2040. To support the changing energy mix and transition process, the Energy Storage and Electromobility Law (Law 21.505/2022) promotes energy storage as well as the sale of electric vehicles, enabling them to participate in the electricity market as storage systems. The government has recognised that the electricity sector, particularly transmission infrastructure, is key to achieving its carbon neutrality goal.
Accelerating electricity transmission infrastructure development has become imperative, given the systemic grid deficiencies in dealing with the dynamic changes, such as rapid RES growth in the north, the impact of coal plant retirements, network saturation and curtailment. These challenges have led to a range of consequences, including the bankruptcy of generating companies and the increase in electricity tariffs of up to 40 per cent for end consumers.
Recognising the importance of a strong transmission network to support large-scale RES integration and the growing electrification of consumption (including high demand from emerging consumers like data centres), in December 2024, the Chilean president promulgated the Ley de Transición Energética, or the Energy Transition Law (Law 21.721). The legislation aims to position electricity transmission as an enabling sector in Chile’s decarbonisation process and seeks to accelerate the participation of RES and clean energy in the system.
The law provides for the transfer of bidding processes of expansion works to owners, streamlines the administrative bidding process, introduces a mechanism to develop necessary and urgent works outside the transmission planning process (currently approved by the Comisión Nacional de Energía [CNE] or the National Energy Commission and promulgated by the Ministry of Energy), and enhances zonal network planning and financing.
These measures are expected to expedite transmission development, which is necessary as the penetration of variable RES has been increasing rapidly. In 2023, RES accounted for approximately 32 per cent of energy generation and 71 per cent of instantaneous power participation during peak RES penetration, a trend that is expected to deepen in the coming years. According to the country’s grid operator and planner Coordinador Eléctrico Nacional (CEN), or the National Electricity Coordinator, its updated “Roadmap for an Accelerated Energy Transition” (December 2024) outlines that operating the electrical system with 100 per cent RES energy starting from 2030 requires establishing enabling conditions. These include regulatory reforms, decisions and actions to prepare the electricity grid for the integration of new technologies to manage RES variability, along with the necessary investments in RES capacity, transmission and storage facilities.
Recently, in December 2024, CNE approved the Informe Técnico Preliminar (ITP), or the Preliminary Technical Report of the Transmission Expansion Plan 2024 (prepared by CEN), comprising 34 works with an estimated global investment of USD2,259 million, making it one of the country’s high-value transmission plans approved in recent years. To compare, the approved ITP 2023 contained 41 works worth USD464 million and the subsequent Informe Técnico Final Plan (ITF), or the Final Technical Report (ITF) 2023, which included projects to be allocated to developers through a bidding process coordinated by CEN, contained 48 works worth USD441 million. The high value is mainly attributed to the inclusion of a high voltage direct current (HVDC) system (Entre Ríos–Lo Aguirre) in ITP 2024. The only other HVDC project under development in Chile is the Kimal–Lo Aguirre HVDC, which was proposed in the 2018 transmission expansion plan, awarded in 2021, and is expected to be commissioned in 2030.
Parallelly, CEN also started its 2025 transmission planning process by publishing the Diagnóstico del Uso Esperado del Sistema de Transmisión, or the Diagnosis of the Expected Use of the Transmission System, in November 2024, followed by the Propuesta Final de Expansion la Transmison 2025 (PET 2025), or the Final Expansion Proposal, in January 2025. Under this, CEN has proposed 39 transmission projects with a reference value of USD708 million.
This article presents the key highlights of the new law as well as an update on Chile’s future transmission plans…
Energy Transition Law: Key highlights
The Energy Transition Law modifies the Ley General de Servicios Eléctricos (LGSE), or the General Law of Electric Services, in the transmission field to promote efficient infrastructure development, competition and energy storage in the electricity market. Under the law, the amendments to the LGSE can be divided into four broad categories which come along with five transitionary articles. The first transitional article provides for the Ministry of Energy to modify or issue regulations for the implementation of the law within one year of coming into force. The fourth transitional article clarifies that the law would not impact the bidding process for expansion works from previous transmission plans whose call for tenders had been announced by CEN. Further, the other pending bidding processes must be announced by the owners within nine months from the publication of the law. The other three transitional articles, along with the applicable amendments, are as follows:
Necessary and urgent works to be excluded from the planning process: The amendment incorporates the new Article 91° bis to introduce a mechanism for carrying out expansion works (both new and necessary) that are urgent for the electrical system, which should not be subject to the transmission planning process, but rather to a more expeditious one. The initiation of this regulated procedure requires approval from CEN, CNE and the Ministry of Energy. The law fixes a maximum threshold for the valuation of all works that can be excluded from the transmission planning process at 10 per cent of the average investment value (VI) of the last five transmission plans, and up to 5 per cent may be allocated to new works. The objective is to simplify the procedure and prioritise the acceleration of necessary and urgent transmission expansion projects. Under the current planning process, it takes about three years for transmission works to enter into the tendering process after it is first proposed. This amendment will help speed up the operationalisation of works since they could be tendered sooner.
The fifth transitory article provides for a special reserve for works in the Ñuble region during the first five years from the publication of the law, where an additional 5 per cent may be considered above the 10 per cent limit. This supports the Ministry of Energy’s Ñuble Special Plan, which aims to resolve the electrical transmission issues and specific production needs of the region.
Tendering of obras de ampliación (OOAAs), or addition works to be carried out by owners: Articles 95 and 96 of the LGSE have been amended to assign the risks and responsibilities of tendering the expansion works to transmission owner companies, with the latter being responsible for the supervision and proper work execution until it is operationalised. CEN will be responsible for supervising the bidding process to protect competition. Indexation formulas will be incorporated for the awarded investment value of the expansion works. This amendment seeks to address the poor performance in tenders, streamline the administrative tendering process, and reduce associated costs as well as assign risk of the bidding process to the agents best positioned to manage it. For instance, the status of the two 2022-23 bidding processes conducted in 2023 reveals that the expansion works (OOAA) show a greater difference between the reference and awarded values compared to obras nuevas (OONN) (new works). 50 per cent of OONNs were awarded at a value lower than the reference compared to only 11 per cent in the case of OOAAs.
The third transitional article states that the owner of the expansion works awarded on the date of the law’s entry into force, whose contract has been terminated early, will be governed by the new rules of Article 95°.
Review mechanism for VI of expansion works: In case of early termination of the contract awarded for the execution of extension works, the owner would be responsible for its timely implementation either by taking immediate possession of the works or re-tendering it. The owner may request a VI revision, according to the mechanism introduced in Article 99°. The regulatory procedure for the mechanism would be established and governed by the CNE. The latter may request a technical report from CEN on the physical and financial progress of the work.
Until the said regulation is issued, the second transitional article lays out a transitional mechanism for expansion works awarded on the date of entry into force of the law. Under this, the owner must submit an application containing the revised VI of the works and the calculation methodology with supporting documents. The establishment of the new VI depends on the reasons for the request. In case of modification in technical characteristics, the additional VI could be up to 20 per cent of the allocated VI. In other cases, the limit would be up to the allocated VI weighted by the consumer price index between the dates of the award of the work and the application for revision. There would be no limit on higher costs arising from delays in works on instructions from CEN due to requirements of the electrical system.
This amendment provides greater certainty about the execution of expansion works and allows the actual construction costs to be reflected, thus preventing them from being halted or abandoned in the future. It addresses situations of expansion works that are currently paralysed. CEN’s Competition Monitoring Report in the Electricity Market 2023 shows that there was no progress on 33 extension works, including 26 works that involved a review of the awarded VI and re-tendering.
Zonal transmission system works for small distributed generation facilities (PMGD): The law amends Articles 77, 87, 91, 114 and 115, authorising PMGD and energy storage systems to propose works in the zonal transmission system. It establishes the requirement of guarantees to propose zonal transmission works, and infrastructure owners must contribute to the financing of such works. It provides for the regulation of mechanisms for determining payment based on use, installed capacity and other criteria. This will bring about a paradigm shift in zonal network planning and financing, and enable the service and operation of PMGD and energy storage systems connected to the distribution networks.
Future plans
According to CEN’s diagnosis report, Chile’s power demand is estimated to increase between 2.9 per cent and 3.7 per cent annually from 2024 to 2044, with the potential for up to 4.6 per cent annually when considering scenarios involving electromobility, electrification of heating and green hydrogen (H2V).
Note: High scenario incorporates electromobility and the electrification of heating; High scenario + H2V incorporates green hydrogen expansion
Source: Expansion Proposal for the 2025 Electrical Transmission System, CEN; Global Transmission Report
This increase in electricity demand in the National Electric System is driven by the development of desalination plants, data centres and mining projects, particularly in the northern region. CEN’s recent studies have recommended increasing the network strength in the north by installing synchronous capacitors by 2030, given the expected retirement of thermal units. Further, to address network flexibility challenges, 2 GW of battery energy storage system (BESS) capacity with durations of six to eight hours by 2026 is recommended. The generation construction plans, based on a co-optimisation of transmission, generation and storage, indicate the need to develop at least 6.9 GW in additional long-duration BESS, particularly to support the expansion of solar capacity in the north and to minimise congestion resulting from the large amount of generation in that region.
ITP 2024
The CNE-approved ITP outlines 15 works for the national transmission system, amounting to approximately USD2,031 million. This includes seven new works worth USD1.91 billion and eight expansion works worth USD119 million. Some of the key new works include the 500 kV Lo Aguirre–Entre Ríos HVDC double circuit (D/C) line, and the 500 kV Nueva Chuquicamata–Miraje and 220 kV Tiquel–Las Delicias D/C lines. The expansion works include the installation of a ±400 MVA static synchronous compensator (STATCOM) at the 500 kV Polpaico substation.
Source: Informe Tecnico Prliminar Plan de Expansion Annual de Transmision Ano 2024, CEN; Global Transmission Report
For zonal transmission systems, ITP2023 details 19 works worth USD229 million, including seven new works (USD156 million) and 12 expansion works (USD73 million).
All ITP2023 projects are expected to commence construction in the first half of 2027.
Source: Informe Tecnico Prliminar Plan de Expansion Annual de Transmision Ano 2024, CEN; Global Transmission Report
Expansion Proposal for the 2025 Electrical Transmission System
CEN’s PET2025, which is based on a series of studies including the projection of electricity demand and generation works scenarios, includes 8 national projects worth USD459 million and 31 zonal projects worth USD249 million.
Source: Expansion Proposal for the 2025 Electrical Transmission System, CEN; Global Transmission Report
Source: Expansion Proposal for the 2025 Electrical Transmission System, CEN; Global Transmission Report
Conclusion
Chile is on the path to achieving its RES and carbon-neutrality goals. This is, however, contingent on identifying and relieving congested transmission networks, continued collaboration among all stakeholders and proactive investment. The timely and orderly implementation of the Energy Transition Law will help accelerate the expansion of the transmission system, unlock the country’s RES potential and ensure a sustanable energy future.
