Chile is actively working towards achieving carbon neutrality by 2050, defined under the Ley Marco de Cambio Climático or Framework Law on Climate Change of 2022. Under this, the country has taken various regulatory steps with a focus on making renewable energy sources (RES) the key generation source, streamlining transmission network expansion, and promoting energy storage systems.

Chile’s Agenda Inicial para un Segundo Tiempo de la Transición Energética or Initial Agenda for a Second Stage of the Energy Transition aims to make RES the country’s main energy generation source. The Primer Tiempo de la transición energética or First Stage of the Energy Transition initiative, which focused on promoting RES, mainly solar photovoltaic and wind, resulted in an increased share of RES (including hydro) in the total generation mix from 40 per cent in 2014 to 58 per cent in 2022. This has further increased to 62 per cent as of October 2023 with a total installed capacity of 34,345 MW.

To enable further RES penetration, the country has planned to retire 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 thermal power plants (that are less than 30 years old as of December 31, 2025), and another that prohibits the injection of electricity from fossil fuels into the country’s national electric system from 2030.

Further, the political, regulatory and urgent works actions of the Second Stage agenda highlight the importance of a strong transmission network to support large-scale integration of RES projects. As part of this, Chile has announced the ‘Transición Energética: Transmisión como un sector habilitante’ or ‘Energy transition: Transmission as an enabling sector’ Bill, the purpose of which is to modify the Ley General de Servicios Eléctricos (LGSE) or General Law on Electricity Services (LGSE) to allow the transmission segment to present itself as an enabling sector for energy transition. It calls for the implementation of transmission projects that are timely and resilient, such that they adapt to temperature variations and are capable of transporting large volumes of RES power.

To further support the network expansion, in October 2023, Chile’s Comisión Nacional de Energía (CNE) or the National Energy Commission, through Exempt Resolution No. 478, published the Informe Técnico Definitivo del Plan Anual de Expansión de Transmisión del Sistema Eléctrico Nacional (SEN) or Definitive Technical Report of the Annual Transmission Expansion Plan for the National Electrical System for 2022. This report outlines 42 expansion works involving an estimated investment of $1,053 million. These works include 15 national projects valued at approximately $662 million and 27 regional works totalling around $391 million.

Additionally, in July 2023, the Ministerio de Energía or Ministry of Energy of Chile presented the draft Energy Transition Bill to the Comisión de Minería y Energía del Senado or Mining and Energy Commission of the Senate, with a focus on modifying the tariff revenue allocation mechanism, improving the transmission system, and promoting energy storage projects. This marks the beginning of the legislative processing of the bill by the Commission. A major focus of the bill is to expedite the establishment of enabling infrastructure, with a particular emphasis on the efficient development of electrical transmission works especially in the south-central regions. The bill also aims to support the tendering of storage systems in the northern region, with the projected operational timeline set for 2026. This initiative is expected to attract an investment of about $2 billion. The bill further proposes changes in the industrial organisation of the generation sector and suggests altering the tariff revenue allocation mechanism. The bill includes ‘congestion rent’, which aims to insure generators against short- and long-term issues like the eviction of regulated contracts and market concentration.

In 2023, Chile also enacted a new Law 21505 to promote energy storage and electromobility. 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.

Existing infrastructure

As one of the early adopters of electricity sector reforms, Chile’s electricity generation, transmission and distribution sectors are completely owned by private companies with the government retaining only a surveillance role and regulatory powers, especially over the determination of certain tariffs.

As of October 31, 2023, the total installed power generation capacity in the country reached 34,345 MW, of which 62 per cent was based on RES, and 38 per cent on conventional sources of energy. In 2022, the 350 MW Bocamina II thermal power plant, and units 14 and 15 of the Tocopilla thermal complex, with a total capacity of 268 MW, were closed.

Chile’s Sistema Eléctrico Nacional (SEN) or National Electric System includes Sistema Interconectado Central (SIC) and the Sistema Interconectado del Norte Grande (SING) (which are connected via a 500 kV line) along with two independent systems, Aysen electric system (including Port Aysen and Coyhaique), and the Magallanes electric system (including Punta Arenas, Port Porvenir and Port Natales). All these are coordinated by Coordinador Eléctrico Nacional (CEN).

As of November 2023, Chile had a total transmission line length of 31,284 km at the 110 kV to 500 kV voltage levels. Of the total installed capacity, 60 per cent of the line length was at the 220 kV level, 15 per cent was at 500 kV, and the rest was at low voltage levels.  In December 2022, AES Andes S.A. energised the country’s first 345 kV line.

Generation expansion

As per the estimates of CNE, the power demand in the country is likely to increase by 2.16 per cent to reach 77 TWh by 2023 and 93 TWh by 2032. To meet the growing electricity demand, under its latest Plan de Obras de Generación 2022, CEN plans to add over 17 GW of generation capacity, which will be based entirely on RES. This includes 47.5 per cent based on wind, 21.3 per cent on solar [photovoltaic (PV) and concentrated solar power (CSP)], 17.2 per cent on battery storge capacity and 10.5 per cent on synchronous capacitor projects. The proposed capacity also includes the installation of 215 MW of geothermal and 400 MW of pumped storage capacity. In addition, about 3.7 GW of thermal capacity will be retired by 2029.

As per the estimates of the energy ministry, as of September 2023, 85 plants (based entirely on RES) with a cumulative capacity of 4,352 MW were under construction in the country with a total investment of $6.3 billion.

Transmission expansion

As per the mandate of LGSE, CNE is required to carry out a process of transmission planning annually, which must consider, at least, a horizon of 20 years. Under this it has recently approved the Annual Transmission Expansion Plan 2022, which contains the proposals presented by the promoters of transmission expansion projects, the CEN expansion proposal, and CEN’s own analysis-based projects.

For the Sistema Nacional de Transmisión or National Transmission System, the report includes 15 projects, of which 10 are expansions of existing facilities with an investment of $90 million, and five are new projects of $572 million. For the Zonal Transmission System, 27 expansion works are presented, of which 12 are expansions of existing facilities, with a budget of roughly $58 million, and 15 are new works amounting to approximately $333 million. Construction of these works is estimated to commence in the first half of 2025.

Key planned national level projects are the 2×500 kV Digüeñes–Nueva Pichirropulli line, with a reference investment of $345 million; the 2×500 kV Entre Ríos–Digüeñes line, with a reference investment of $102 million; the 500 kV Digüeñes substation ($73 million); the 220 kV Manuel Rodriguez substation ($16 million); and installation of a new flow control system for sections of the existing 220 kV Las Palmas–Centella line ($35 million). The national expansion projects include the laying of the second circuit of the 2×500 kV Ancoa–Charrúa line, with a reference investment of $60 million (to increase transmission capacity in the southern zone of the National Electric System to at least 1,700 MVA); and expansion of the 220 kV Kimal substation, with an investment of $8.1 million [to facilitate the connection of the second 2×220 kV link associated with the New Kimal–Lo Aguirre high voltage direct current (HVDC) line project].

Conclusion

Overall, Chile has been taking various steps to strengthen the electricity sector, with an aim to have a more detailed path towards its decarbonisation plans. Timely implementation of these initiatives will help the country maintain a smoother energy transition.