Clean energy targets in Chile: 20/25 and the contribution of solar power

The president of Chile and the Ministry of Energy committed in 2013 to providing 20 percent of the country’s energy from renewable sources, such as solar power and wind farms, by 2025. They are encouraging the drive to renewables, and a new solar power plant – the largest in Latin America – is being constructed near the northern town of Copiapó.

The challenge

Chile is enjoying relatively strong economic growth. Its consequent need for energy to support its growth has led to an increase in the number of power plants and a surge in fossil fuel consumption, resulting in a substantial rise in Chile’s greenhouse gas emission. The country risks severe environmental problems in the future if it does not achieve a more sustainable energy policy, based on the creation and deployment of more renewables, such as solar power.

The initiative

In 2013, the Chilean government passed Law 20.698, also known as “Law 20/25” or the Non-Conventional Renewable Energy Law. It promotes a diversification of energy sources, and established the target for the country to generate 20 percent of its electricity from renewables by 2025. To foster market development, the Ministry of Energy has passed a promotion law that creates tax incentives for the use of solar collectors for water heating.

Latin America's first large-scale solar power plant is under way: Atacama-1. In order to encourage market development, the Ministry of Energy has implemented the following measures:

  • “To foster market development, the Ministry of Energy has passed a promotion law that creates tax incentives for the use of solar collectors for water heating. The net billing law governs the process by which surplus energy from small systems delivering up to 100 kilowatts for captive use is fed into the distribution network.” [1]
  • The “Solar energy for the production of electricity and heat” project supports the Chilean government in achieving their goals of reducing greenhouse gases and opening profitable market segments for the use of solar energy.

The public impact

The actual level of renewables in the electricity matrix is lagging heavily behind aspired goals. The target as per the law was for five percent of electricity to come from renewable energy sources by 2010, but at that time the actual figure was only 2 percent. It is projected that if the country continues on its current trajectory, by 2030 about 8.5 percent of electricity will be generated from renewable sources. However, by 2014 Chile had become Latin America’s leading solar power market.

What did and didn't work

All cases in our Public Impact Observatory have been evaluated for performance against the elements of our Public Impact Fundamentals.

Legitimacy

Public Confidence Weak

At the time of the passing of the 20/25 Law in 2013, the president was Sebastian Piñera, who had become a very unpopular figure. The same is true of President Bachelet, who has approval ratings of 24%.

However, the general public in Chile and renewable energy experts recognise the value of pursuing the objectives of the 20/25 Law.

Stakeholder Engagement Good

The main internal stakeholder is Chile’s Department of Energy. Of the external stakeholders, the Spanish company Abengoa (the official sustainable energy partner of Manchester United) is the main actor from the private sector. It is engaged in building Atacama-1, a solar tower 200 metres in height, which will soon become the continent’s largest source of solar energy. Google’s upcoming plans will also contribute to the country's clean energy future: it is “reportedly planning on building its first Latin American data centre in Chile, with its Quilicura headquarters expected to be fully powered with solar energy come 2017.” [2]

Political Commitment Good

The Chilean government has made several reforms in the regulatory framework that oversees renewable energy projects and the participation of clean energy in the electricity market. There is some scepticism, though. “Moreover, the government seems to lack the political will for implementation and faces a highly contested political battlefield, illustrated by the fact that in April 2012 Jorge Bunster became the fifth minister of energy since the founding of the ministry in 2010.” [3]

Policy

Clear Objectives Good

The clear and memorable main objective was summarised as 20/25: 20 percent of energy supplied by renewables by 2025.

There are other objectives that support the move towards cleaner energy:

  • The National Energy Strategy 2012-2030, which was launched in March 2012, places the promotion of clean energy as its second highest priority.
  • The 2014-2018 Energy Programme aims at achieving a 45% renewable energy share for new electric capacity installed between 2014 and 2025.

Evidence Strong

Relevant scientific research has been commissioned by the Chilean Ministry of Energy. The UN Economic Commission for Latin America and the Caribbean (ECLAC) and the Global Energy Research Institute (GERI) have measured the potential of renewable sources in Chile at an estimated 10,000MW (the required amount to achieve 20 percent is estimated at 40,000MW).

In 2001, Chile launched the Programme for Rural Electrification with Renewable Energy in collaboration with the Global Environment Facility (GEF) and the UN Development Programme. “By its conclusion in 2012 the programme had resulted in pilot projects, over 6,000 individual PV systems ..., a capacity building program for small business and cooperatives on ... renewable energy systems, and over 44 standards issued for solar PV, micro-wind, micro-hydro and hybrid systems. The findings from this programme were used to inform the Solar Energy Policy.” [4]

Feasibility Fair

The research studies indicate the technical feasibility of obtaining sufficient solar power to meet the 20 percent target, and to exceed it. Chile has 400 megawatts (MW) of solar photovoltaic (PV) generation under construction in Aracama-1, more than any other nation in Latin America.

The 20/25 initiative also has legal force behind it and small changes in the relevant regulations have facilitated the process. However, due to intense competition in the electricity pricing market, there are doubts over its financial feasibility. “Unfortunately, the financial markets in Chile are not favourable for renewable energies. This is due to the lack of understanding about nonconventional sources, guarantee requirements, doubts about long-term profitability, the unpredictable prices of renewable electricity in the spot market, unattractively low prices in power purchasing agreements, and the availability of alternatives in the conventional sector with lower risks and higher profitability.” [5]

Action

Measurement Good

The are clear, well-defined metrics for the project:

  • The amount of energy produced through renewable sources as a percentage of total power generation.
  • The amount produced through specific clean energy sources, e.g. solar energy.
  • These amounts set against the schedule for achieving the 20 percent target.

The project continues to take measurements of solar radiation with high-precision equipment. This solar roof register, the first in Latin America, is supplemented by a publicly accessible calculator for working out cost efficiency. Thus it is also used to calculate the energy efficiency and sustainability.

Alignment Fair

The Chilean Ministry of Energy is the main actor in the drive to renewables. External NGOs have cooperated in research and development, e.g., the UN through ECLAC and UNDP, the GEF and the GERI, all playing an important role in the achievement of objectives of 20/25 and latterly 20/20. Private sector actors like the Spanish firm Abengoa are contributing by building the necessary sustainable power plants.