The installed renewable capacity in Chile grew at a CAGR of 7% during the period 2011-18 and is expected to continue the growth momentum over the forecast period. During the last decade, the government has started to lay emphasis on way to capitalize on other domestic resources, namely strong coastal winds, strong solar irradiation, and tectonic plate conditions that have made geothermal power-generation viable in some areas. Additionally, the declining cost of solar modules and wind turbines is expected to drive the market. However, the technological limitation such as strong dependence on prevailing weather condition is likely to restrain the growth of the market over the forecast period.
- The solar energy sector dominated owing to large number of power plant projects present and being developed in the country.
- The government effort to reduce the carbon emission by shutting down the thermal power generation sources and increasing the renewable generation is likely to provide an opportunity for the growth of the market.
- According to the Project Management Unit (PMU) of the Ministry of Energy, 3,072 MW (35 power plants) were under construction at September 2019, of which 96.7% correspond to renewable energies, with the following breakdown of the total under construction: 26.6% hydroelectric power plants larger than 20 MW; 37.9% of wind power plants; 31.8% of solar power plants and 0.5% to mini-hydro plants. A rapid shift away from fossil sources of power generation toward cleaner energy has been aided by the presence of a liberalized power market and strong policy support for non-large hydro renewables.
Key Market Trends
Solar Energy to Dominate the Market
- The installed solar capacity grew from 2 MW in 2012 to 2137 MW in 2018. Furthermore, the installed capacity of solar energy in total power generation in 2013 stood at 0.06%, increasing to 9.8% in 2018. Additionally, according to a study by the Chilean Association of Power Generators, by 2030 solar power is expected to reach 30% of total installed capacity, becoming the country's first source of electrical energy.
- In June 2019, the Chilean government and the country's four largest electric utilities company AES Gener, Colbun, Enel and Engie reached a voluntary agreement to phase out their coal units, which will end no later than 2040. The phasing out of coal units will be carried out in the schedule, and it covers phasing out of the first 1,047 MW of the eight oldest plants by 2024. In June 2019, the Tocopilla coal power plant was phased out and 158 MW Tarapacá power plant in Iquique was also phased out in December 2019.
- The shutdown of the coal power plants is expected to create additional demand for the installation of new capacity, which in turn is expected to drive the demand of solar power plants across the country during the forecast period.
- The decreasing cost of solar module clubbed with phase out of coal power plant and supportive government policies are likely to foster the growth of the solar power in the country.
Increasing Demand for Renewable Energy to Drive the Marekt
- Share of the renewables has increased from 8.7% to 19.4% in the country’s electricity generation during 2012-2018. The sector is mainly driven by the growth of the solar and wind power sector. During the coming years, solar PV technology is expected to account for the largest share in new renewable capacity addition. As of September 2019, there are about over 979 MW of solar PV projects under construction, which is expected to increase the solar PV capacity by 25% compared to 2018.
- The solar industry has cut costs dramatically in the past few years through economies of scale. As the market was flooded with equipment, prices plummeted, and the cost of solar panels has been dropping exponentially.
- As of 2018, solar photovoltaic (PV) modules are over 80% cheaper, than they were in 2009. The cost reductions are driven by continuous technological improvements, including higher solar PV module efficiencies. The overall decline in the solar PV system costs can also be attributed to the effective feed-in tariff programs in countries, such as Germany, etc.
- Furthermore, the declining cost of wind turbine is likely to boost the installation of renewable energy capacity across the country over the forecast period.
The Chile renewable energy market is fragmented. The key players in this market Acciona, S.A, JinkoSolar Holding Co., Ltd., Trina Solar Limited, Enel Green Power S.p.A, and First Solar, Inc.
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