SunPower Corp. will spend about $1.5 billion on solar farms in Chile as new rules for power auctions spur investment in the largest solar market in Latin America.
The San Jose, California-based company plans to have 1 gigawatt of Chilean solar farms in five years, increasing its presence in the country, Chief Executive Officer Tom Werner said.
“Chile is a strategic market for the company,” Werner said in a telephone interview Monday. “To build such a big solar capacity, we will participate in the energy auctions processes. Chile has phenomenal sunshine, and the economic environment is favorable.”
With a target of 20 percent of energy generation coming from renewables by 2025, President Michelle Bachelet’s government has stepped up to play a stronger role in the sector. Last year Chile introduced a system in which intermittent suppliers like wind and solar could sell power in specific time-blocks, increasing their ability to compete with traditional power plants.
Chile will install a record amount of renewable capacity this year, with 1.1 gigawatt of clean energy going online, including 680 megawatts from photovoltaic plants, according to Bloomberg New Energy Finance.
“Now growth will come from auctions. Chile alone will be responsible for half of new solar installations in Latin America this year,” said Adam James, solar analyst for Latin America at GTM Research.
Solar energy generation in Chile has soared in the past two years. In 2013, the country had almost no capacity. Now it has 546 megawatts installed and another 1.7 gigawatts under construction, according to government data.
SunPower built the 70-megawatt Salvador solar farm in Chile’s Atacama region. It will begin construction on a 100-megawatt project in the central region of the country by the end of the year to serve large power consumers, such as Chile’s mining companies.
The company is in talks with development and private banks to get financing. Solar panels for the new facilities will come from SunPower’s manufacturing plant in Mexico.
For the new installations, SunPower will focus on long-term power purchase agreements with distributors, according to Nam Nguyen, SunPower’s vice president of global power plants. Contracting directly with mining companies will also drive growth, while Chile’s spot market will have less activity in the next few years, she said.
The company will participate in Chile’s next energy auction, Werner said. Participants may submit bids until April 2016 and the winners will be announced the following month. In February, 38 companies expressed interest in the auction, according to New Energy Finance.
“Most South American solar is occurring in Chile, and most of it is focused on utility scale,” said Lilian Alves, an analyst based in Sao Paulo for New Energy Finance.