Chile Doubles Renewable-Energy Goal to 20% to Spark New Projects

Chile doubled its renewable-energy target and may solicit competitive bids in 2015 for contracts to sell electricity as the South American nation seeks to spur investment in new power plants and curb its reliance on imported fossil fuels.

Utilities must get 20 percent of their power from renewable sources by 2025. That will work out to 6,500 megawatts of capacity from projects including solar farms and small hydroelectric dams, up from about 1,000 megawatts now, according to Maria Paz de la Cruz, director of Chile’s Renewable Energy Center, a government agency. President Sebastian Pinera signed the new target into law today.

Chile is already exceeding its current 5 percent goal, slowing demand for new renewable-power plants, said Rodrigo Fernandes, an engineer at the Santiago-based electricity consulting company Energetica SA.

“We have a surplus of renewable energy,” he said in an interview today.

Chile previously required utilities that own at least 200 megawatts of capacity to get 5 percent of their energy from renewable sources, rising to 10 percent in 2024, Lilian Alves, a Sao Paulo analyst at Bloomberg New Energy Finance, said today in a telephone interview. Chile produced about 8 percent of its energy from renewable sources last year.

Cheaper Credits

Utilities that don’t meet their renewable-energy quotas must buy credits from developers or power producers with an excess, Fernandes said. The clean-power surplus may drive down the price of the credits to about $8 a megawatt hour this year from an average of $12 from 2010 through 2012.

If utilities aren’t meeting the new goals, the country may hold its first auction in 2015 for 10-year contracts to sell power from renewable-power plants, Cruz said. Power-purchase agreements will help developers get financing from banks.

The new target “is really good news for private developers,” Cruz said. “With the change in the law we have secured an amount of demand for this type of technology.”

More renewables will help Chile “become more independent from imported fossil fuels,” which provide 80 percent of the nation’s energy, Cruz said. “We’re trying to secure a clean energy matrix for the future.”

Chile also published its Electrical Concessions Law today that will cut the time developers have to wait to get permits to connect projects to the grid to 150 days from 700 days, Cruz said.