Solar Energy Is Cheapest Source of Power in Chile, Deutsche Says

  • Country expected to install 1 gigawatt of solar this year
  • Solar and wind offered lowest prices in October energy auction

Solar power is now the cheapest source of electricity in Chile, according to Deutsche Bank AG.

That conclusion is based on the results of an energy auction in October when renewable projects offered the lowest prices and won contracts to supply 1,200 gigawatt-hours of power, Deutsche Bank analyst Vishal Shah said in a report Tuesday.

That may lead to more than 1 gigawatt of new solar capacity installed in Chile this year, Shah said. It will help the country reach a target set in 2014 by Chile’s government of having 45 percent of its installed electric capacity powered by renewable sources.

Three solar farms offered to sell power for $65 to $68 a megawatt-hour in the auction, Shah said. Two wind farms bid $79 a megawatt-hour, and a solar-thermal plant with storage offered power at $97. Coal power was offered for $85 in the same event.

In Chile’s power auctions, developers offer to provide a certain amount of capacity at a specific price, without saying what type of power plant they’re planning to build. Bids are listed from cheapest to most expensive, and distribution companies select the lowest-cost proposals available until reaching their target capacity. Shah’s report is based on information compiled from the participants.

Thirty-one companies participated in the Oct. 23 event and the average price for winning bids was $79.30 a megawatt-hour, 40 percent less than a comparable auction in 2013. The power plants must go into operation by 2017. Renewable-energy projects won every contract.

Transmission Lines

While demand for solar power in Chile will remain strong, growth may be hindered by limited access to transmission lines. Shah forecasts solar installations will decline by 50 percent to 500 megawatts in 2016 and then slip to 400 megawatts in 2017.

“All the best spaces for solar projects have generally been already taken away,” he said. “Chile has approved 2.1 gigawatts of projects, but it does not have any place to put them in.”