Company That Offered Cheapest Solar Sees Prices Falling More

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  • Solarpack offered record low price in Chile auction in August
  • ‘None of the fundamentals have changed’ in market since then

The company that sold solar power at a record low in Chile in August sees prices going down even more at the country’s next energy auction in October. 

“There is an enormous amount of competition in this market and none of the fundamentals have changed from the previous auction,” Inigo Malo, Solarpack Corp. Tecnologica’s manager for the Andean region, said in an interview in Santiago. “Prices will possibly be lower.”

The Spanish developer won contracts in August to sell solar power for $29.10 a megawatt-hour, at the time the cheapest in the world. Since then panel prices have continued to decline while the technology has become more efficient. A September auction in Abu Dhabi set a new record of $24.20.

Solarpack expects to close financing in 2018 for a 120-megawatt solar farm in Chile’s Tarapaca region. The project should be finished by 2021, when Solarpack will have to start sending energy into the grid.

“The financial model we proposed at the auction is still completely viable,” Malo said. “The project remains viable and none of the variables that could put it in danger have changed.”

Chile awarded contracts for a total of 12,430 gigawatt-hours a year at the August auction, at an average price of $47.59 a megawatt-hour. That was 40 percent cheaper than the prior event in 2015.

The results changed the face of the Chilean energy market and took people by surprise, even government officials. The bids also raised concerns that electricity generators may struggle to finance their projects, but Solarpack says banks trust them and low prices are here to stay.

“We knew banks were comfortable with this when we made the offer,” Malo said. “We have kept talking with banks after this and none of these conversations have changed their perception.”

Renewable energy company’s ability to deliver low-cost energy in Chile depends in part on the cost of components continuing to decline. It also relies on a government project to build two transmission lines that will link the country’s north, where most of the renewable energy plants are located, and central Chile, where most of the consumers live. The lines should alleviate congestion in the northern grid, where sometimes spot prices reach zero. 

Transmission Delays

One of the projects, the 753-kilometer (458-mile) Cardones-Polpaico line faces a three-month delay, builder InterChile said in February. The Chilean Renewable Energy Association estimates that delays may eventually stretch to a year, and Energy Minister Andres Rebolledo said in January that finishing the line on time will be “a challenge.”

Developers are watching carefully.

“We’re concerned about the delays in building the transmission line because as generators we had counted on a strong transmission system,” Malo said. “All this information suggests the transmission line will be delayed, but we don’t think it will go beyond 2021.”

Solarpack sold in September an 81 percent stake in four existing solar farms in Chile and Peru to the private investment company Ardian France SA. Solarpack is open to repeating the model with other projects as it prepares to build 125 megawatts of power plants over the next six months. 

“Solarpack’s plan is to develop, finance, build and operate,” Malo said. “We are not talking to anyone, but companies have approached us asking how we can collaborate and they think these prices are viable.”

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