Considering Chile’s high level of solar irradiation, the country has long been one of those with the greatest potential for solar development.
Last year, R&D Manager for Chile’s Renewable Energies and Energy Storage Trade Association, Darío Morales, told PV Tech Premium that due to climatic conditions providing an almost ideal environment for solar PV generation, solar plants installed in northern Chile will produce “30%-35%” more energy than the same project built in southern Spain.
The Chilean government recently provided support for growth in Chile’s solar industry with the Small Means of Distributed Generation Program (PMGD), which promotes new small-scale projects. The PMGD program stipulates that projects with generation capacity not exceeding 9MW can automatically connect to the grid, will not be curtailed, and can also get reduced transmission rates.
The PMGD program aims to encourage new small-scale projects, locating generation at points of consumption, contributing to steady growth in Chile’s solar installed capacity in recent years. In July 2021, Chile’s cumulative installed capacity reached 3.7GW, which almost doubled to 7.3GW by July 2023.
Therefore, the next step for Chile’s solar industry is finding ways to encourage a large increase in installations at utility scale, which requires major investment. The International Energy Agency reported that $150 billion is needed in renewable energy investment across Latin America and the Caribbean through 2030, and some firms have started committing parts of that money.
In October this year, France independent power producer Sonnedix made a significant investment in Chile solar with its over $500 million acquisition of a 416MW project portfolio from Enel and Arcadia Generación Solar. However, these operational projects represent a transfer of existing assets rather than new builds, which Sonnedix may leverage as a springboard for long-term plans in the Chilean market.
A Series of Acquisitions
Sonnedix’s Director of Development for the Americas and Country Manager for Chile, Daniel Garrido, told PV Tech Premium “Chile is an important market for Sonnedix” and “acquiring Arcadia Generación was an opportunity to quickly expand our footprint while complementing our existing portfolio. In fact, this is the largest acquisition of operating assets we have made globally to date.”
Garrido pointed out the deal takes Sonnedix over 1GW of operational capacity in Chile. Acquiring operational projects rather than those in early-stage development provided an instant return for the company. Sonnedix has taken an unblanketed approach to expanding its Chilean portfolio, keen to invest in projects with long-term potential in the jurisdiction where solar growth has been impressive, generating immediate rewards.
In fact, in just the last six months, Opdenergy and Enel Green Power have made progress on PPAs and greenfield projects in Chile’s renewable energy industry, where interest has heightened recently.
Garrido explained “Chile has a very favorable operating environment with a regulatory framework and culture that is both business friendly as well as highly supportive of the energy transition,” pointing to a range of factors encouraging Sonnedix’s investments in Chile.
“With the Arcadia portfolio acquisition, we have cemented Sonnedix as a relevant player. We are working to transform around 1.5GW of wind, solar and storage projects to provide Chilean homes with cleaner, more reliable and more affordable power.”
However, the rapid expansion of renewable energy projects poses a challenge for both Chile’s grid network and the capability of grid infrastructure to meet the needs of the rapidly transforming generation mix. Currently, Chile sees over 2,000 hours of zero spot price annually, where generation exceeds what is required to meet national demand, limiting the efficacy of new generation facilities, particularly in the burgeoning realm of renewable additions.
Energy Storage and Grid Resilience
With the Chilean government planning to close all coal plants before 2040, a rapid shift in grid infrastructure is required for Chile. A July 2022 report from Wärtsilä stated that for Chile to meet its energy demands without utilizing coal through 2040, 21.8GW of solar capacity must come online alongside 3.3GW of energy storage deployment.
Some battery developers have become more active in pursuing projects in Chile’s market, with 12 slated to come online this year totaling 1.3GW. With 85 projects in development in Chile totaling 6.4GW, although not all of this capacity will materialize in the short-term, the swift growth is encouraging. For example, earlier this year AES Andes brought a 180MW solar-plus-storage plant online in Chile.
“As more and more generation comes from renewable sources, energy storage can provide flexibility to the grid which is critical for grid reliability and resiliency,” said Garrido. “Sonnedix has experience operating battery storage systems and we are actively assessing opportunities in this space presently.”
While Sonnedix has been active with storage, much of this work has been done alongside wind rather than solar generation. Last month, Sonnedix submitted the Environmental Impact Assessment for its 92MW Carica Wind Farm with storage, representing a $290 million investment. This demonstrates the company’s commitment to investment in Chile’s grid, and not simply participation in some form of renewable generation.
Garrido added “We support consolidating the transmission system as we see this as the right approach to eliminate market distortions. We look forward to working with stakeholders to massively install storage systems and ensure the grid is prepared and stabilized to enable Chile to achieve its goals.”
Diversified Portfolio
This approach of investing across a range of technologies is aimed at strengthening and reshaping Chile’s grid, also reflecting what Garrido referred to as Sonnedix’s pledge in Chile to establish “a diversified portfolio”.
Garrido explained “Since 2015, we have been rapidly expanding our footprint in Chile, diversifying our portfolio to take full advantage of Chile’s tremendous scale and potential.”
“In October 2022, we acquired Arco Energy adding wind assets to our solar portfolio and kicking-off our hybrid journey in Chile. This diversification is key as a diversified portfolio enables us to better meet customer needs, tackle today’s energy challenges, addressing affordability, reliability, security and flexibility of power.”
The Arco Energy deal added 290MW of new renewable capacity to Sonnedix’s portfolio which, together with its other Chilean ventures, showcases the breadth of projects. The Arco Energy acquisition provides an example of fully acquiring an independent power producer, while deals for the Arcadia Generación Solar and Enel portfolios exemplify acquiring a piece of a larger corporate structure.
Aside from these acquisitions, greenfield projects like the Carica Wind Farm with Storage demonstrate the range of Sonnedix’s activities in Chile, and that its scope of operations is fitting for a country attempting a rapid overhaul of its energy makeup.
In 2021, Chile saw 45.7TWh of fossil fuel generation, with 25.7TWh coming from coal specifically. The Chilean government aims to reduce coal generation to zero within two decades. This prompts questions around how best to enable this transition. Sonnedix will also be answering those as it attempts to concurrently manage multiple decarbonization pledges in admirable proposals.
Garrido concluded “This is at the cornerstone of Sonnedix’s strategy with Sonnedix taking secure, clean power through corporate PPAs that cover a growing pool of end-customers, supporting companies in decarbonizing carbon-intensive industries.” “We are excited by the tremendous momentum we have gained in Chile and look forward to continuing to play a key role in Chile’s energy transition.”
