Author: Jason Deign, Solarplaza
The Chilean Solar Energy Association (Acesol) wants better conditions for distributed PV following a massive growth in grid-scale projects.
“There are two opposite realities between the development of large PV installations and distributed generation ones,” said Verónica Munita Bennett, head of Acesol. “In the first case, there is already 176 GW connected to the grid, while in the second there isn’t even 2 MW.”
Chile’s spectacular growth in grid-scale solar is thanks to incentivising policies including recent moves to allow renewable energy to bid for specific blocks of generation time, Munita said.
Meanwhile, “distributed generation is governed by the 20.571 or net billing law, which allows PV self-consumption for installations under 100 kW, and injection into the grid. However, the payment is 50% less than what the consumer pays for using it, since grid usage costs are assumed. This means the payback for projects is too high.”
In addition, said Munita, there are no financing mechanisms for distributed solar power and regulation makes getting approval for installations a long and tricky process.
“The 20.571 law needs to be changed for something else closer to net metering,” Munita said. “The banks need to create financing systems, or there needs to be partial support from state institutions such as Corfo. And the regulation must be changed to make the process shorter and more expeditious.”
It remains to be seen how quickly and easily the Chilean administration could bring about such changes. Even the vibrant Chilean grid-scale market has suffered major ups and downs in its evolution, Solarpack’s Andean region general manager, Iñigo Malo de Molina, told Solarplaza.
Much early attention was focused on signing power-purchase agreements with large energy users, such as mining companies, but in the end the demand from these customers has been limited. “It was a market that was expected to develop a lot,” said Malo de Molina, “but in reality the examples have been limited.” In response to this, he said, developers switched to creating projects for the spot market, mostly using multinational or multilateral financing sources.
“The experience there is that the spot market has changed a lot in a very short time, and our perception is that banks are now a lot more cautious about taking on the risks,” Malo de Molina said.
This has forced the solar community to change tactics again and focus on bids for generation capacity into Chile’s regulated distribution markets. Here PV developers have been spectacularly successful, with Solarpack subsidiary Amunche Solar driving costs down to just USD$64 per MWh in the latest tender by Chile’s National Energy Commission. Solarpack is among the solar developers awaiting details of the next government-sponsored auction, which the CNE has said will be delayed until this July.
Nevertheless, the need for companies such as Solarpack to keep finding new niches within the Chilean market, and lack of progress in areas such as distributed generation, is likely a salutary lesson for developers elsewhere in the region.
“In Chile the key is to find a way of selling energy that is viable and financeable,” Malo de Molina said.
Across other Latin American markets, such as Argentina and Uruguay, there are likely to be similar challenges, with developers and financiers being forced to reduce costs in order to win out against competition from traditional generation sources.
In Peru, for example, prices of solar have dipped below even those achieved last year in Chile. To achieve further cost cuts, developers will at least have the advantage of technical experience gained from the Chilean market.
Many of the regions being earmarked for solar development in Argentina, for example, are part of the Puna high desert region, with less than 200 mm of rainfall a year and high solar resource. These are very similar to the Atacama Desert Andean plateaus favoured for solar installations in Chile.
However, market volatility is likely to be even more of an issue for developers in places such as Argentina than it has been in Chile, even after US courts cleared the way for Argentina’s return to capital markets after a 15-year absence.
“You have to consider that these investments are long-term,” said Malo de Molina. “There are countries in the region, such as Argentina, where the investment conditions are improving, but the investments are still much longer term than the terms of a specific government. You need to take that risk into account.”