5 September 2017


Solar PV Project Development Chile

Has Chile fixed its transmission issues?

Author: Adam Critchley

The country’s particular geography and extreme north-to-south length of around 4,200km, coupled with a high level of seismic activity, make transmission a tricky issue, but expansion of the country’s two grids is moving forward and the end to grid constriction appears to be in sight.

We're closing the chapter,” Felipe Ribbeck, general manager of Sonnedix Chile, tells Solarplaza in relation to the obstacles Chile has faced in expanding its transmission infrastructure.

Other power sector protagonists consulted by Solarplaza agreed that the transmission constriction is now coming to an end, and that the much-needed expansion of the grid to accommodate the new capacity being built will now move forward.

"The two main grids will be connected later this year, when construction is finished on the 600km SING-SIC interconnection line."

Chile’s $100-million, 192km Encuentro-Lagunas transmission line entered operations in June and was developed by InterChile, the grid operator, and Siemens. The line connects the towns of Pozo Almonte, in Tarapacá region, and María Elena, in Antofagasta. It is part of a larger project by Chile’s Coordinador Eléctrico Nacional (CNE), the country’s grid manager, to ease transmission congestion on the northern SING and central SIC power grids.

These two main grids will be connected later this year, when construction is finished on the 600km SING-SIC interconnection line, which is being built by Transmisora Eléctrica del Norte.

This optimism is further buoyed by the fact that, also in June, the CNE announced tenders for 21 transmission projects that will require an investment of around $600 million, and are planned for 2018.

Among the projects on the table are a 500KV transmission line stretching south from the city of Concepción, which is located midway between the capital Santiago and the southern port of Puerto Montt, that will ease grid congestion in the country’s south. The projects are part of a definitive grid expansion plan to be published in the coming months, pending energy ministry approval.

In mid-2018, the 753km Cardones-Polpaico transmission line is expected to be completed, which will significantly alleviate grid congestion for wind and solar parks connected to the northern section of Chile's central SIC power grid, according to a study released in June by the CNE.

The $1-billion project is divided into three sections: Cardones-Maitencillo, Maitencillo-Pan de Azúcar and Pan de Azúcar-Polpaico. The latter stretch ran into local opposition in the coastal town of Zapallar. This resulted in the project’s delay, as it had an original completion date for this summer.

The CNE said that completion of the first two sections, and the commissioning of the Mejillones-Cardones line linking the SIC with the northern SING power grid, could reduce the transmission constraints plaguing the northern SIC by half by the end of this year.

Chile held a transmission, transformer and substation tender in June, in which four bidders were awarded contracts: Colombian firm ISA, Enel Distribución Chile, Consorcio Red Eléctrica Chile and Cobra Instalaciones y Servicios and Saesa-Chilquinta. The works are expected to be operational between 2019-21.

“The problem will only be partially solved by the end of the year.”

But others are less optimistic.

Nicolás Sadon, South America manager for French firm Solairedirect, which has been present in Chile for 10 years and which developed the 58.3-megawatt Los Loros merchant solar facility in Atacama, says that things remain the same.

“The problem will only be partially solved by the end of the year,” he tells Solarplaza. 

“There is currently more power generation than transmission capacity, and until the works are completed to expand the grid, the current problem will continue. We are waiting for expansion of the grid to continue, and there are auctions coming up, so hopefully we can have this sorted out.”

“In Chile there is no such thing as reserved capacity. We have open access, but while you can connect, you cannot distribute, which makes energy generation much more difficult,” he says. 

He says he is hopeful, however, that the grid issues will be solved, which will lead to greater renewable investment in the country, and allows for longer term planning and investment.

From a financing perspective, solving the transmission issue will make projects more attractive to lenders. It would also alleviate operative merchant projects that are exposed to spot prices, like Los Loros.

However there are still difficulties in procuring customers for the take-off of electricity and closing of power-purchase agreements (PPAs), he adds.  

The next step, he continues, will be the growth of battery storage, as the expanded transmission capacity allows for more projects to be built.

"Ancillary services remain the biggest question mark in Chile's power sector from a banking perspective."

Speaking at a recent event in Santiago, Rodrigo Violic, head of project finance for Banco BICE, said that ancillary services remain the biggest question mark in Chile's power sector from a banking perspective.

He was quoted by local media as saying that lenders still don't know how these services will be defined, or who will pay for them, and until the answer is known, assessing the bankability of new power projects will be difficult.

The remuneration of ancillary services will become more important as solar and wind continue to grow, given their variable power generation.

The CNE has said it will publish a regulatory framework for ancillary services in November, with the aim of creating a robust market for such services, which should include load following, reactive power-voltage regulation, system protective services, loss compensation service, system control, load dispatch services, and energy imbalance services.

Ancillary services and equipment are necessary to support the transmission of electric power from seller to purchase contribute, and will increase grid stability and reliability. 

Such services can be provided by power generation companies, either by varying output from thermoelectric plants, or by using energy storage systems, which is another reason why storage is set to play an increasingly important role as the country’s renewable energy capacity expands.

The government of President Michelle Bachelet has introduced incentives to increase the percentage of non-conventional renewable energy supply to 20% by 2020, up from the current 17%, and a sharp increase on the 6% share the source had at the beginning of her administration. An undeniable sign of how far the country has come in terms of increased use of renewables.

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