A closer look at Chile’s green energy achievements

Chile continues to lead the transition to renewable energy in Latin America and beyond, featuring among the countries with the highest level of green energy penetration in their electricity matrix.

In the first eight months of the year, solar and wind power accounted for 39.5 per cent of the country’s total generation of electricity, according to national renewable energy association Acera. That’s more than thermal generation (36.8 per cent) and hydropower (21.3 per cent), and halfway to the government’s target of 80 per cent by 2030.

In solar power alone, the country already boasts the second-highest global rate of solar energy generation at 22 per cent, and is among the countries with more than five terawatt ours of solar generation, behind Hungary (25 per cent) according to figures from research firm Ember.

Success story

The story of Chile’s transition to renewable energy began in 2005, when a new law required electricity distributors to purchase through public auctions, thus encouraging greater competition. Prior to 2005, domestic companies made private deals with companies that produce electricity.

However, it wasn’t until 2015 when the sector began to truly flourish, when energy minister Máximo Pacheco introduced legislation that granted the Comisión Nacional de Energía (National Energy Commission) more control over the auction process.

“After 2015, everything lined up: solar and wind became competitive, long-term contracts made it easier to finance new projects, and Chile’s open market and abundant renewable resources made the transition take-off”, says Francisco Muñoz Espinoza, a Santiago-based electricity market expert and professor at the Business School at Universidad Adolfo Ibáñez.

Chile’s geography is exceptionally favourable for renewable energy. It is home to the Atacama Desert, which has the globe’s highest rate of solar irradiance, and Patagonia, which has persistent, powerful winds.

The country’s prosperous mining industry has also played a vital role in the expansion of Chile’s renewable energy industry. Large companies such as Antofagasta Minerals and The National Mining Company of Chile have signed long-term power purchase agreements with solar and wind developers, providing reliable demand for new projects.

In the years following Pacheco’s reforms, the Chilean renewable energy industry grew rapidly, reaching the fourth-highest share of solar electricity globally by 2019, according to data from Ember. That same year, Chile’s then president, Sebastián Piñera, announced a plan to close all of the nation’s coal-fired plants by 2040 and declared the country’s intention to be carbon-neutral by 2050.

Despite Chile’s success, such rapid technological growth has come with infrastructural and institutional setbacks. Muñoz Espinoza said that a nearly nationwide blackout in February of this year “raised broader awareness of the importance of security, reliability, and resilience”.

Besides, the country’s retail electricity prices have been a cause of discontent among citizens for years, with a proposed rise in 2019 prompting nationwide protests.

Next chapters

Chile’s renewable energy trajectory is already laying the groundwork for its next chapter. With installed capacity in solar and wind power on a steady growth trajectory, battery energy storage systems, which allow distributors to better align supply and demand are also flourishing.

According to Acera’s figures, the country’s battery energy storage systems backing up renewable energy generation stood at 4.3 gigawatt hours in the first eight months of the year, with another 23.7GWh under construction.

The country also launched a national green hydrogen road map strategy in 2020, which was then updated in 2023. It targets 5GW of electrolysis capacity installed or under development by 2025; in the longer-term, it aims at turning Chile into one of the world’s largest exporters of green hydrogen.

While progress in green hydrogen has been slower than expected, Chile’s achievements in renewable energy development so far are a benchmark for other emerging economies with big green energy potential as risk capital slowly, but surely looks for opportunities other than those in more mature developed markets — in Latin America and beyond.

Maximilian Bashford is a freelance journalist based in London.