Renewables takes 20% in Chilean power auction

CHILE : The development of wind energy in Chile has taken a significant step forward with a major tender to supply electricity to regulated clients through the country's main grid.

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Renewables developers took almost 20% of the 11TWh awarded at the tender under 15-year contracts starting in 2016-2019.

Aela Energia, the joint venture between Irish renewables developer Mainstream and investment fund Actis, is preparing to build four wind farms with a total installed capacity of 343MW.

The firm plans to close financing worth $860 million in 2015, before beginning construction. The projects are Alena (44MW) and San Manuel (26MW) in the southern Biobio region, Aurora (90MW) in the Los Lagos region and Sarco (150MW) in the northern Atacama region.

The 33MW Negrete wind farm, also in Biobio, began operating early this year and will also provide part of the power under contract.

Spanish engineering firm Acciona plans to invest around $500 million to develop 250MW of renewable energy capacity after being awarded contracts to supply around 600GWh annually.

Acciona commercial manager Jorge Calderon said wind projects will account for around 30% of the new installed capacity.

In a major change from previous tenders, the National Energy Commission altered the rules to allow developers to offer to supply electricity at certain times of the day, suiting intermittent technologies such as solar and wind.

But renewables developers also picked up baseload contracts which suggesting they aimed to provide 24 hour coverage through a portfolio of technologies.

"It is the first time power purchase contracts (PPAs) of this magnitude have been awarded in Chile for renewable energy generation," noted Barry Lynch, Mainstream's managing director for onshore procurement, construction and operations.

Lower electricity prices

The increased participation of renewables also sparked a sharp drop in electricity prices, which averaged $107/MWh, down from $128/MWh in the last major power tender held last year.

And while conventional generators offered electricity at around $110/MWh, most wind developers offered closer to $90/MWh and lower.

"There were some who said it was impossible in Chile to hope prices to get below $100/MWh, so we are enormously happy with what has happened today," said Rodrigo Castillo, head of distribution association Empresas Electricas.

The development of the new wind farms should help to bring down electricity prices for residential consumers from 2018-2019, explained Andres Romero, head of Chile's national energy commission.

Attention is now turning to the next major tender, scheduled to take place in March next year, when the government plans to award at least twice as much as demand.

By then Congress is expected to have approved government legislation introducing further changes to the tender process, removing more barriers to renewable energy projects.

"We will be more competitive as a sector," said Carlos Finat, president of Chile's renewable energy association Acera, said, noting that at least 14 more companies were planning to make offers in the tender.