With prices at $38-73MWh, wind left no room for most conventional generators, the lowest of which bid $65/MWh.
Mainstream Renewable Power alone will invest $1.65 billion in seven new wind farms totalling 960MW, while Germany's WPD will install around 350MW.
Chile has around 1GW of installed wind-power capacity. However, many of this first batch were showcase projects, built to highlight the green attributes of owners, including thermal and hydro producer Endesa and mining firm Barrick Gold.
Many failed to fulfil promised capacity factors and have only survived thanks to high spot prices or generous power purchase agreements.
The country's new generation of wind farms should be much more competitive, according to Bart Doyle, country manager for Mainstream.
The Irish firm, one of the first to enter the renewable-energy market in Chile, has spent the best part of a decade scouring the country for the best sites. As a result, its new wind farms will have an average capacity factor of 39%. Others are in the lower 30s.
Land disputes
The new projects will bring new challenges. While the bulk of operating projects are concentrated on a lonely stretch of coast 500km north of the capital Santiago, many of the new investments are in more heavily populated southern Chile, in an area at the centre of a century-old land dispute between the indigenous Mapuche population and landowners.
WPD has been working with communities around its three sites in the area for several years to ensure it has their support, says country manager Lutz Kindermann.
Although the tender winners have until 2021 or 2022 to begin supplying electricity, developing so much capacity at once could be a rush.
Environmental authorities will face a wave of permit applications, which could overwhelm their limited manpower. Finding enough qualified technicians and key equipment such as cranes could also be a squeeze, said Kindermann. WPD may lease its own crane to avoid relying on contractors.
Wind's triumph has raised eyebrows in some quarters. Only last October, Aela Energy, a joint venture between Mainstream and private-equity firm Actis, and Spain's Ibereolica won with bids of close to $80/MWh. Aggressive bidding by renewables developers could be storing up trouble for later, some critics warn.
WPD admits that making its targeted returns at these prices could be a challenge. "We still have to materialise those savings through negotiations and being efficient," says Kindermann.
But Mainstream's Doyle is confident it can be done. The higher capacity factors of the new projects and a new law passing transmission tariffs on to consumers should significantly reduce costs. Further reductions in the cost of wind turbines should take care of the rest.
"The question is not why prices are so low; it's why have Chileans been paying so much for electricity," Doyle concludes. "They've been fleeced and everybody knows it."
