Chile scales back 2017 tender as competition heats up

CHILE: Just two months after its launch, the Chilean government is planning to dramatically cut back the amount of electricity to be acquired through October's tender.

The cut in tenders is due to more companies contracting power directly
The cut in tenders is due to more companies contracting power directly

The government said the cut was due to more clients contracting power directly with generators.

The National Energy Commission had originally planned to acquire 4,200GWh annually from 2023 through the tender.

But following a recalculation of demand from regulated clients over the next 20 years, the commission said the contracts on offer will only kick in from 2024 and involve much smaller volumes.

So far the government estimates that 1,400GWh of annual demand has left the regulated market, rising to 2,100GWh by 2023.

"This is good news for our economy. Generators that have capacity available are offering very attractive prices in the market to unregulated clients," said the country's energy minister Andres Rebolledo in late March.

Power prices in Chile have fallen dramatically over the past three years as strong investment in renewable projects has increased competition with conventional suppliers.

A major tender last year contracted electricity at an average price of $47.30/MWh, down from almost $130/MWh four years earlier.

New tender rules introduced in 2014 have made it much easier for variable energy sources to compete with conventional generators, leading to renewable projects winning the bulk of demand over the past three years with ever-lower prices.

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