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Renewables lock out gas projects in major Chile power tender

Highlights

Plans for a series of new gas-fired plants in Chile, to supplied by sea, have been put on hold after none of the projects won contracts at the country's largest-ever electricity tender.

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The auction, organized by the National Energy Commission, sought to cover 12,450 GWh annually around a third of demand from regulated clients from 2021.

Several companies, including Shell, Japan's Mitsui and Chile's state ENAP, participated in the tender with projects to developed new combined-cycle plants in the country.

However, more than half of the demand on offer was taken by a series of wind and solar energy projects. Ireland's Mainstream Renewable Power said it plans to spend $1.65 billion building seven wind farms in Chile after winning the largest part of the contracts awarded to renewables.

Article Continues below...



The remainder was awarded to Endesa Chile, the country's largest hydroelectric generator and a unit of Italy's ENEL.

Chile's wealth of renewable resources, including a blustery coastline, the driest desert and fast-moving rivers, have attracted billions of dollars of foreign investment into the sector despite the complete lack of subsidies.

"The tender results shows our renewable energy solutions are very competitive, even against conventional technologies," said Jose Antonio Escobar, CEO of Acciona Energia Chile.

The Spanish company is to build an 183-MW wind farm in southern Chile after winning a contract to supply 506 GWh annually.

The development of 2,000 MW of solar and wind under the tender makes it almost certain that Chile will achieve its target of securing 20% of its power from renewables by 2020, five years earlier than required by law, said Carlos Finat, head of renewables association ACERA.

BAD NEWS FOR GENERATORS

With average prices falling to $47.55/MWh, down more than 50% from levels seen just three years ago, Energy Minister Maximo Pacheco proclaimed the results as a triumph for the government which has promised to turnaround a sector hit by underinvestment and high electricity prices.

However, the tender failed in the government's other stated aim of boosting demand for natural gas, seen as a cleaner and cheaper alternative to fuels such as fuel oil and firewood and a more flexible compliment to the growing renewables sector.

Several companies had heeded the call.

Working in partnership with Japan's Mitsui, ENAP is looking to develop the 500-MW Nueva ERA plant next to its Aconcagua refinery in central Chile Gas would be supplied via the Quintero regasification terminal in which the firm owns a 20% stake.

Meanwhile, Mitsui had partnered with Shell in plans for a 540-MW combined-cycle plant in northern Chile to be supplied by a new regasification terminal with capacity to process up to 10 million cu m/day of the fuel.

The tender results are also bad news for several of Chile's largest generators. Domestically owned Colbun, AES Corp unit AES Gener and Engie Chile were all looking to replace long-term supply contracts that are due to expire in the coming years.

Prior to the release of the results, some sources complained that the tender rules had been changed to make it more difficult for gas-fired projects to compete.

Global Power Generation, a subsidiary of Spain's Gas Natural Fenosa, said it plans to continue present its 600-MW Tierra Noble combined-cycle project in future tenders, "demonstrating its long term commitment to the country."

--Tom Azzopardi, newsdesk@platts.com
--Edited by Richard Rubin, richard.rubin@spglobal.com