Energy, Projects Tagged

Chile Renewables Sector – Moving in the Right Direction

Chile has taken huge strides over the last 10 years as it has worked towards the goal of decarbonizing its electric sector. These efforts have allowed the country to create a very dynamic renewable industry that has made it a pioneer in many ways.

The new National Energy Policy is even more ambitious with aims to reach 80% by 2030; and 100% by 2050. Goals that many experts believe could be possible.

In 2021, renewables contributed on average over 25% of the electrical demand for the national grid. This has risen considerably since with a wave of projects that were built pushing renewables share of the energy matrix to over 30% for 2022.

Although it has been impressive what Chile has been able to achieve to date, there are also some immediate challenges that need to be solved to help the country advance further.

  • The first is the overall stress the system has been under due to the rapid growth of renewables. This has happened at a time when the country has been facing an extended drought making it difficult to use the countries hydroelectric plants to support the energy transition.
  • The second is the transmission problems and slow adaptations of regulation that have created unfavorable prices when solar output is at its highest during the day.

Last year was a transformational year with Chile taking some concrete steps to help alleviate some of the problems that are currently creating pain for the industry.

The Governments Response

In 2022, the Chilean government enacted the electromobility bill that would allow stand-alone storage projects to be paid for the power they inject into the grid.

The idea is to make it easier to relieve pressure by absorbing extra electricity during peak production periods so that it can be stored and released later. This would go a long way to help solve some of the sectors current issues – back-up supply given the intermittency of renewables and taking advantage of excess capacity during the day.  

The legislation will also allow electric vehicles to enter the power supply market. Something that might not be so relevant now but will surely be interesting in the future. Owners would be remunerated for injecting electricity into the grid and using the battery of their vehicle for storage. To promote the adoption of electric vehicles, the bill also proposes a reduction in road tax for electric cars.

The electromobility bill is an important step that needed to be taken to alleviate issues that the sector is facing. It will set off the next stage of investment for the Chilean electric sector – battery storage.

Battery Storage

Changes from the electromobility bill will unleash a new wave of investment. Currently, there is a huge pipeline of projects (+2000MW) that have battery storage components attached to them. There is also a significant number of projects that are pure battery plays that needed to have the laws adapted so they could sell their electricity.

Currently, according to the local industry group Acera, pure battery storage technology currently only accounts for only 64MW or 0.20% of Chile’s overall installed capacity. An additional 60MW of battery storage capacity is under construction and 275MW has been given environmental permits or is waiting for approval.

In terms of what type of technology is being used for storage, pure play lithium batteries are still the favorite at this point but there are other projects based on compressed air, molten salts, and other types of batteries.  

For example, AES Gender submitted a project for environmental evaluation to convert units 1 and 2 of the Angamos coal-fired thermoelectric power plant, located in northern Chile, into an energy storage system using molten salts. These salts will be directed to the steam generator where they will exchange heat with the water, generating the necessary steam to reach a power of 560 MW with both units in operation.

Battery projects will need to be individually assessed in terms of their profitability, but there is an economical case being built that supports their growth. Currently in Chile, there is spot-market disparity between daytime and night-time injection prices that can easily reach over USD$100. The key for many projects is to take cheap daytime energy and inject it back into the grid during the night when power is more expensive.


The huge growth of renewable projects being built over the last few years and now the potential for battery storage is exciting for the industry. The issue is that electricity needs to be moved to where it is needed. In this case, it needs to move from Northern Chile to the central region.

Transmission constraints means that renewable energy cannot be fully transmitted to where there is demand at peak production periods creating unfavorable margins for producers, often having to give their power away during peak solar hours. From January-September of 2022, more than 748GWh of electricity was dumped because of transmission bottlenecks in Chile. 

To help solve these issues, Chile has been building out its transmission network and has several tenders set to be launched for 2023. According to official estimates, Chile will need 4,000km of new lines in the coming years to expand the current network of roughly 30,000km.

The most important project advancing is a new 1,500km HVDC power line is forecasted to enter service by 2028. The USD$1.4b transmission line is necessary to relieve pressure between the north where the electricity is being generated and the central region where it can be used. The environmental agency recently said they would create a dedicated evaluation team given the importance of the project to the country. 

In addition, inter-connections are being made with Argentina. In 2022, authorities authorized an electricity interchange via the 409km transmission line owned by AES Andes. Chile will export during daylight hours the power generated from solar plants. At night, Argentina will export to Chile electricity from gas-fired power stations, substituting up to 200MW of diesel capacity.

The Chilean renewable industry is at a crossroad. The renewable market has grown quickly over a relatively short period of time which has put pressure on the transmission system. Now transmission capacity must be built out to move the power to where it can be used.


Chile is set to close its coal-fired power plants by 2040. The energy sector is the country’s largest emitter, making up almost 80% of total CO2 output. Just changing this one industry will have a huge effect on the countries overall carbon output.

Chile is in a unique position. It has been able to take transform its energy matrix in a very short period. The growth of renewables has also uncovered weak points that needs to be addressed if the sector will continue to grow. Battery storage and transmission capacity are at top of the list to help solve these issues.

The government has taken some concrete steps to create the right conditions. They have enacted the electromobility law which will give battery storage a clear path to sell the power they store. They are also taking steps to improve transmission auctions and fast track the evaluations of important transmission projects. Should these corrective steps be successful, renewable projects in Chile will increasingly make up the energy matrix and it will do so in a way that is more profitable then now. It will also lead to the next stage of development which is the production of hydrogen. 

Ax Legal is an advisory firm that works with foreign companies in Latin America. Our team of legal and commercial advisors have a distinguished track record of helping foreign technology and services companies to grow and operate in Latin America. Over the years, we have worked with starts up, mid-size businesses, and publicly listed companies. The one common factor that connects are clients is that they are leaders in their field, providing innovative technologies and services to the industrial sectors.

To better understand how we can support you in the Region, please contact Cody Mcfarlane at