[PURA ENERGÍA]

p

Third International Dialogue on Enhancing Ambition (IDEA)

through Climate Finance

Carlos Finat

Executive Director

ACERA AG Barcelona, Spain

May 22, 2017

Finance, Climate and Market

Renewable Energies Development in

Chile and Perspectives

[PURA ENERGÍA]

Founded in 2003

Mission: Encourage the implementation of a national sustainable energy strategy.

Solar

Wind

Mini-hydro

Sea

Geothermal

Biomass

Chilean Association of Renewable Energies A.G. -

ACERA

12

0 +

mem

bers

Project development

Power stations operation

Energy commercialization

Service delivery

Equipment supply

Financing and Insurances

Legal services

[PURA ENERGÍA]

Individual members: Aldo Poblete – Carlos Jorquera – Hugo Correa – Jaime Vasquez – Mauricio Zeman – Ricardo González –

José Luis Domínguez – Richard Sanhueza – Pablo Cruz

Member companies

[PURA ENERGÍA]

ACERA´s profile

• ACERA was created in 2003 to promote a regulatory framework in Chile which would allow NCRE* (Non Conventional Renewable Energies) to compete on equal terms with other conventional sources.

• 120+ members, from every NCRE technology, covering the entire renewable energy value chain.

• ACERA represents 71% of NCRE’s current operating capacity, including 90% wind and 91% solar photovoltaic.

• ACERA’s members are building 55% of new NCRE projects

• NCRE are the main source of investment in Chile: • > 3,000 MUS$ to be built as a result of the last tenders.

• > 4,153 MUS$ in projects under construction. • > 8,200 MUS$ in already operating plants.

• As a result of NCRE’s participation in the last tender, final consumers will save over 1,800 MUS$.

• The law goal of 20% NCRE by 2025, will most probably be met by 2019/2020.

• So far this year, NCRE have contributed with 15% of Chile’s generation.

*: Wind, solar, geothermal, biogas/biomass, wave&tidal, hidro below 20MW

[PURA ENERGÍA]

• Represent the NCRE sector before authorities, Congress, public and press, just to mention a few.

• Together with its members, it prepares and disseminates the association’s positions concerning subjects of interest to the sector.

• Promote the relationship among NCRE sector’s companies.

• Represent the sector in energy and sustainability events, in Chile and countries of the region.

• Disseminate the knowledge of NCRE, the transition towards a sustainable energy system.

• Organize technical events of its own, or together with other energy sector entities.

• Organize the Annual Dinner of Renewable Energies. • Sponsorship and dissemination of others’ congresses, seminars and fairs.

• Newsletter ACERA is distributed every month to over 6,500 people in Chile and abroad. • Permanent presence of NCRE on social networking.

• Training on energy for journalists – over 300 journalists have attended ACERA’s Energy Course, from Arica to Puerto Montt.

• Training on energy for authorities and civil society – in 2016 in Arica and Iquique.

• Reception and initial orientation of national and foreign companies interested in the NCRE sector in Chile.

ACERA´s main activities.

[PURA ENERGÍA]

Finance, Climate and Market

Renewable Energies Development in

Chile and Perspectives

Non-conventional Renewable Energy

NCRE

[PURA ENERGÍA]

• 2008: a percentage of energy coming from NCRE sources must be a part of each PPA. Percentage to grow from 5% in 2015 to 10% in 2024.

• 2015: target percentage was augmented to 20% by year 2025

• If a contract did not meet the percentage in a given year, the generator should pay a charge of approximately 30 US$ for each missing NCRE MWh.

• The developer of a NCRE power plant can sell energy separate from the “NCRE certificate”.

Regulatory Framework

From the first NCRE law to Energía 2050

• Not a dollar has been paid for the charge of failing to meet the

percentage of NCRE

• Everything indicates that it would be possible to reach 20% of NCRE by

2020 or before

[PURA ENERGÍA]

During 2015, through a consultation and participation process, the Chilean government issued Energía 2050 the first long term energy

policy.

Regulatory Framework

From the first NCRE law to Energía 2050

This policy set long term (non-binding) goals

as:

• 2035: At least 60% of electric generation

comes from renewable sources.

• 2050: At least 70% of electric generation

comes from renewable sources.

but things

could move

faster:

[PURA ENERGÍA]

Primary energy sources of Chile

Crude oil Coal Biomass / Biogas Natural gas Hydro energy Wind and solar Energy

• 68% of primary sources is fossil and imported

• A high percentage of biomass is wood

Ref: 2015 Energy Balance

[PURA ENERGÍA]

• Low availability of information on energy resources.

• Uncertainty regarding the processing of permits for new technologies.

• Regulatory framework under development (it was just beginning to be outlined in 2004).

• Precarious infrastructure (especially access to some resources).

• Difficulty of access to credit/financing.

• Uncertainty about technological options, costs and performance.

• Few local service providers.

• Need to adapt the operation of the systems to a greater presence of variable sources

• Barriers for non investors whose (main) business is not the generation of electricity.

In the beginning there were barriers… (2004…)

• Few local service providers.

• Need to adapt the operation of the systems to a greater presence of variable sources

• Barriers for non investors whose (main) business is not the generation of electricity.

[PURA ENERGÍA]

– “Stabilized price” for NCRE

– System must purchase total production of NCRE generators under 9 MW.

+ – KFW financing.

– CORFO (Chilean development agency) management.

– Private banks execute.

– Public studies (resource availability, grid impact, etc.)

The answer for small developers: Regulation +

Financing + Information

Ley 19.940

/ 2004

[PURA ENERGÍA]

• Spanish developer

• First to win a competitive power tender for a large customer in Chile

• Installed power 25 MW.

• Financing:

– IADB

– Proparco

– C2F

Grid scale projects financing (2012)

[PURA ENERGÍA]

$

New regulation introduce a NCRE charge.

This charge is tradeable and becomes an upside.

Some “early adopters” non-regulated customers contract NCRE energy.

Partial competition:

Tenders for distribution companies demonstrate de highly competitive bids from NCRE.

Open competition in the market

Non-regulated customers of different sizes are attracted by the competitive prices.

2014

2011

2008 - 2011

Market also answered to large NCRE development –

2008 to date

Improvements in the knowledge about the very high potential of NCRE resources

Continuous reduction of LCOE of NCRE technologies

2016

[PURA ENERGÍA]

But things can move faster

[PURA ENERGÍA]

NCRE Development perspectives

(“front of the meter”, non self producers)

Sources:

* Proyectos de generación y transmisión en construcción SIC – SING ( Resolución Exenta N° 97, CNE

* Fuente: Informe técnico fijación de precio de nudo de Corto plazo primer semestre-2017

[PURA ENERGÍA]

NCRE Development perspectives

(“behind the meter”, self producers)

End-consumer installations declared (Law 20.571

Total end-consumer power declared Number End-consumer installations declared

[PURA ENERGÍA]

• Different R&D&A initiatives are in place,

supported by public – private.

• All these initiatives are looking for niche

where Chile can get a place as a player.

Goal is not only to increase NCRE generation but

also to create competitive advantages.

[PURA ENERGÍA]

NCRE, National sustainable development and

climate goals

Long Term Energy Policy

INDC

GHG Mitigation Plan for

Energy sector

[PURA ENERGÍA]

• Access to the transmission/distribution

network

• Market risk containment.

• Financing projects in indigenous

communities lands.

• Net metering or net balance?

Gaps and challenges to mobilize investment for

small-scale distributed RE Segments

0 – 100 kW: “residential” generation

100 – 9 MW: Small Generation Plants (PMG / PMGD)

[PURA ENERGÍA]

• Almost 100% of the Chilean thermoelectric power plants will end their technical-economic life before 2050. – No “social license” for new coal capacity.

– Gas based new generation may obtain the “social license, but will the future price be competitive?

Why/how to mobilize investment for grid scale NCRE

generation

• An accelerated decommissioning of fossil fuel based generators is possible: – Negative externalities (emissions) should be priced at a real

price (today, 5 US$/Ton-CO2 2050.

– Cost of the negative externalities must be supported by the generator, without “pass-through” to end customers.

– “Trigger” financing is required for newer technologies in Chile.

– Risk mitigation is required for geothermy.

[PURA ENERGÍA]

[PURA ENERGÍA]

Our information platforms:

Newsletter Web

@ACERAAG Asociación Chilena de Energías

Renovables, ACERA AG.

Mapa de Proyectos

informaciones@acera.cl