We have a stable outlook for renewable energy in Chile. The country’s government backdrop, privatized market pricing, and strong pipeline of renewable energy projects will be offset by grid bottlenecks, lower power prices and project delays.
Chile has historically been of the most attractive markets for renewable energy projects in Latin America. Largely due to the stable investment environment and supportive government policies to encourage renewable energy. The power sector is also fully privatized. In addition to the positive government regulations and free market dynamics, the solar power and wind speeds are some of the best in the world.
However, the market is facing significant challenges stemming from the fall in wholesale electricity prices and logistical issues connecting various wind and solar projects to the transmission lines.
Chile’s electrical grid is complicated and split into four different systems. The complex grid system creates inefficiencies across the network which causes bottlenecks and congestion. This hinders the integration of renewable energy projects. With a robust renewable project pipeline, and delays integrating current projects, we expect bottlenecks going forward as more projects are ready to be connected.
The lack of grid integration can also lead to spot power prices close to zero when transmission lines are oversupplied. This negatively impacts the profitability of solar and wind projects and could slow the actual capacity growth of renewables in Chile.
