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<\/a><\/p>\nConditions in Chile are even more favorable given that Chile boasts some of the highest rates of solar radiation in the world [8]. Chile\u2019s auction model is powerful because it ensures that the government enters into market-efficient pricing contracts, both from a technological and geographical standpoint. While global average costs for utility-scale solar energy currently are around $50-$60\/MWh [9], Chile\u2019s auction model has encouraged for local pricing to reflect the benefits of favorable conditions in e.g. the Atacama desert, with the Ministry receiving a record-low bid of $21\/MWh in a recent bidding round \u2013 the second lowest in the world after Saudi Arabia [10]. At these rates, solar energy is financially significantly more attractive than coal-powered energy bids recently received at the $60-$70\/MWh level [11]. Against a global average of levelized costs of energy, regardless of geography or source of origination, these costs are extremely competitive [9]:<\/p>\n
Not only does the Ministry of Energy attempt to grow renewable energy as a share of the overall power mix and drive towards economically viable outcomes, but the Ministry is also addressing the longer-term problem of intermittency. For renewable energy to become 100% of the power mix, we must find a way to have consistent production from renewable energy \u2013 not just production whenever locally, the wind blows or the sun shines [12]. This can among other things be achieved through energy storage or energy transmission. The Ministry of Energy is encouraging a long-term focus on these issues by supporting projects like the 24\/7 solar plant in the Tamarugal region: the solar plant has in-built over-night energy storage via a newly developed molten sand technology [13]. The Ministry has also been accepting mixed wind-solar project proposals, which reduce sole reliance on either of the elements [14].<\/p>\n Apart from the encouraging steps that the Ministry is taking already, I think the Ministry could also focus on virtual power plants. Virtual power plants can intelligently ramp production up or down depending on wind conditions and power consumption, which helps with grid reliability and also provides services such as power balancing, import and export of power, and voltage control [15]. Virtual power plants could be integrated across the country and then intelligently distribute energy as needed. Especially given the rapidly changing weather conditions throughout Chile, a virtually integrated power plant network could significantly reduce intermittency concern.<\/p>\n To me, the single largest outstanding concern is that while the auction model has produced historically low prices, the prices are based on forecasted required electricity delivery rates, and thus inevitably bake in expected cost declines in the industry. I worry that in an attempt to win auctions, energy companies bid unrealistically low prices that they then cannot deliver on. This is exemplified by Abengoa, the parent company behind some of Chile\u2019s most promising solar projects in the Atacama desert, having filed for bankruptcy recently [16]. Additionally, with coal prices increasingly falling out of favor in the developed world, a demand-driven lower pricing spiral may persist, making coal generation competitive with renewable projects, and challenging wins based on economic superiority. (763 words)<\/p>\n Bibliography<\/b><\/strong><\/p>\n [1] Kreft, Soenke et al. \u201cGlobal Climate Risk Index 2017.\u201d Germanwatch<\/em>, 2016. https:\/\/germanwatch.org\/de\/download\/16411.pdf<\/a><\/p>\n [2] University of Notre Dam Global Adaptation Initiative. http:\/\/gain.nd.edu\/our-work\/country-index\/<\/a><\/p>\n [3] World Economic Forum. https:\/\/www.weforum.org\/agenda\/2017\/03\/which-latin-american-countries-are-best-prepared-to-tackle-climate-change\/<\/a>.<\/p>\n [4] Warn, Elizabeth and Susana Adamo. \u201cThe Impact of Climate Change: Migration and Cities in South America.\u201d World Meteorological Organization<\/em>, 2017. https:\/\/public.wmo.int\/en\/resources\/bulletin\/impact-of-climate-change-migration-and-cities-south-america<\/a><\/p>\n [5] Ministry of Energy, Chile. \u201cAnnual progress report: A good year for Chile.\u201d 2016. http:\/\/www.energia.gob.cl\/sites\/default\/files\/annual_progress_report_-_eng.pdf<\/a><\/p>\n [6] International Renewable Energy Agency. \u201cRenewable Energy Auctions \u2013 Analyzing 2016.\u201d 2017. http:\/\/www.irena.org\/DocumentDownloads\/Publications\/IRENA_REAuctions_summary_2017.pdf<\/a><\/p>\n [7] National Renewable Energy Laboratory. \u201cNREL Report Shows Utility-Scale Solar PV System Cost Fell Nearly 30% Last Year.\u201d 2017. https:\/\/www.nrel.gov\/news\/press\/2017\/nrel-report-utility-scale-solar-pv-system-cost-fell-last-year.html<\/a><\/p>\n [8] Simon Currie, et al. \u201cMasen\u2019s NOOR solar energy projects.\u201d Norton Rose Fulbright<\/em>. 2017.<\/p>\n [9] Lazard. \u201cLevelized Cost of Energy Analysis \u2013 version 10\u201d. 2016. https:\/\/www.lazard.com\/media\/438038\/levelized-cost-of-energy-v100.pdf<\/a><\/p>\n [10] Weaver, John Fitzgerald. \u201cChilean solar cost down 26%, as important as Saudi Arabia at 1.79\u00a2\/kWh.\u201d Electrek. 2017. https:\/\/electrek.co\/2017\/11\/08\/chilean-solar-down-26-as-important-as-saudi-arabia-at-1-79%C2%A2-kwh\/<\/a><\/p>\n [11] Mills, Luke. \u201cH2 2016 Global LCOE Outlook.\u201d Bloomberg New Energy Finance<\/em>, 2016.<\/p>\n [12] Goldman Sachs. \u201cThe Great Battery Race \u2013 Solar + Storage takes center stage, but is it ready for primetime?\u201d 2016.<\/p>\n [13] Geuss, Megan. \u201cThree solar thermal plants in Chile could generate electricity 24 hours a day.\u201d Ars Technica, March 14, 2017, https:\/\/arstechnica.com\/science\/2017\/03\/plans-for-a-24-hour-solar-thermal-plant-earn-environmental-approval-in-chile\/<\/a>, accessed November 2017.<\/p>\n [14] PV Magazine. \u201c$25.38\/MWh bid sets new record low for 24\/7 block mixing wind and solar at Chile Tender.\u201d November 8, 2017, https:\/\/www.pv-magazine.com\/press-releases\/25-38mwh-bid-sets-new-record-low-for-247-block-mixing-wind-and-solar-at-chile-tender\/<\/a>, accessed November 2017.<\/p>\n [15] HSBC Global Research. \u201cRenewables and the Grid.\u201d 2016.<\/p>\n<\/a><\/p>\n