This piece was originally published by Latin American Policy Organization (LAPO).
Chile has become the leading Latin American producer of solar Photovoltaic (PV) energy. The production of solar energy expanded so quickly that Chile is giving away electricity for free in certain parts of the country.
A country once closely associated with dirty environmental habits such as mining and an energetic dependency on coal and gas-fired electricity plants, Chile is turning into a clean energy frontier. It has been a testing ground for governments and companies to experiment with policy, and the investment has paid off.
Chispa
The solar energy chispa has ignited hubs of innovation, and the tendency is spreading quickly. Solar energy has kindled the growth of clean energy in the Andean country.
In 2013, Chile only generated 11 megawatts of solar energy, enough to supply 2,200 households. Today, Chile generates more than 1 gigawatt (1000 megawatts) of solar energy, enough to supply 200,000 households.
Sofofa, Chile’s society for industrial development, announced that US$ 28.9 billion have been invested in solar energy projects currently in the pipeline, estimated to generate an additional 14 gigawatts of energy once completed. This is enough energy to supply 2.8 million households.
Why Solar Energy? Why Now?
Chile faced exorbitantly high energy prices, severe energy blackouts, and an unhealthy dependence on fossil fuel imports for its energy supply. This burden, however, pushed the country’s shift towards unconventional sources of energy, including solar energy.
High energy prices coupled with the diminishing cost of solar power technology and progressive energy laws equated to an optimal investment climate, which has made the Chilean clean energy market appealing to foreign investors and ranked the fourth most attractive renewable energy market in the world.
The growth of solar PV production in Chile follows a governmental effort to promote the adoption of renewable energy, culminating in a government approved renewable energy target of 70 percent domestic generation by 2050. In 2013, the Chilean congress amended the Non-Conventional Renewable Energy Law (NCRE Law) to mandate that electric utilities generate at least 20 percent of their energy matrix from renewable sources. What is remarkable is that Chile has achieved significant success in expanding solar energy generation without providing fiscal incentives such as subsidies.
Among all other factors, Chile has also achieved solar grid parity, where solar is at equal cost or cheaper than traditional utility sources. This is a promising sign of the long-term viability of solar VP as a prominent source of energy for domestic consumption and even for supplying neighboring markets.
What’s Next For The Shiny Chilean Energy Market?
In the future, Chile needs to unify its two main electric grids. By unifying the central grid -the most populated grid- with the northern grid, where most solar energy projects are located, the Chilean energy market can scale up and attract more investment in solar energy projects.
In fact, Chile should not only focus inward. They now have the potential to become the first major exporter of solar energy in the region. Chilean Energy Minister, Máximo Pacheco, announced that the country would start exporting solar energy to Argentina, a neighbor who historically has supplied Chile with natural gas. According to Minister Pacheco, Chile’s solar energy could be exported to more neighboring countries as the Latin American region works on grid integration.
This thin arid strip of copper, wine, and avocados has found its own clean and sunny comparative advantage in the energy market. The possibility of becoming a net exporter of clean energy marks the zeitgeist of an era of sustainable energy policy in Chile.
~ Cody Etlin is a Geography and International Affairs major and Geographic Information Systems (GIS) minor at The George Washington University. He is Chair of the Latin America Policy Organization (LAPO) and a member of the Gamma Theta Upsilon Honors Society.
