There are not many countries in the world that can boast of having some of the best solar irradiance globally. Chile is one of them. The Atacama Desert is home to most of the country’s installed solar PV capacity. However, in recent years, Chile has been facing some serious issues: curtailment and marginal costs nearing zero.
With solar project owners needing to find a solution to make their projects financially viable, battery energy storage systems (BESS) are emerging as key enablers. Having energy storage in Chile is no longer a luxury asset but has become an “absolute necessity”, explains Alejandro McDonough, business development manager of Americas area sales at Wärtsilä Energy Storage and Optimisation (Wärtsilä ES&O).
The current wave of excitement around Chile’s BESS market started in October 2022, when the Chilean government passed legislation that incentivised the deployment of energy storage. The bill allows standalone energy storage systems to receive income from dispatching their energy and power in the country’s National Electric System market.
Even though the ramp-up of BESS projects in Chile might have been kickstarted in 2022, with the implementation of that new legislation incentivising the deployment of energy storage and electric vehicle (EV) technology, the history of BESS in the country is far older than that.
One of the first projects was developed at the beginning of the 2010s, explains Luciano Silva, BESS product and engineering manager, LAC at Trina Storage. Silva refers to the world’s first commercial-scale Li-ion BESS connected to an electric grid, by utility AES Corporation in 2009. Silva adds that this allowed Chilean companies to build experience with the technology very early on.
3.4GW of BESS to solve Chile’s curtailment issues
“Technically speaking, the curtailment is an excess of renewable energy, and it’s an excess because of transmission restrictions,” explains Juan Pablo Toledo, country manager, Chile, at METLEN Energy & Metals.
“Since the transmission lines are not capable of receiving all of the energy, mainly coming from solar, curtailment needs to be applied on the whole system.”
During the Energy Storage Summit Latin America (ESS LatAm) in October 2024, Ana Lía Rojas, executive director at the Chilean renewable energy and energy storage association (ACERA), explained how the current levels of curtailment in Chile, which could end up at approximately 5TWh in 2024, could power up to 3.4GW of 4-hour duration energy storage.
This figure would only solve the issue of curtailment without looking into other needs and applications for energy storage in Chile, one of which is the mining industry. An industry that runs 24/7 and would allow for an easier transfer of excess solar PV generation during the day to be dispatched at nighttime through energy storage.
McDonough highlights that Chile’s energy consumption between the day and night does not oscillate much and is stable at around 11-13GW, primarily due to the mining industry. “Mining represents roughly 60% of the total energy consumption [in Chile]. Out of roughly 12GW, nearly 7-8GW comes from mining, all of which need to be supplied 24/7. There’s a lot of space [to supply with batteries],” explains McDonough.
Rojas outlined the urgent need to decarbonise the nighttime electricity supply in Chile. In 2023, only 19% of renewable energy was used at night and 25% during peak hours – from 7pm to midnight – while the daytime sat at around 56% on average.
“Batteries, in the short term, are an excellent contribution to move all this power generation made during the day and dispatch it at night,” explains Henrik Tuveson, market development senior manager at Wärtsilä Energy Storage and Optimisation.
Toledo mentions that another solution would have been to increase the capacity of the transmission lines; however, this would have required years to implement.
Financial uncertainty due to lack of regulation
With such a large pipeline of projects being built in Chile, one might believe that things are moving smoothly in the Latin American country despite the Chilean BESS market being at such a nascent stage.
Yet, an important challenge that needs fixing quickly is related to regulation and the monetisation of a BESS asset, which is in itself linked to the issue of how a BESS project manages to be financed.
This lack of regulation and the need for a legal framework was brought up by María Florencia Attademo-Hirt, country manager, Chile, at Inter-American Development Bank Group, during the ESS LatAm event at a panel about financing storage projects. For Attademo-Hirt, this is an issue that is not exclusive to Chile but, more broadly, to the region – both Latin America and the Caribbean.
Attademo-Hirt said there is still a gap in the regulation, which needs to highlight the technological risks of energy storage and give investors or financial entities more safety regarding the costs, incentives and payments.
What about ancillary services?
Silva highlights the need for Chile to look at the state of other electricity markets in Europe and North America, where a BESS plant is allowed to participate in several sub-markets or give several applications to the same asset. In contrast, in Chile and the region, it is more of an energy-focused market, adds Silva.
“This, of course, would give more options to finance and remunerate the asset from the point of view of the private IPP owner of the asset. But it will also decrease the cost of operating the system as a whole. And this is really what is desirable from a consumer standpoint,” explains Silva, adding: “We all should want that asset to be utilised as much as possible.”
Silva mentions that another major difference between Chile and European markets is the fact that Chile’s BESS demand is edging towards 4- or 5-hour duration assets, instead of shorter ones of 1- or 2-hour duration.
“This is mainly because they [Europe] are more motivated in some more power applications or ancillary services applications. In the case of South America, just as it is in the North American region, since it’s much more solar-based, you will see more energy-shifting applications [for utility-based], at least for the time being,” adds Silva.
“If you want to extract all the versatility of the battery, you want that battery to manage energy, but also to participate in other grid services – what are known as ancillary services. Frequency regulation, voltage regulation and whatnot.” McDonough says these ancillary services, which exist in other markets, are not currently being considered a possible income source because the conditions for them are not there.
Silva explains that, currently, Trina Storage is focused on energy applications to fill developers’ demands for batteries with a duration of four or five hours. This is due to the capacity market being capped at five hours, which could change in the future.
Indeed, Supreme Decree No. 70 of 2023, passed earlier this year, sees changes in the recognition and compensation of energy storage in the capacity market. In it, the de-rating factor for a 5-hour duration energy storage project would see the entirety of its capacity it bid be remunerated, while as the duration lowers, the percentage decreases as well, to as low as 36% for 1-hour duration energy storage.
Finally, Chile’s peculiar geography, which is very large from north to south but thin from west to east, and with the Andes mountains nearly isolating the country from Argentina, makes cross-border electricity generation more difficult.
Standalone versus co-located: different approaches
However, when looking at the Chilean BESS market, curtailment is but one piece of the puzzle that explains the stellar growth expected in the coming years.
One aspect of the development of Chile’s BESS market this year that seems to have taken Silva by surprise is that he expected the market to come in different waves, starting with co-located or hybrid projects over standalone or even solar-plus-storage over wind-plus-storage. But everything has been unfolding at once.
In the case of co-located projects, having already secured a grid connection and built a substation, building a BESS co-located asset will require less time and be less risky, explains McDonough.
One reason for co-locating BESS with solar PV is the aforementioned curtailment issue, with PV owners seeing their revenues diminish. Silva explains that these projects were financed and executed with an outlook much more positive than the current situation.
Appetite for large co-located projects is already present in Chile’s nascent market, notably Oasis de Atacama, one of the largest BESS projects being built globally, located in the Atacama region.
Developed by Spanish independent power producer Grenergy, Oasis de Atacama will eventually have an installed solar PV capacity of 2GW – up from the initial 1GW when the project was announced in 2023 – and 11GWh of BESS, up from an initial 4.1GWh. This project alone nears the capacity (13GWh) the Chilean Ministry of Energy sought in a public land bidding auction for standalone energy storage projects in May of 2024.
Chile has been one of the countries at the forefront of the renewable energy transition in Latin America, first with solar PV and now with BESS.
This is an extract of a feature article that originally appeared in Vol.41 of PV Tech Power, Solar Media’s quarterly journal covering the solar and storage industries. Every edition includes ‘Storage & Smart Power’, a dedicated section contributed by the Energy-Storage.news team, and full access to upcoming issues as well as the nine-year back catalogue are included as part of a subscription to Energy-Storage.news Premium.
About the Author
Jonathan Tourino Jacobo is a section editor at PV Tech, Solar Media’s solar technology news website. He joined Solar Media in February 2021 following an MA in Data Journalism. Jonathan mainly writes for PV Tech, covering both the upstream and downstream solar industry with a keen interest in Latin American and emerging European markets.