Chile’s solar price hits record global low

Source: Daniel Cusick, E&E reporter • Posted: Wednesday, August 24, 2016

The contract price for utility-scale solar power reached a new world low last week as a Spanish energy firm agreed to sell output from a 120-megawatt solar farm in Chile for $29.10 per megawatt. That’s 80 cents lower than the current record price set in the United Arab Emirates earlier this year.

The agreement calls for Maria Elena Solar SA, a subsidiary of the Spanish multinational Solarpack Corp., to supply up to 280 gigawatt-hours annually to the Chilean grid by 2021. It was approved by the national energy commission, known as CNE, as part of Chile’s largest ever solicitation for electricity, estimated at 12.4 terawatt-hours per year.

The low-cost solar generation will come from a photovoltaic array to be built in northern Chile’s Tarapaca region by 2019, according Solarpack Chile officials. Power will be delivered to the grid during peak solar power production times — from 8 a.m. to 5:59 p.m., according to a press release, allowing the generation to match “in the best way possible [the] curve of production and demand.”

Once completed, the Tarapaca plant will be Solarpack’s seventh and largest Chilean solar facility. The company already operates four solar plants in the Pacific coast country, with two additional plants under construction, according to the firm.

“This tender, in addition to reaffirming the commitment of Solarpack with Chile, has also demonstrated the competitiveness of Solarpack and solar energy to offer the best price among bidders companies,” CEO Pablo Burgos said in a statement announcing the contract.

In total, the Chilean government offered tenders for five blocks of electricity accounting for about one-third of the current electricity consumption on the country’s two regulated grids, known as SIC and SING. In 2015, the government agreed to interconnect the two grids, which traditionally served customers in either the northern (SING) or central and southern regions (SIC).

The grid merger is expected to reap more than $1 billion in savings for utilities and ratepayers by way of greater efficiencies and increased competition between power suppliers, while also boosting the development of renewable energy technologies, according to the consulting firm Enerdata.

Ana Verena Lima, a South America analyst with Bloomberg New Energy Finance, said the contract price assumes much lower transmission costs for the new generation as well as a continued reduction in capital costs for solar panels and modules through 2019.

Andres Romero, executive secretary of CNE, said that the issuance of the new contracts “marks a before and after in energy policy in Chile,” whereby residential, commercial and industrial consumers will pay lower rates for electricity that is delivered more reliably and from a broader set of generation assets.

“Today we have taken a definitive boost to the electricity market with more players; better prices; more investment; more competition and concern for better service; and a more secure, reliable and efficient electricity system,” he said.

The previous low price for delivered solar power was set in May, when developers offered solar for $29.90 per MWh under an 800-MW solicitation from the Dubai Electricity & Water Authority. The bidders on the Dubai projects were not disclosed.