SANTIAGO (Reuters) - Record low renewable energy prices in Chile are here to stay and will likely push power prices even lower, Chile’s energy minister told Reuters, a development that would pressure the nation’s already squeezed diesel and natural gas industries.
Chile, with ample solar and wind resources, has become a poster child for renewable energy, with other countries looking to emulate the sector’s development.
In August 2016, wind and solar producers won the right to supply around half of the power in a massive 12.3-terrwatt government auction to supply Chile’s public grid for 20 years starting in 2021.
But some of the winning renewable projects are struggling to obtain financing, raising speculation that the rock-bottom prices at last year’s auction will not be repeated when producers come back to the table for a 2.2-terawatt contest this October.
In an interview late on Thursday, Chilean Energy Minister Andres Rebolledo dismissed those concerns, and said that while prices may not fall significantly more, they will likely fall nonetheless.
“We want the auction this year to reflect what has been happening, which is dropping prices ... and we expect this auction will consolidate this tendency,” he said.
“Though it’s true that lower prices makes financing more difficult, we don’t have any information suggesting projects (that won previous auctions) are going to back out.”
Some new renewable projects have been hurt by Chile’s underdeveloped transmission network, which has made it difficult in some cases to transport power to key markets, such as metropolitan Santiago.
Rebolledo said his government is working hard at preparing auctions for new transmission lines, and has received interest from many foreign companies.
A transmission line being constructed by Engie Energia Chile that will connect Chile’s two major grid networks should be completed at the end of October or beginning of November, he said.
He added that the government hopes to have a formal proposal to pitch to investors for a line connecting northern Chile with southern Peru by the end of the current government in March. The government will also likely thread a transmission line through the proposed Agua Negra tunnel, which is set to connect northern Argentina and Chile, he said.
Still, energy cooperation with neighboring countries is largely limited to transmission for now. Rebolledo said state oil company ENAP has not considered exploring Argentina’s Vaca Muerta shale play, even as the Argentine government has been shopping around aggressively for investors.
“ENAP is always looking for alternatives,” Rebolledo said, “but today we’re not looking (at Vaca Muerta) specifically.”
Reporting by Gram Slattery; Editing by Phil Berlowitz