Distributed energy resources in Chile can be classified into two categories. The first includes power plants with an installed capacity of up to 9 MW, connected to the electricity grid via distribution lines within the area served by the distribution company (PMGD, in Spanish) or via transmission li Contact online >>
Distributed energy resources in Chile can be classified into two categories. The first includes power plants with an installed capacity of up to 9 MW, connected to the electricity grid via distribution lines within the area served by the distribution company (PMGD, in Spanish) or via transmission lines (PMG, in Spanish). The second category comprises net billing facilities up to 300 kW, which are exclusively connected to the grid through distribution lines within the distribution company''s (DisCos) service area.
Part of the success of PMGDs can be attributed to the special economic regime provided by regulation. From the outset, PMGDs have had access to an alternative economic framework when selling energy to the system, allowing them to choose between a ''stabilised price'' or selling their generation at the marginal price.
It is important to note that Chile''s electricity system operates in a two-tier market: (1) the market among generators, or ''spot market'', where energy is valued and sold at the marginal price at the specific node where transactions occur; and (2) the contract market, where generators can sell energy to end customers through PPAs.
Although PMGDs can sell energy to end customers via the PPA market, they benefit from this special economic regime when selling energy in the spot market. Under the ''stabilised price'' regime, PMGDs gain access to a predictable and certain cash flow, reducing the requirement of PPAs for securing financing. It is, therefore, unsurprising that two-thirds of PMGDs operate under the stabilised price regime.
Regulatory changes are not the only challenge for PMGDs. Infrastructure limitations are also affecting their ability to inject and sell energy into the system. Transmission congestion, constraints within distribution lines or networks, security concerns by the operation of a myriad of PMGDs in a concentrated zone (mostly in the central part of Chile), and intense competition for available positions in the relevant infrastructure are making the path for new PMGD projects increasingly arduous and challenging.
Despite their initial success, PMGDs are currently experiencing a degree of deceleration. According to data from Chile''s ISO, there were 493 PMGDs in operation in 2022, but by 2023, this number had fallen to 322 connected PMGDs.[7] Other figures indicate a reduction in growth rate of approximately 11 per cent between 2022 and 2023.[8]
As mentioned, one of the primary drivers of this slowdown is congestion in transmission lines, which limits PMGDs'' ability to feed energy into the electrical grid and sell it to other generators or end users. Data from Chile''s ISO of May 2024 highlights a significant rise in substation-level congestion, from none in 2020 to 56 substations in 2024. This congestion also affects other infrastructure, including transformers, many of which are experiencing an inversion of electrical flow due to the integration of PMGDs. This, in turn, increases the likelihood of transmission congestion.[9]
As expected, transmission congestions means that PMGDs face restrictions when attempting to inject energy into the grid. According to current regulations, if transmission congestion is detected during the connection process with the distribution company, the connection can only be authorised to the extent that the transmission lines can physically support it. Therefore, even if a PMGD has additional capacity, its energy output will be limited by the capacity of the relevant transmission lines.
At the system level, transmission constraints result in energy curtailment, which disproportionately affects renewable energy sources. According to Chile''s ISO, by June 2024, curtailment had reached 2,046.77 GWh of wind and solar generation, representing a 243 per cent increase compared to the same period in 2023.[10]
In this context, PMGDs, which are predominantly solar, can be seen as indicative of broader challenges within Chile''s generation system, particularly the significant limitations on feeding and selling energy into the market due to infrastructure constraints.
One solution is to move power – mainly solar – from periods of the day when it cannot be consumed due to these limitations to times when it is more needed, and alternative sources of generation – primarily renewable energy – are unavailable. In essence, this involves using storage to move the daylight into the night time.
Storage capacities are rapidly advancing in Chile. As of July 2024, there are 26 standalone energy storage system projects nationwide under environmental evaluation in the SEIA (Environmental System), equivalent to 2,103 MW of installed storage capacity, 10,639 MWh of stored energy, and an investment of US$2.8bn.[13]
This is also a current trend with PMGDs. In 2023, the first PMGD plant with storage (oEnergy in alliance with Huawei as BESS provider) inaugurated a solar plan of 3 MW,[14] and, from our professional experience, almost all developers are now considering storage solutions as part of new PMGD projects.
In this context, PMGDs combined with storage will help alleviate transmission congestion, freeing up infrastructure for the injection of utility-scale projects which cannot incorporate storage due to financial, physical, or technological constraints. Additionally, PMGDs with storage could enhance the flexibility and resilience of distribution energy grids, which may prove crucial in addressing potential disruptions to domestic energy services caused by extreme weather conditions, such as droughts or severe storms, as were recently experienced in Santiago.
In summary, the successful implementation of new regulations enabling PMGDs with storage capacity could spur industry growth, reduce transmission congestion, and strengthen the resilience of Chile''s energy grid against future disruptions.
Net billing is still not significant in Chile''s system. Since its introduction in 2014, net billing generation accounts to 259.5 MW of installed capacity, with a total of 24,537 facilities.[15] This accounts to less than one per cent of the total installed capacity in the country (as of May 2024).[16]
However, there are some interrelations that regulators are starting to consider when gauging the impact of energy projects within distribution networks. One signal of it are recent changes in PMGDs'' regulations (February 2024), that now consider net billing facilities over 100 kW in the connection process.
Additionally, aggregated impact of net billing facilities should be considered and not only when capacity is over 100 kW. For example, if five or more projects of 20 kW are identified in the same zone, they will not be identified as relevant individually, but would have an aggregated impact equivalent to 100 kW that, under current rules, could be overlooked.
Despite its relative irrelevance today, net billing and PMGDs should be treated in the say way, with connection procedures and technical rules harmonically interplaying, preventing potential effects on distribution grids which could lead to constraints and, in the end, frustration for developers and consumers.
Over the past decade, Chile has seen significant growth in distributed energy resources, particularly PMGDs, which now exceed 3,200 MW in installed capacity as of July 2024. This rapid expansion has been driven mainly by solar projects. However, PMGDs are currently facing challenges due to infrastructure constraints and recent changes in their economic regulatory framework.
The primary issue is congestion in the grid caused by the high concentration of solar generation during the day, which limits the ability of PMGDs to inject energy. Additionally, regulatory adjustments have altered the previously favourable conditions for PMGDs, creating uncertainty in the sector.
Energy storage is emerging as a critical solution to these challenges. By shifting energy from daylight to night time, storage can alleviate grid congestion and enhance flexibility. Market trends reflect this, with a majority of new projects now incorporating storage facilities. In response, regulators are updating the framework to recognise the benefits of storage, enabling PMGDs to navigate transmission limitations and continue contributing to Chile''s energy landscape.
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