Just five years ago, Chile’s energy prices were among the highest in Latin America. A few monopolistic utility companies dominated the sector, and Argentina had stopped selling natural gas to its neighbor. Facing the risk of blackouts, the private sector planned to open more coal-burning power plants and build hydroelectric dams that would have flooded Patagonia.
But mass protests soon followed. In 2010, the movement became so powerful that then-president Sebastián Piñera shut down the coal project Barrancones, even though its developer, GDF Suez, was following the law. While it was a win for the environment, the decision seriously harmed Chile’s business reputation.
Today, renewable power is on the rise, with energy investment surpassing mining investment in a nation that’s the largest copper producer in the world. Chile even started exporting electricity and natural gas to Argentina earlier this year.
So what brought on such a rapid change? In a word: competition. There were 84 bids during this month’s power auction, with the winners signing 20-year power purchase agreements. And in a surprising turn, three of Chile’s four largest generators failed to win a supply contract.
The biggest win went to Granja Solar, Solarpack’s project, a near impossible feat a few years earlier. Until recently, solar power couldn’t compete without subsidies, but the falling price of solar panels has made this form of energy more appealing. The average price has declined to a record low of 44.7 cents a watt for standard polysilicon panels.
The new plant will break ground in Northern Chile’s Atacama Desert, an ideal location given its position high in the Andes near the equator. It’s one of the sunniest and driest places in the world, making it a rich option when it comes to solar power.
The Chilean government is also on board. It plans to complete transmission lines that will deliver Granja Solar’s power to the entire country, which is why Solarpack bid so low, Molina told Bloomberg.
Solar power wasn’t the only success, either. Renewable-energy companies won more than half the contracts this time around. The lowest price for wind power was $31 per megawatt-hour, natural gas sold for $47, hydroelectricity for $60, and geothermal for $66, according to Bloomberg.
The triumph of renewable energy at Chile’s recent auction is a strong indicator that the energy sector is in transition. Companies looking to compete will need to adapt quickly if they want to remain competitive, which is a major win for both consumers and the environment.