Chile 93
households could fall into energy poverty and which specific households would
be affected if energy prices were to increase. This tax, by increasing the prices of
the electricity sector, indeed decreases poor households’ budgets. Thus, focused
compensation measures for those most negatively impacted by rising electricity
prices could ensure some distributive justice and mitigate this risk. Such compensation measures have limited fiscal costs, which makes them quite attractive.
Additionally, non- quantifiable risks associated with a low- carbon energy transition are based on expert perception only and stakeholder perspectives are considered to make a robust analysis in this chapter.
The current Chilean low- carbon pathway
The geographic characteristics of Chile make the country one of the most
potential markets for renewable energy expansions. Specifically, the leadership
of Chile in solar investments is observed through the significant and fast growth
of installed capacity from 2012 to 2017. According to the International Renewable Energy Agency (IRENA, n.d.), in 2012 Chile had 2 MW of solar photovoltaic (PV) installed, and by 2017 was leading in Latin America with
2110 MW of solar PV installed. This ‘solar revolution’ means an average rate of
302% growth by year. Comparing with the rest of the region, Chile has 58.6%
of the installed capacity in 2017.
Four main drivers explain this expansion. First, the observed average growth
of the per capita electricity demand of around 4% in the last 46 years. Second,
the natural potential of Chile concentrated in the Atacama Desert in the north
of Chile, the driest desert in the world with an estimated solar potential for
electricity generation of nearly 1000 GW or five times the present peak load of
all South America. (Jiménez-Estevez et al., 2015). The third driver is the
absence and cost of possible substitutes like the natural gas that in the past
achieved US$15 per thousand cubic feet. In the case of coal there is an official
agreement for decarbonisation, signed by the industry and the government, that
prevents new investment in this fuel in the future (Generadores de Chile,
2018), plus carbon pricing through the implementation of carbon tax. The
fourth driver is that the success of this industry was based without fiscal transfers
or subsidies. An example of this is the tender for the sale of electric power in
2016, where the company Solarparck Corp Tecnologica was awarded 120 MW
of solar energy at US$29.10 MW per hour, practically half the cost of a coalfired plant in Chile.
To take advantage of these four drivers, actions are needed to: (1) create a
more sustainable electricity sector by 2025 to facilitate the entrance of new
competitors; (2) interconnect the two main electricity systems, the Central
Interconnected System (Sistema Interconectado Central, SIC) and the Northern Interconnected System (Sistema Interconectado del Norte Grande, SING);
and (3) promote energy efficiency and clean technologies.
The implementation of these actions requires, however, significant private
investment in the sector, which is expected to trigger economic growth.
households could fall into energy poverty and which specific households would
be affected if energy prices were to increase. This tax, by increasing the prices of
the electricity sector, indeed decreases poor households’ budgets. Thus, focused
compensation measures for those most negatively impacted by rising electricity
prices could ensure some distributive justice and mitigate this risk. Such compensation measures have limited fiscal costs, which makes them quite attractive.
Additionally, non- quantifiable risks associated with a low- carbon energy transition are based on expert perception only and stakeholder perspectives are considered to make a robust analysis in this chapter.
The current Chilean low- carbon pathway
The geographic characteristics of Chile make the country one of the most
potential markets for renewable energy expansions. Specifically, the leadership
of Chile in solar investments is observed through the significant and fast growth
of installed capacity from 2012 to 2017. According to the International Renewable Energy Agency (IRENA, n.d.), in 2012 Chile had 2 MW of solar photovoltaic (PV) installed, and by 2017 was leading in Latin America with
2110 MW of solar PV installed. This ‘solar revolution’ means an average rate of
302% growth by year. Comparing with the rest of the region, Chile has 58.6%
of the installed capacity in 2017.
Four main drivers explain this expansion. First, the observed average growth
of the per capita electricity demand of around 4% in the last 46 years. Second,
the natural potential of Chile concentrated in the Atacama Desert in the north
of Chile, the driest desert in the world with an estimated solar potential for
electricity generation of nearly 1000 GW or five times the present peak load of
all South America. (Jiménez-Estevez et al., 2015). The third driver is the
absence and cost of possible substitutes like the natural gas that in the past
achieved US$15 per thousand cubic feet. In the case of coal there is an official
agreement for decarbonisation, signed by the industry and the government, that
prevents new investment in this fuel in the future (Generadores de Chile,
2018), plus carbon pricing through the implementation of carbon tax. The
fourth driver is that the success of this industry was based without fiscal transfers
or subsidies. An example of this is the tender for the sale of electric power in
2016, where the company Solarparck Corp Tecnologica was awarded 120 MW
of solar energy at US$29.10 MW per hour, practically half the cost of a coalfired plant in Chile.
To take advantage of these four drivers, actions are needed to: (1) create a
more sustainable electricity sector by 2025 to facilitate the entrance of new
competitors; (2) interconnect the two main electricity systems, the Central
Interconnected System (Sistema Interconectado Central, SIC) and the Northern Interconnected System (Sistema Interconectado del Norte Grande, SING);
and (3) promote energy efficiency and clean technologies.
The implementation of these actions requires, however, significant private
investment in the sector, which is expected to trigger economic growth.