Chile has long been a pioneer in adopting renewable energy and energy storage – dating back to the world’s first commercial grid-scale battery-based energy storage system in 2009 – setting an example for other countries in the region and around the world to follow. In partnership with one of our parent companies, AES, Fluence is proud to help continue driving clean energy’s progress in Chile, delivering what will be Latin America’s largest solar + storage project, pairing 180 MW of solar energy with a 112 MW, five-hour duration energy storage system, slated for completion in 2021.
Chile: charting a path to decarbonization
Chile has set a timeline for decarbonizing its electric grid – shutting all coal-fired plants before 2040 – and is already recognizing a variety of benefits from renewable energy investments, including greater energy independence, improved grid reliability, lower costs, new jobs and more investment capital – all as the country and the world seek to recover from the effects of the global pandemic.
Nowhere is Chile’s leadership on clean energy more pronounced than in the northern part of the country. The Antofagasta Region in the Atacama Desert is geographically remote and harsh, making traditional large-scale infrastructure projects challenging, yet is also a hub of critical mining operations that require large amounts of power. The region also has some of the highest solar radiation in the world. The confluence of market structure changes, decarbonization goals, high solar energy penetration and transmission constraints is creating ideal conditions for an energy storage boom in Northern Chile.
The next evolution of energy storage
Renewable energy and energy storage technologies are ideally suited for precisely this kind of environment and application, as evidenced by AES Gener’s recently announced Andes Solar II B solar + storage megaproject. Combining 180 MW of solar power generation with a 112 MW / 560 MWh battery, Andes Solar II B will be the largest lithium-ion battery-based energy storage system in Latin America. Designed using Fluence's 6th generation Tech Stack, the project's DC-coupled Sunstack™ energy storage system will allow solar energy to be stored for five hours, providing firm power well after sunset and supporting AES Gener’s Greentegra strategy.
The Andes Solar II B project is noteworthy not merely for its scale and technological sophistication (integrating DC-coupled energy storage and solar is extremely complex), but also because it represents a significant evolution in the energy storage industry - namely, using energy storage to reduce exposure to a number of market risks. The energy storage essentially provides a generator with a technology-based “insurance policy” against zero or high spike pricing events or curtailments effects, and consequently improves the amount of energy available to fulfill power purchase agreements. Furthermore, energy storage provides enough duration to ensure sufficient stored solar power is available when needed to meet system peak load hours, increasing capacity payments.
Energy storage driver #1: falling renewables generation costs paired with new revenue streams
Recent policy and market developments have put pressure on renewable energy developers in Chile and are driving increased interest in energy storage. In 2014, the Chilean government created a tender mechanism that supported wind and solar developers by setting up auctions to supply power during specific “time blocks” during the day. (The winners of the 2017 auctions were all renewables projects.)
As Bloomberg New Energy Finance outlined in its 2019 report on the Chilean power system, this tender design “improve[d] the competitiveness of intermittent sources such as wind and solar by allowing their developers to bid most aggressively for the blocks when they could best serve the market. Such tenders have been technology-blind, meaning renewables have competed directly with fossil sources of generation. As wind and solar costs fell, those technologies became increasingly competitive.”
Renewable energy developers who won Chile’s 2017 long-term electricity auctions and now have contractual obligations with Chilean distribution companies are exposed to the spot market – competing against a steadily scaling amount of solar generating at similar times of day, with the potential to drive prices to zero or even negative territory. The ability to store and redispatch hours of solar output to peak demand times can help mitigate this risk.
Furthermore, the fact that Chile’s regulation already includes capacity payments for long duration storage, an intraday price differential, and an ancillary services market is also driving interest in energy storage. The technology’s ability to capture multiple revenue streams -- capacity, arbitrage, and ancillary services, for example -- make energy storage a very attractive proposition in Chile.
Energy storage driver #2: congestion on transmission corridors connecting generation and load
However, growing Chile’s share of electricity from renewables further is not only a matter of storing and using solar energy where it is generated or when it is needed, but of getting that energy where it needs to be. The Chilean grid – like many other grids around the world – is challenged by the large amounts of variable renewable generation assets being deployed where solar potential is best but also often far from load centers with limited transmission capacity in between. The extreme remoteness of the Antofagasta region compounds the problem: upgrading existing lines or building new transmission infrastructure to carry more excess solar energy over the vast distances from the desert in the north to where the load concentrates in the center of Chile would be extremely costly.
However, battery-based energy storage is a uniquely flexible asset that offers a resource to manage transmission line investments while relieving congestion on Chile’s network. Energy storage’s ability to both absorb and discharge energy make it ideally suited to fulfill transmission functions. Deploying battery-based energy storage as a transmission asset at specific nodes reduces congestion, increases use of existing transmission lines, and lowers system operation costs, as explained in a previous Fluence blog post on using energy storage as a “virtual transmission” asset in Chile and our white papers on “Redrawing the Network Map” and “Building Virtual Transmission.”
Chile is among the first movers in recognizing the value storage can provide to the transmission system, allowing storage-as-transmission projects to be submitted for consideration and inclusion in Chile’s National Transmission Plan. Grid planners are evaluating energy storage from an early planning stage in Chile and elsewhere and finding it a flexible and reliable resource for addressing a number of transmission and distribution network issues. In addition to Chile’s evaluation of energy storage as virtual transmission, Colombia’s regulator is also considering similar assets as a viable solution to increase transmission capacity, avoiding expensive local dispatches.
A replicable model
Longer-duration storage solutions like the Andes II B project being deployed by AES Gener and Fluence have already gained acceptance in the United States, notably in southwestern states and Hawaii. The conditions driving Chile’s new evolution in energy storage are setting the stage for similar projects across the country, as well as in other countries in the region. Latin America’s energy transition is picking up speed, and we expect projects like Andes II B to grow both in number and scale as utilities across the continent transform the way they deliver procure and power to consumers.
