Chile’s energy transition faces difficulties

RIO DE JANEIRO, BRAZIL – In recent years, Chile has seen exponential growth in renewable energy, becoming the second most attractive market for energy investment among emerging economies, according to Bloomberg New Energy Finance’s Climatescope 2021. However, Chile’s energy transition faces significant challenges.

Five coal-fired power plants were closed by 2021, with four more expected to follow by 2022. So by 2025, a total of 15 power plants are expected to be closed and three converted, representing 65% progress. By 2040, the 28 coal-fired power plants in Chile’s electricity generation system are expected to be permanently closed.

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However, getting there is difficult because of the drought that has plagued large parts of the country for more than a decade. Experts agree that the country will achieve carbon neutrality by 2050, which it committed to under the Paris Agreement, but point to the social and practical challenges of the transition.

NUMBERS ARE NOT ENOUGH

According to the National Energy Commission, 166 non-conventional renewable energy projects with a total capacity of 4473 MW were under construction in Chile last year. These projects represent half of the electricity generation already operating in the country (8695 MW) and are all expected to be operational by 2023.

Despite this expansion, the country was almost in the dark in the middle of last year, and there was a risk of a blackout. This forced the government to issue a decree with preventive measures to avoid rationing.

This decree is now to be extended until September 2022 by the government of new President Gabriel Boric, who takes office in March.

It was a perfect storm, with water scarcity playing a major role, but other unforeseen factors also came together.

The drought has meant that reservoirs used for power generation have recently barely reached more than half their capacity, often well below. Added to that was the failure of the first coal-fired power plants to cease operations, a crisis in the supply of diesel oil and technical problems at some plants.

“Not only did we have a very bad dry year, the worst in 70 years, but there were power plants that stopped operating,” explains Alvaro Lorca, a researcher at the Catholic University’s School of Engineering. In addition, he says, many resources that were supposed to be available for emergencies were not.

The scale of the crisis was such that there were considerations to restart closed coal-fired power plants, such as Ventanas 1 in the Valparaíso region, which has been shut down since December 2020. In the end, this did not happen, but this will not prevent these power plants from no longer having to be used in the future as part of the energy transition.

That’s partly because Chile will become drier even in the best-case climate change scenarios, so water scarcity will be a constant. “Every year we will have 2% less water,” Lorca explained.

For Felipe Pino, a lawyer with the nongovernmental organization Fima and the person in charge of the Just Transition project, it is a shortcoming that drought was not included as an important factor in the equation.

However, Lorca says there are many lessons to be learned from the drought. He believes coal plants could be closed by 2040 and that Chile will be carbon neutral by 2050, but changes need to be made.

One of them is reservoir management. “Thirty percent of Chile’s energy comes from water resources, so we need to manage them more intelligently,” he said.

A study assures that although no imminent deficit in energy supply is projected for the first quarter of this year, energy reserves could reach 15% of the total by the end of March if the current policy of operating reservoirs is not changed. This is the same percentage as when the precautionary regulation was drafted in August.

“The overly optimistic use of water and the closure of more coal plants could set us back to a very delicate year,” Lorca added. Therefore, he said, expectations that coal use will not decline should be tempered.

In addition, he said, it is important to realize that a stable and secure supply is not possible unless some of the retired coal plants are available as security. An example of this is what will happen to electricity generation from diesel plants in 2021, Lorca said. Demand increased so much due to the above conditions and the pandemic that neither supply nor logistics were sufficient.

CLIMATE JUSTICE

While Pino acknowledges that there has been great progress on the energy transition since Chile assumed the presidency of the 25th Climate Change Conference (COP25) in 2019, two things are still missing: a timeline for closing the remaining coal-fired power plants and a modern look at the transition process that will allow for effective climate justice.

“For those living in sacrifice zones, this process has started very late, and the cost of this delay should not be borne by communities,” he opined.

The so-called sacrifice zones are highly industrialized, populated areas or areas where certain highly polluting industries, such as coal-fired power plants, are located. For this reason, environmental justice is sought for those who live in these areas and suffer from pollution.

According to Pino, the transition has focused almost exclusively on labor conversion, which, while crucial, is not the only thing to consider. “Ecological restoration, rehabilitation and social security for communities are equally important,” he said.

At the end of 2021, the Strategy for a Just Transition in the Energy Sector was published to help update Chile’s Nationally Determined Contribution (NDC). The work, led by the Ministries of Energy, Environment and Labor, also included a public consultation.

This strategy, explained Carolina Urmeneta, head of the Climate Change Office at the Ministry of Environment, includes not only workforce transition measures, but also a plan to monitor the areas where coal-fired power plants are located to determine how they will fare after closure. Some of this work has already begun in the regions of Quintero, Puchuncaví, Huasco and Coronel.

“People will know how to improve their areas, what the quality of water and soils are, and what the sediment situation is in the bays,” she explained.

“Internationally, there are cases where the focus is on mitigation, which disregards what’s happening in the areas and puts off adaptation. And that is what we are trying to avoid in the Chilean energy transition,” she concluded.