The energy transition plays a fundamental role in achieving carbon neutrality by 2050. In order to achieve this commitment, Chile has committed to developing a safe, quality, reliable, efficient and environmentally compatible energy sector. Its commitments are aimed at improving its regulatory framework and energy policy, increasing the incorporation of renewable energies in the generation matrix, strengthening innovative technologies based on clean energy and promoting the decarbonization of its economy; all this within a process of inclusive citizen participation that has been accelerating over time.
In 2018, the government launched the 2018-2022 Energy Route focused on modernizing the regulations and policies of the sector, which consisted of the promotion of non-conventional renewable energies, the promotion of innovative technologies based on clean energy, efficient transport and improving the quality of life of citizens. For this, it developed several policy instruments such as: (i) updating the distributed generation law, which allows users up to 300kW to self-supply their consumption and inject surpluses into the electricity grid; (ii) the updating of the Nationally Determined Contribution (NDC), and (iii) the development of the electromobility strategy.
The impact of these new measures was reflected in the increase in the installed capacity of: solar and wind power, which went from 0.6% to 21.4% in the last ten years; distributed solar generation, which multiplied by four between 2018 and 2020; and total renewable energy generation, which reached 44% in 2019.
In this way, electricity generation is currently made up of:
The achievements made by Chile in recent years demonstrate its commitment to carry out a profound process of energy transition and thus be able to count on a clean, sustainable and decarbonized matrix. But the sector still faces three challenges:
- Have a regulatory framework and a long-term energy policy that allow the modernization of the sector and guarantee an affordable electricity service with clean generation (displacing polluting fuels such as firewood).
- Decarbonize the energy matrix to achieve carbon-neutrality, mainly associated with the removal of coal-fired plants, under fair conditions for the affected workers, and increase the flexibility of the network to incorporate more renewables and allow the correct operation of the electrical system.
- Implement a framework that enables and promotes innovation and new technologies, in particular electromobility and the take-off of green hydrogen in Chile, viable due to its enormous solar and wind renewable potential.
In order to support overcoming these challenges and accelerate the energy transition, the Inter-American Development Bank (IDB) approved a US$300 million loan. This is the second program in a series that was approved in 2021, which seeks to complement the reforms initiated in the first program and continue to consolidate the progress made by the Chilean government in perfecting the regulatory framework for the energy sector; through improvements in the regulation of the distribution market, encourage citizen participation in the use of clean energy, and promote the participation of more women in the sector.
Among the measures to accelerate the decarbonization process of the energy matrix, the programming of the voluntary retirement of 4 coal-fired power plants stands out, along with the publication of the Just Transition Strategy, which accompanies the closure process and new uses of these plants. This proposal puts people at the center, with fair, participatory, inclusive and sustainable enabling actions and measures, promoting the creation of jobs that improve people’s quality of life and safeguard the rights of the most vulnerable affected people.
The program will encourage the penetration of renewables, by replacing these coal plants with variable renewable energy generation plants. This will promote greater flexibility of the system, to maintain the stability of the electrical network. Additionally, it will promote measures to encourage innovation in new energy technologies; through the approval of the National Electromobility Strategy and the launch of the high-distance vehicle replacement program, aimed at impacting public passenger transport.
Finally, the program seeks to support the development of new energy sources essential to achieve a clean transition, as is the case of green hydrogen, through the beginning of the regulation that promotes the production, use and creation of a national market, following based on the guidelines of the National Green Hydrogen Strategy.
All this set of policies comprise an ambitious agenda that ratifies the great steps that Chile is taking to reach carbon neutrality by 2050 and 70% renewables in its energy matrix, in line with the Paris Agreement and the IDB’s commitments with the region and that are reflected in its Vision 2025 on issues of digital economy, actions against climate change, gender and diversity.