Following the approval of the General Law of Electrical Services (Ley General de Servicios Eléctricos – LGSE) in 1982, Chile laid the basis for the creation of a competitive electric system that was pioneering at international level. The associated regulatory framework has been improved over the years, maintaining its original goal as a system operated at a minimum global cost, although the interpretation of this principle was evolving over time. This framework remained relatively stable until 2004, when through a change to the LGSE, made official by Law 19.940, modifies a set of aspects of the electricity market that affect all means of generation and others applicable exclusively to the Non-Conventional Renewable Energies (NCRE), improving its conditions of access to the market, providing the right to evacuate energy through distribution networks, granting exemptions from transmission charges to smaller scale NCRE projects, among other notable changes.
Later, in 2008, Law 20.257 became effective, which obliges electricity companies that sell to final customers provide a percentage of the energy marketed through NCRE projects, generating a fundamental change in the national electric market. This Law was updated by Law 20.698 of 2013, which increased the obligation percentages.
Even more profound changes have been experienced in the electricity market in recent years, with the regulation and refinement of new markets such as distributed generation of up to 9 MW (S.D. N°244 of 2005/2006 and S.D. N°101 of 2015), residential and commercial distributed generation (Law 20.571 of 2012/2014, modified in 2018 with Law 21.118), refinement to the system of regulated customers energy blocks bidding (Law 20.805 of 2015), structural reform to the planning, expansion and payment of transmission systems and the creation of a single independent coordinator of the electricity system (Law 20.936 of 2016). This law consolidates the efforts undertaken by the Chilean State to remove barriers to the incorporation of the NCRE to the national electricity generation matrix as a way to contribute to the objectives of economic efficiency, security of supply and environmental sustainability which govern Chile’s energy policy.
Finally, it is worth mentioning the new commitments in recent years related to the integration of NCRE, among them, the retirement and / or reconversion schedule of the coal-fired thermoelectric plants, the flexibility strategy and the green hydrogen strategy.
All these commitments, modifications to the national electric system and market have represented price signals and business models that are quickly captured by different decision makers in the electricity market. These signals are also perceived by potential investors of NCRE projects, both those currently present in the national electricity market and other potential new investors. This has led to an explosive development of NCRE projects in the national electric systems during the last 10 years, raising Chile as a Latin American leader in the development of projects of this type of technologies.
The aim of this document is to contribute to this process, providing an analysis of relevant aspects to the development of NCRE projects from the perspective of an investor or project developer, foreign and national, who may not necessarily have detailed knowledge of the Chilean electricity market. The analysis focuses on the process of integration and operation of NCRE in the market, without delving in great depth into aspects such as the evaluation of natural resource potential, technology selection, or financing schemes. This publication aims to be a guide and provide a conceptual basis for investors, project developers and other interested parties.