Chile's Cheap Power - Sign of a Solar Future?

In Chile, Spain’s Solarpack Corp. Tecnologica has installed the first panels at its Granja Sola plant. The plant is due online by the end of the year, at which point it will become the cheapest generator of electricity anywhere in the world.

Earlier this year Solarpack won an auction to provide 123 megawatts (MW) of electricity at $29.10 per MWh, or $0.0291 per kWh at its Granja Sola plant. This breaks the current record held by Dubai’s Electricity and Water Authority (DEWA) which announced a deal earlier this year at $0.0299 per kWh.

While there has been increasing awareness of the strides made in cutting the cost of renewable energy technologies (solar for example has fallen 90% in cost over the last ten years), the argument is still often being made that coal is the cheapest form of generation. That is simply no longer true.

While renewable energy received subsidies in many markets to ensure a more level playing field, that trend is set to change. The Chilean project has no form of subsidy attached. Given the level of subsidies provided to the fossil fuel industry, which stood at EUR 55 billion in Europe alone in 2016, it seems likely that the fossil fuel industry needs to watch its back. Even if there is no desire to address climate change, as the US federal government’s withdrawal from the international Paris Climate Agreement, the health costs alone  should be a concern. In Europe the health costs relating to fossil fuel use outweigh taxpayer-funded subsidies by around 600%.

Local context is important, as Chile’s Atacama Desert (where the plant is located) is one of the driest areas in the world, with an enormous amount of insolation. Chile has been taking advantage of the opportunity, with IRENA reporting that solar capacity in the country doubled from 2016 to 2018 from 1.12GW to 2.13GW.

Pablo Burgos, chief executive of Solarpack said, “The Granja project will be one of the most efficient and competitive solar PV plants in the world and will generate more than 340 GWh of clean electricity every year, contributing to the decarbonization of the country's energy matrix". Off take agreements have been signed covering 2021 to 2040, with 25 regional distribution companies. The remaining energy produced will be sold through the spot market.

According to the IRENA report, Renewable Power Generation Costs in 2018, renewable power is already the cheapest source of electricity in many parts of the world. over three-quarters of the onshore wind and four-fifths of the utility-scale solar PV project capacity that is to be commissioned next year shows lower prices than the cheapest new coal-fired, oil or natural gas option.

At the same time, the total lifetime costs of new onshore wind and solar PV projects installed in 2020 and beyond are set to cost less than the operating costs of existing coal-fired plants, with system-wide planning keeping integration costs to a minimum.

At the beginning of 2018, IRENA’s analysis of auction and PPA data suggested that the global weighted-average cost of electricity could fall to just under five US cents per kilowatt-hour (USD 0.049/kWh) for onshore wind and five and a half cents per kilowatt-hour (USD 0.055/kWh) for solar PV in 2020. A year later, the potential value for onshore wind in 2020 has dropped a further 8%, to four and a half cents per kilowatt-hour (USD 0.045/kWh), while that of solar PV drops 13%, to less than five cents for kilowatt-hour (USD 0.048 /kWh). And in places like Chile, a lot lower.

What’s exciting about renewable energy however is the impact it can have on other sectors. The report says that cost decreases will unlock decarbonisation for industry, transport and buildings. IRENA’s analysis sees electricity use growing from less than one-fifth of energy demand to nearly half by 2050, largely on the back of cost-competitive renewables. And that means the future is electric, renewable and, best of all, cheap.

Source: Forbes
Date: Jun 5, 2019