Whenever we hear almost daily that big projects are delayed or halted by the energy factor, the idea of “abundance” seems taken from a science fiction novel. However, that’s exactly what’s happening in Chile. The local solar industry expanded with such speed and aggressiveness that in some regions of the country the price of electricity fell to zero during the first four months of the year. Of course, the main beneficiary is the consumer, but the owners of solar farms and distributors tell a different story.
An episode of the old series seaQuest (if I’m not mistaken, it’s the season one finale) tells of a power plant capable of generating electricity for the whole world, free. As expected, that vision ends with a couple of explosions, but if we bring it into the real world, it seems even more absurd. Free energy? Who’s willing to give away energy these days? Unless an independent consumer decides to install their own solar solution and “cut the cord,” there’s no other option but to pay. In fact, some economists who play at being futurologists (a bit too much, because they always do that) explore a future where energy will be the new “currency,” replacing metals and bonds. But something very particular is happening in Chile. The country holds a clear advantage in installed solar capacity compared to its neighbors, and its expansion was so great that it produced an unexpected effect: giving away electricity.
The “spot” or “immediate delivery” price fell to zero in several regions of the country during the first 113 days of the year up to April, a number that seems destined to easily surpass the 192 days recorded in all of 2015. Just as many regions of the world saw lower fuel prices due to the sharp drop in oil, the fact that there is an oversupply of solar production in Chile undoubtedly benefits “retail” consumers, but the situation forces us to read between the lines. The initial increase in demand linked to mining activity led to the development of 29 solar farms, with another 15 under construction. The problem is that the global economy shows clear signs of slowdown, and there is a glut of copper on the market. Chile is the number one producer and exporter of that metal, and if mining activity declines, the excess solar capacity explains itself.
Needless to say, investors are crying over the idea of red numbers. According to Rafael Mateo, CEO of Acciona's energy division, the growth of the solar industry in Chile was “disorderly,” because “there cannot be so many developers in one place.”
Added to this is another problem: the lack of infrastructure. Chile's two main grids are not connected to each other, and won't be until at least next year. This prevents any balance in tariffs, and prices will continue to be low or reach zero in some parts of the country, while others pay the full amount. The news leaves a bittersweet taste, if you will: free energy helps the consumer's pocket, but it could “freeze” solar development in Chile in the long term.
