Thursday, July 26, 2018

Chile: Potential for Around 3,800 MW and Over USD 20 Billion in Investments for Geothermal Energy

The Geothermal Roundtable of Chile issues Final Report

The Geothermal Roundtable of Chile was a request from the Geothermal Council of Chile through its Chairman Mr. Gonzalo Torres Macchiavello to the Ministry of Energy. It was financed by the ESMAP/World Bank and counted with the active  participation of the industry, academia and social actors.

The process consisted of 13 workshop sessions held during 2017 and the preparation of the final report took place in the first semester of 2018 which ended covering two successive Government Administrations (from different political wings). 34 entities attended represented by an average of 40 people per workshop.

The Geothermal Roundtable focused on determining CAPEX, OPEX, modelling the insertion of the technology into Chile´s energy matrix, identifying barriers to entry and proposing Public Policies to provide incentives for geothermal development.

On July 12, 2018 the final report was released in a ceremony summoned by Mrs. Susana Jimenez (Minister of Energy of Chile) and attended by Mr. Gonzalo Torres Macchiavello. The final report includes the most important points raised by the industry and will play a crucial role in the development of the industry.

The Chile´s energy context where the study was developed is driven by:

  • Matrix Decarbonization public-private agreement:
    • Decommissioning schedule for existing power plants.
    • New thermal power plants only feasible with carbon capture schemes.
  • 100% Renewable energy matrix by 2040.
  • 2050 Chile Energy Policy and 2018-2022 Chile Energy Route.
  • Solar PV and Wind (intermittent renewables) explosive development in the recent years.
  • Rising need to cope with renewable intermittency and need for base-load.
  • Responsible copper and traceability in export products.
  • Regional development.
  • Chile has a competitive market with technology neutrality.
  • Chile is an OECD member.
  • Chile acquired compromises in COP21.

The Report brings 11 concrete measures/proposals which some of them will be implemented immediately and some others will require additional work to be developed. The most relevant ones are:

  • CNE – CommisiĆ³n Nacional de Energia (Regulator dependent of the Ministry of Energy):  It was concluded that without any changes to existing laws or regulations, the Energy Commission has complete legal authority to call, implement and conduct PPA auctions including award criteria for flexibility and/or security of supply as required by the needs and or constraints of the electric system.
  • Geothermal Projects Bids Requirements:   Geothermal projects were required to have one well drilled to be able to participate in the PPA Auctions for distribution companies. From now on this can be replaced by a report on the evaluation of the geothermal resource carried out, by a qualified third party, according to the criteria established in the “Canadian Geothermal Code for Public Reporting” or “Australian Code for Reporting of Exploration Results, Geothermal Resources and Geothermal Reserves” or the criteria used by the MiRIg Program (IDB). This avoids geothermal companies to spend USD 10 million upfront as previously required. 
  • Decarbonization:  Geothermal energy is described in the report as a flexible base-load technology for the system, and it also said that these technologies will have an opportunity when thermal technologies such as coal are forced to abandon the system, either for being obsolete, low competitiveness, or for political environmental reasons. Such opportunity has already started as a result of the recent decarbonization agreement signed between the Government and the main generation companies of the Country. 
  • Competitiveness of geothermal energy: Considering the results of the planning assessment made and with all the assumptions available at the time,  geothermal energy in Chile will be competitive with other base-load technologies such as LNG and CSP.  It is also stated that with the development of the Chilean geothermal industry and technology advances geothermal energy costs will probably reduce and become more competitive.
  • Capacity Payments:   The capacity payment system requires modernization.  Not only the allocated criteria, but also the price determination mechanism needs to be modified in order to adapt the system for current and future security needs.  This review will be further developed as part of the 2018 – 2022 Energy Route.

In the 2018 GEOLAC Conference held in Mexico City the week of July 16 The Geothermal Council of Chile had the opportunity to present their view and importance of geothermal energy in the future energy matrix and their important contribution to the renewable base load required by Chile´s future energy matrix. Mr. Torres Macchiavello commented “the Geothermal Roundtable report shows the tremendous potential that Chile has for the development of this technology and that when there is goodwill it possible to work close with the Government in proposing real solutions for the Country development”.

Also members of the Ministry of Energy of Chile attended and had the opportunity to share their views about this abundant energy source in the country.

Currently Chile has over 25% of the world’s active volcanoes, and that their exploitable potential, based on existing exploration work the potential is around 3,800 MW and can bring over USD 20 billion in investments.