Journey Through the Andes: An exploratory approach to unveiling the Renewable Energy Potential with ACWA Power

After an enlightening visit to ACWA Power 's state-of-the-art facilities in Dubai a couple of weeks ago with 瑞士洛桑国际管理发展学院 (IMD) - 商学院 , I found myself inspired by the company's innovative approach to sustainable energy. The hum of cutting-edge machinery and the buzz of ideas in those halls ignited a thought: What if ACWA Power's expertise could be brought to my homeland—the majestic Andean region of South America? With over a decade of experience working in the region, I knew firsthand the untapped renewable energy potential nestled among the peaks and valleys of the Andes.

Eager to explore this possibility, I embarked on a journey through the region, inviting you to join me as we traverse landscapes rich in natural beauty and opportunity. Together, we'll uncover how ACWA Power can illuminate the Andean energy landscape, fostering sustainable development and bridging continents in the process.

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The Sun-Kissed Expanse of the Atacama Desert

Our adventure begins in northern Chile, where the Atacama Desert stretches out like a vast, sun-drenched canvas. Standing under the cloudless sky, I felt the intensity of the sun—a relentless force that bathes the desert in over 2,800 kWh/m2 of solar irradiance annually, according to the Chilean Ministry of Energy.

As we traverse the rugged terrain, it's impossible not to envision solar panels shimmering under the sun's rays. The Atacama isn't just the driest place on Earth; it's a solar treasure trove waiting to be harnessed.

Imagine ACWA Power's Noor Energy 1 CSP plant replicated here, its mirrors capturing the sun's energy and converting it into 950 MW of power with 15 hours of thermal storage. This technology could provide Chile with continuous, reliable renewable energy, addressing grid stability issues caused by the intermittency of solar power.

Relevant Laws and Incentives:

• Chilean Energy Policy 2050 (Updated 2023): Chile aims to achieve 70% renewable electricity generation by 2030 and 95% by 2050.
• Law 20.936 (2016): Establishes a new regulatory framework for the electricity transmission system, promoting open access and encouraging the integration of renewable energy sources.

As the sun set, painting the sky with hues of orange and pink, I reflected on the synergy between ACWA Power's expertise and Chile's renewable ambitions. The desert's silence was broken only by the whisper of the wind—a reminder of the untapped potential that surrounds us.

The Whispers of the Wind in La Guajira

Our journey continued northward to Colombia's La Guajira Peninsula, a land where the wind speaks in steady whispers. The warm breeze carried stories of the Wayuu people, the indigenous community that calls this place home. With wind speeds averaging 9 to 11 m/s, as per the Global Wind Atlas, La Guajira is one of the most promising regions for wind energy globally.

Walking along the rugged coastline, we met María, a Wayuu elder who shared tales of the wind's significance in their culture. "The wind is our companion," she said. "It brings life and movement."

Drawing from its experience with the 140 MW Khalladi Wind Farm in Morocco, ACWA Power could help Colombia reach its goal of adding 4 GW of renewable capacity by 2030, as outlined in the National Energy Plan they currently have in place.

Relevant Laws and Incentives:

• Law 2099 (2021): Promotes non-conventional renewable energy sources by offering incentives like VAT exemptions, customs duty exemptions, and income tax deductions up to 50% over 15 years.
• Decree 829 (2020): Simplifies the procedure to obtain tax benefits for renewable energy projects.

Sitting with María, we discussed the importance of involving local communities in such projects. I recalled how Enel Green Power, an Italian renewable energy company, successfully developed the 286 MW Cerro Pabellón geothermal plant in Chile by engaging with indigenous communities, respecting their traditions, and providing employment opportunities. This approach could serve as a model for ACWA Power in La Guajira.

The High-Altitude Promise of Peru's Andes

Ascending to the highlands of southern Peru, we arrived in regions like Arequipa and Moquegua, perched above 2,500 meters. The air was crisp, and the sky an unparalleled shade of blue. Here, the sun felt closer, its rays stronger—a fact supported by the 6.5 kWh/m2/day of solar radiation these areas receive, according to the Peruvian Ministry of Energy and Mines (MINEM).

We visited a small village where alpacas grazed against the backdrop of snow-capped peaks. The community relied on limited electricity, and the potential for solar power was both a beacon of hope and a practical solution.

By deploying high-efficiency PV panels designed for high-altitude conditions, ACWA Power can aid Peru in achieving its enhanced NDC goal of 20% renewable energy generation by 2030.

Relevant Laws and Incentives:

• Legislative Decree No. 1058 (2021): Offers long-term PPAs and prioritizes grid access for renewable projects.
• Supreme Decree No. 018-2022-EM: Initiates new rounds of RER auctions, aiming to add 2 GW of renewable capacity by 2025.

I recalled how in 2018, the Spanish company SolarPack successfully completed the 123 MW Montalvo Solar Plant in the Moquegua region, overcoming logistical challenges by using local labor and adapting technology to high-altitude conditions. Their experience demonstrated that with careful planning and community engagement, large-scale solar projects are feasible in these remote areas.

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Navigating the Complex Tapestry of Policies and Incentives

Our travels had shown us the immense potential across the Andean region, but realizing this potential requires navigating a complex web of policies and regulations.

Chile's Investment Climate:

Chile stands out for its stability and transparency. The Foreign Investment Statute (Decree Law 600) guarantees non-discriminatory treatment, while the Updated Transmission Law (2016) facilitates the integration of renewable projects.

In 2017, Mainstream Renewable Power secured contracts for 1.3 GW of wind and solar projects in Chile's energy auction by offering competitive prices and leveraging favorable regulations. Their success underscores the opportunities available under Chile's supportive policies.

Colombia's Energy Transition:

Colombia's National Development Plan 2022–2026 and the Roadmap for Offshore Wind Energy (2022) signal a strong governmental push towards renewables. When EDP Renewables entered Colombia in 2020, they partnered with local companies to navigate regulatory processes, securing a foothold in the burgeoning market.

Peru's Regulatory Reforms:

Peru's Unified Environmental Licensing System (2021) and Public-Private Partnership Law (Legislative Decree No. 1362) have significantly reduced administrative hurdles. In 2019, Italy's Enel Green Power was able to expand its Rubí Solar Plant to 180 MW, benefiting from streamlined permitting processes.

These frameworks are the bridges that connect opportunity with action and understanding them is key to ACWA Power's successful entry into the market.

Meeting the Rising Tide of Energy Demand

Back on the ground, we witnessed the bustling cities and expanding industries driving up energy consumption.

• Chile: With a projected 4% annual increase in electricity demand, fueled by the mining sector, the National Energy Commission (CNE) underscores the urgency for new energy sources as of today.
• Peru: Anticipating a 5% annual growth, MINEM highlights the need for an additional 3 GW of capacity by 2030.
• Colombia: The UPME's forecast of a 3.5% annual increase reflects the country's industrial ambitions.

Financing the Future:

The financial landscape is supportive. Chile's issuance of $7.7 billion in green bonds demonstrates investor confidence. Notably, in 2020, AES Gener (now AES Andes) issued a $450 million green bond to finance renewable projects in Chile, showcasing how companies are leveraging these instruments.

Organizations like the IDB and GCF offer substantial funding. For example, in 2021, the GCF approved a $195 million investment for renewable energy projects in Latin America, indicating the availability of international funds to support such initiatives.

These economic currents create a favorable environment for ACWA Power to invest in and contribute to the region's energy future.

Overcoming Technical and Environmental Challenges

As we delved deeper, we confronted the technical hurdles of integrating renewable energy into existing grids.

Grid Enhancements:

• Chile's Kimal-Lo Aguirre HVDC Project: A 1,500 km transmission line enhancing north-south energy transfer by 2029. Companies like Transelec are investing in grid upgrades, setting precedents for collaboration between private firms and the government.
• Peru's $4.5 Billion Grid Investment: Outlined in the Transmission Plan 2023–2032, this initiative opens opportunities for public-private partnerships. In 2017, ISA Interconexión Eléctrica S.A. won the concession for the 500 kV Mantaro-Nueva Yanango-Carapongo transmission line, demonstrating successful foreign participation.

Technological Innovations:

• High-Altitude Solutions: Implementing double-glass PV modules to withstand harsh conditions. Canadian Solar utilized such technology in the 100 MW Cafayate Solar Project in Argentina's high-altitude Salta region.
• Energy Storage: Utilizing vanadium redox flow batteries for large-scale storage. In 2020, Sumitomo Electric installed a 51 MWh flow battery system in Japan, proving the viability of this technology for grid stabilization.

These advancements can help ACWA Power overcome logistical challenges, making projects not just feasible but also efficient and sustainable for the region.?

Embracing Cultural Richness and Community Partnerships

Our journey reinforced the importance of cultural sensitivity.

Engaging Indigenous Communities:

• Community Benefit Agreements: Proposing initiatives like allocating 1% of annual revenues to community projects can make a significant difference. When the Hidroeléctrica Ituango project in Colombia allocated funds for local development, it helped mitigate community opposition.

Sitting around a communal fire in a Peruvian village, we listened to elders speak of their aspirations. They sought progress that honored their traditions—a balance that ACWA Power can help achieve.

Corporate Social Responsibility:

• Education and Training: Establishing scholarships and vocational programs. Siemens Gamesa, during its wind projects in Mexico, launched educational initiatives that benefited over 1,000 students, enhancing community relations.
• Environmental Stewardship: Partnering in reforestation and conservation efforts, aligning with the UN Decade on Ecosystem Restoration. In Chile, AES Andes has been involved in reforestation projects, planting over 500,000 native trees to offset carbon emissions.

Navigating Risks and Building Resilience

No journey is without its risks, but foresight and planning can mitigate them.

Financial Safeguards:

• Currency Protection: Using PPAs indexed to the U.S. Dollar and incorporating polynomial tariff adjustment formulas. For instance, in Peru's RER auctions, tariffs are adjusted annually based on U.S. inflation rates, providing revenue stability for the investment.

Political and Legal Protections:

• Risk Insurance: Securing coverage from MIGA or ECAs. In 2018, the Lake Turkana Wind Power project in Kenya, valued at $700 million, obtained political risk insurance from MIGA, facilitating financing and protecting investors against political uncertainties.

Forging Strategic Alliances

As we neared the end of our journey, the importance of collaboration became evident.

Local Partnerships:

• Chile: Alliances with AES Andes, which has a significant renewable portfolio, could provide local insights. In 2019, AES Andes partnered with Google to supply renewable energy to its data centers, showcasing successful collaboration.
• Colombia: Collaborations with ISA Intercolombia can aid in navigating grid interconnections. ISA's extensive experience in transmission projects makes it a valuable ally.

Development Bank Engagements:

• CAF and EIB: Offering financial support and technical assistance. In 2021, the EIB provided a €150 million loan to Enel Green Power for wind projects in Brazil, indicating their willingness to fund renewable initiatives in Latin America.

Capacity Building:

• Training Centers: In partnership with leading universities like the Pontificia Universidad Católica de Chile, ACWA Power can establish programs to develop local talent. Similar initiatives by Siemens in Brazil have resulted in over 2,000 trained professionals.

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Illuminating the Andes Together

As our journey concluded, we stood atop a hillside overlooking a tapestry of possibilities—a region ripe for transformation through sustainable energy. The Andean countries are not just locations on a map; they're vibrant communities with rich histories and bright futures.

ACWA Power's entry into this landscape isn't merely about expanding business; it's about forging connections, sharing knowledge, and contributing to a global mission of environmental stewardship.

By integrating technological expertise with cultural understanding and strategic planning, ACWA Power can illuminate the Andean region, fostering growth that resonates from the highest peaks to the deepest valleys.

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