Why are we struggling with decarbonization, Part 3: Case Chile

Anyone who has been to Chile knows, the bright sun shines abundantly. Chile is actually very lucky: they have some of the best wind and solar resources of the world! The unique shape of the nation poses a challenge, though. The best wind potential is in the south, the best solar is in the north, and the people needing those resources are in the middle! Chile has set ambitious goals to generate 70% of its energy from renewable sources by 2030, to close down all fossil fuel plants by 2040, and to reach zero carbon electricity by 2050.?

Chile is really going for it and has an excellent chance at becoming the world′s first nation to totally decarbonize electricity! As they are suited to do. Last year over 17% of Chilean electricity came from solar power — giving it the distinction of being the country deriving the highest percentage of its electricity from solar in the world ! At the same time almost 11% came from wind power. Well done.?

W?rtsil? has recently been promoting to Chile a relatively straight forward way to speed up the decarbonization timeline and eliminate the remaining carbon by end of 2032, which they can do with only some 2+ % in additional costs!

This is all good news… But…

Chile has been focusing on adding renewables and has today similar situation as Germany (see part 1). They have installed a lot of renewables while also adding more inflexible coal power plants. Their last new coal plant (350 MW) was inaugurated just 4 years ago, in 2019; in 2022, coal produced 23% of Chilean electricity.

Chile is one of the very first countries to enter the decarbonization transition “dead end.” Coal plants are crucial for providing security of supply during the nights, but they cannot – due to their inflexibility - be closed down during the daytime hours of high solar radiation, which forces major curtailment of solar power, and major loss of revenue for solar investors, every day. At the same time, renewables have been pushing down prices on the day ahead electricity market, reducing earnings of all market players. Bankruptcies of solar investors are a real risk!

Even worse, as the coal plants do not fit the merit order during daytime hours, they are not paid by the market, which leads to a situation that they cannot cover their costs. As the system cannot operate without them during the nights, a deal with the devil has been made to pay the coal plant owners for daytime generation costs despite the facts that they aren′t needed, they cause major solar curtailment, and produce high carbon emissions!?

OMG. Obviously, Chile lacked a decarbonization plan while focused on adding renewables. This is the transition dead end I have been talking about.

Unfortunately all nations who have major inflexible firm power assets (coal, combined cycle gas, even nuclear causes the same but doesn′t produce carbon) in their power systems will head for the same dead end when adding renewables, unless they act early enough to gradually retire these plants. Initially, it was hard to see this situation coming but my advice to the world nations is to take action now to avoid the dead end, before wide solar curtailment starts! Thank you, Chile and Germany, for showing us the way!

Chile has of course recognized this problem and wants to close all coal plants by 2030. But the key question is: What is needed before we can do that!? Obviously, we need to have a power system that can serve the load day and night, on any weather conditions, without asking for coal to help!

The unfortunate truth is that retiring 5+ GW of coal power plants in Chile requires investments in almost 30,000 MW of new wind, solar, storage and flexible gas power plants. There is no fast and easy way out of the dead end.

Why do we need to install 5+ times more capacity in MW than we will close down??

Solar and wind power plants generate the bulk of the electricity

• 15 GW of solar plants in the North with 30+ % capacity factor
• 5 GW of wind capacity in the South with 50+ % capacity factors

8 GW of Battery Storage is needed to provide system stability, and to store and shift excess solar and wind generation for future use.

3 GW of flexible gas power plants located strategically in the grid to provide security of supply (firm power) under any and all weather conditions.?

What does this mean? It will take years to permit, finance and install 30 GW of new plants, and until then, coal will remain part of the system, forcing solar curtailment and increasing emissions and costs. Acting very fast, coal may still be retired by the end of this decade, but this obviously forms a major regulatory challenge for Chile on how to enable rapid private investments on the right quantities of? solar, wind, storage and flexible firm power.

In part one of this series on decarbonization, I explored why the world is struggling with goals to reach 100 percent renewable energy, even when those renewable sources of energy are widely available. This is exactly what we are seeing play out in Chile; an abundance of sun and wind, and a robust renewable energy plan is overshadowed by a continued dependency on fossil fuels without being able to rapidly ramp down their use.?

In part two of this series on decarbonization, I detailed how to make a long term decarbonization plan. Chile can harness the sun, and in doing so, get closer to the moon, i.e. achieve the moonshot of being the first decarbonized nation in the world!

In order to avoid the dead end, a coal replacement plan is key. Remember, coal produces most of our carbon emissions, and it has no role to play in the decarbonized future.

I assume one questions remains: Why would we build 3 GW of flexible gas power plants in Chile, while we are supposed to get rid of fossil fuels!? The answer is simpler than you might think:?

1. They are needed to fill in generation gaps and enable fast closure of coal power plants. They ensure that during longer cloudy and calm weather periods there is enough electricity for to serve the load.
2. They will – at the desired point of time – be converted to use green hydrogen derived fuels, and become part of the 100% carbon neutral solution, ensuring system reliability for many years to come.

Chile’s ambitious national hydrogen strategy projects that sustainable hydrogen derived fuels will be locally available after 2030.

Sustainability. Reliability. Affordability. These are our goals continuously during and after the transition to clean electricity. Proper planning with Supercomputers will help us get there, faster. Together we can do it!