How gas interests slowed Chile’s clean energy transition

FILE – Solar panels stand in the Quilapilún solar energy plant, a joint venture by Chile and China, in Colina, Chile, Aug. 20, 2019. Chile has long held itself out as a global leader in the fight against climate change and now nearly 22% of Chile’s power is generated by solar and wind farms, putting it far ahead of both the global average, 10%. (AP Photo/Esteban Felix, File)

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RIO DE JANEIRO (AP) — Chile holds itself out as a global leader on climate change. Nearly 22% of Chile’s electricity is generated by solar and wind farms, putting it far ahead of both the global average, 10%, and the United States, at 13%. In 2008, Chile was the first country to declare a target for renewable energies.

Despite the growth of solar farms in the northern and central regions of the country, the government has made it possible to import natural gas, which is a polluting fossil fuel, to offset the clean electricity they provide.

Marcelo Mena, a former Chilean environment minister, saw the waste of clean energy before he became the head of the Global Methane Hub, an organization that aims to reduce global methane emissions. Natural gas is basically methane.

”They’re actually hindering the power that we can deliver from renewable energy,” Mena said of his experience with natural gas in an interview with the Associated Press. “It’s been more of an opposition towards 100% renewable target.”

Mena was disillusioned when he saw the decline in renewable energy from fossil fuels in the northern part of the country, the area where the sun is most abundant.

“At the same time, in the south of Chile, there is a big lack of natural gas for heating and people are heating themselves with wood and choking on it. It was such a big contradiction,” said Mena. “That’s my personal journey.”

Chile offers a glimpse into how fossil fuel companies can stay on top even under governments that are trying to promote clean energy.

The shock that caused Chile’s energy transition was in the mid 2000s when Argentina dramatically reduced its gas exports to Chile in order to focus on its domestic market. Chileans had to endure power rationing and frequent blackouts.

After much effort, the nation finally found a solution.

Chile has some of the most intense and consistent sunlight on the planet, particularly in the Atacama Desert in the north. The country was naturally able to attract investment in solar and wind projects through public bidding and quotas that required electricity providers to offer a minimum amount renewable energy.

Investors heard their call. Developers built hundreds of solar and wind plants in the country that stretches 4,300km (2.700 mi) from north to south.

The devil was in details. To provide power when the sun wasn’t shining, the government also invested heavily in fossil fuel infrastructure.

Natural gas importers and gas-fired plant owners successfully argued that in order to secure long-term gas contracts, they needed to be sure that the Chilean power grid would accept their gas-fired electricity, even if other, more powerful generators were producing plenty of power.

Colbun, Chile’s power generator, said that the sector is vulnerable because of international contracts where LNG importers must pay for gas regardless of whether they use it or not.

“It is important that the regulations recognize this condition so that the electricity market has enough natural gas to ensure the safety and competitiveness of the system,” the company said in an emailed response to the AP.

The government allowed them to declare electricity from LNG imports as “forced gas,” meaning gas-fired electricity was given priority on the power market, which otherwise favors renewables.

“Any situation in the electricity market that preferences fossil fuel, taking space away from renewables, is a loss for the environment and for the energy transition,” said Ana Lía Rojas, who leads the Chilean Association of Renewable Energies and Storage.

Another consequence of forcing gas-fired electric electricity into the market was that it lowered electricity costs for all providers, which meant they got paid less. Alfredo Solar, a manager of a solar plant, stated this: “It also caused electricity prices to drop for all providers. This is because it forced gas-fired electricity in the market.

“I have worked in solar plants that, for example, were in default because the market price was much lower than what was projected,” Solar said, stressing that providers of renewable energy operate without contracts and depend on those revenues.

Climate change is driven mainly by the emissions from burning oil, gas, or coal for electricity, transportation, or other purposes. Last year, researchers calculated that nearly 60% of the world’s oil and gas reserves and 90% of the coal reserves need to stay underground by 2050 in order to meet the goals of the Paris Climate Agreement.

Methane, or natural gas, is a powerful greenhouse gas and has a greater impact on the environment than carbon dioxide in the short-term. Methane traps heat 84 times more effectively than carbon dioxide over a 20-year period, making methane reduction one of the fastest routes to reducing global warming, experts said.

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At the U.N. Climate Summit in Glasgow, Scotland, November, the Biden administration, European Union, and dozens other countries pledged to reduce global methane emissions by 30% by 2030.

The Chilean government decreased the advantage granted to natural gas power providers last year. Their power enters the grid at an affordable price, but it is not meant to replace renewables. Yet the concept of “forced gas” still exists, and renewable advocates in Chile say the changes are not enough.

Battery storage is rapidly replacing new gas-fired power plant because it can provide electricity to grid even when the sun goes down or the winds are not blowing. This amount of stored electricity has increased 1200% over five years in the United States. Installed in 2021, this amount was equal to the output of three nuclear reactors. This was twice as much as the previous year.

But large-scale battery storage is still too expensive to be widely used in Chile, said Daniel Salazar, former executive director of Chile’s northern power grid, now with consultancy firm EnergiE. “Chile has several projects, but they are still high-cost solutions that do not compete with other options,” Salazar said.

Rojas, a member of the Chilean renewable energy organization, supports natural gas. “Natural gas is the fuel of the energy transition, the technology that will allow us to make those adjustments, as long as it never takes space away from renewables,” she said.

Natural gas is being considered less attractive in many countries as a fuel for the energy transition. That’s because the fuel is only more climate-friendly than coal if it does not leak out and is not deliberately released from wells and infrastructure along its path to the power plant. But studies and satellite imagery show both things do happen.

According to the Association of Power Generators, solar power should account 30% of Chile’s total installed electricity capacity by 2030. That would make it the nation’s largest source of power.

Mena, the former environment minister said that the old energy companies used to tell Mena that the phaseout of fossil fuels is a long process. He stated that five years ago people told him that the price of solar couldn’t fall. It did. “My take-home message is change comes from unreasonable people,” willing to go up against what is supposedly impossible, he said pointing to Chile’s large and growing clean energy sector. “We need unreasonable people making that change.”


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