PV Insider LATAM 2013

Organized by:

PV in Chile A Guide to Opportunities

Contents

• Creating a profitable PV Plants in a competitive energy market • Electricity generation and transmission in Chile • Solar Plants operational and in development

www.pv-insider.com/chile In association with:

PV Insider LATAM 2013

1st Latin America PV Conference & Exhibition

10-11 September, Santiago, Chile In partnership with PV Insider Latin America (10-11 September 2013), PV Insider has provided you with an exclusive overview on the opportunities for utility scale PV projects in Chile, alongside a comprehensive map of how developers are currently taking advantage of the opportunity. The aim of this guide is to help you develop, finance and build commercially successful PV plants to secure your

share of the solar opportunity in Chile. In the following pages you’ll get a glimpse of the key topics which will be addressed in greater detail at the event. To find out more about the only solar PV focused event in Chile, and to see the full line up of speakers and agenda, visit the website:

www.pv-insider.com/chile

PV in Chile - A guide to opportunities Creating profitable PV plants in a competitive energy market

Chile’s energy crisis With a traditional reliance on fossil fuels and an insecure fuel supply, electricity prices for consumers in Chile are amongst the highest in the world. A lack of domestic production means Chile is vulnerable to international fluctuations and changes in the supply chain. In recent years drought has hit hydroelectric generation hard leading to widespread power cuts. In 2011 water accumulated in hydroelectric facilities fell by 32 per cent from 2010.

2012 and 2013 have been landmark years for the development of solar power in Latin America. Whilst the whole region is becoming an exciting market for photovoltaics (PV), the fastest growing and largest market for utility scale solar power is Chile. With nearly 100 developers now established in the country, the global PV community has quickly realised that Chile presents a solar opportunity like no other in the world.

That being said, Sebastian Piñera the current president has recognised the need for Chile to increase its energy independence to not only reduce costs but to secure supply. In 2010 law 20257 was passed, requiring that 5% of energy produced by IPPs had to come from non-conventional renewable energy (NCRE) by 2015 and 10% by 2024. Non-compliance currently results in a fine of 0.4UTM per MW not-obtained from NCRE. Whilst modifications were made to increase the 10% obligation to 20% by 2024, it was soon realised that this was not achievable with the current grid and for the time being 10% by 2024 is the target.

A number of factors distinguish Chile as an exciting solar market. Firstly, Chile’s high global horizontal irradiance (GHI) areas correspond with the location of many of Chile’s prospective solar customers- the mining companies with high energy demands. Secondly, the national non- conventional renewable energy target (NCRE) incentivises solar development without subsidising it. In this guide you’ll discover:  Why Chile is an exciting opportunity for PV

companies in 2013  The current market status and the triggers and

inhibitors affecting solar growth

At this point in a state’s renewable energy development, other countries might introduce a tender system for solar or a Feed in Tariff to stimulate the growth of solar power and renewable energy. However in Chile, this has not happened. Chile is one of the few markets in the world where PV needs to be competitive in a free market. The rise of PV plants being developed for the spot market as well as the increasing number of PPAs with mining companies suggests that PV is truly competitive.

 How to take advantage of the most exciting and

large-scale wealth solar opportunities up for grabs

PV Insider Latin America (10-11 September, Santiago) will bring together over 30 global and local PV experts to give you strategies to successfully develop, finance and build commercially PV plants and secure your share of the solar market in Chile. For further information visit www.pv-insider.com/chile

There is however, concern as to how large the demand for PV solar from mining companies will be. With

Electricity consumption by origin

Electricity consumption by sector

Biomas 1%

Wind 1%

Others 10.4%

Oil 7%

Residential 16.3%

Hydroelectricity 33% Commercial 12.3% Industrial 23.9%

Agriculture 2.2%

Coal 35% Natural gas 23% 2010 Electricity consumption in Chile by origin and sector

Mining 34.9%

To make sure you get a competitive edge in the race for operational plants, go to www.pv-insider.com/chile

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PV in Chile - A guide to opportunities PV unable to meet the constant demand for energy required in mining operations, there is some concern that the take-up of solar is to fulfil a green image rather than supply a large amount of energy for the mines in daylight hours. That being said, one PPA signed has been for as much as a 25MW plant which is certainly not small. Trends so far are for large capacity PPAs with multiple plants.

The dream solar opportunity

Alongside government-driven targets, the demand for electricity in Chile will also continue to increase at an expected rate of 4.7% (CAGR) in central grid (SIC), and 3.4% in the northern one.

Electricity generation and transmission in Chile

Chile’s grids and electricity demand SING Installed capacity: 3574.9MW Generation: 15881GWh

The climate and geographical conditions in Chile are some of the best in the world. GHI for northern Chile is 3,300 kWh/m². Such high rates of GHI mean that the yield on well-designed plants should be high. However as with any market for solar there are project development processes that can be challenging.

As one of the first countries to privatize its electricity system, Chile’s electricity market and infrastructure is privatized except for regulation of the grids themselves. Power production, transmission and distribution is handled by a number of companies, resulting in a relatively competitive marketplace. At present there are four grids in Chile; the Large Northern Interconnected System (SING- Sistema Interconectado del Norte Grande), the Central Interconnected System (SIC- Sistema Interconectado Central), as well as the much smaller SI Aysen and Magallanes grids in the south of the country.

Large Northern Interconnected System (SINGSistema Interconectado del Norte Grande) The SING interconnected electric system of northern Chile is the second largest grid but with the largest industrial demand. This grid usage is dominated by the

Public 3.2% Residential 4.1%

Hydro 0.4%

SIC Installed capacity: 11845.1MW Generation: 46052GWh

Commercial 2.8%

Industry and mining 89.9%

Fossil 99.6%

Other renewables 3.5% Hydro 47.4%

Commercial 14.6% Public 2.0%

Fossil 49.2%

SI Aysen Installed capacity: 49MW Generation: 145.7GWh SI Magalianes Installed capacity: 89.1MW Generation: 286.1GWh

Residential 21.3%

Industry and mining 62.1%

Other renewables 3.8% Hydro 39.4%

Fossil 56.7%

Fossil 100%


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PV in Chile - A guide to opportunities coal and mineral industries active in the north. Unlike residential areas the demand for electricity is constant with little variation throughout the day. However, as the mining industry continues to expand in the region the demand for the amount of electricity is expected to increase at an even larger rate than at present. The SING and SIC operate separately to each other, and are currently unconnected. The SING grid provides power to 93% of the population predominantly based in Chile’s central regions. With a large number of different transmission lines and substation providers, there is certainly disparity in the quality of transmission.

Sistema Interconectado Central (SIC) This grid supplies power to the central and most densely populated region of Chile. Whilst the lower areas of the central regions do not have optimal climatic conditions for solar, the northern area of the central region covered by the SIC receives similar levels of GHI as the north. The high GHI in this region may be very beneficial given that the SIC grid has had severable notable power cuts in the last decade, the most notable being in 2008 due to the severe drought that substantially affected the hydro-dominated SIC distribution. Both the SIC and the SING have become congested and as a consequence if one power supply to the grid fails, it can be hard for the other to compensate.

Challenges with the Chilean grid system For solar developers, planning solar projects can involve a small risk due to the difference in time frames that solar developers and grid authorities are operating within. For example, the state mandated grid review process means that decisions on new transmission lines and changes to grid transmission can take up to 42 months. Furthermore, obtaining permission for a grid connection point needs to be submitted both to the Centre for Economic Load Dispatch and the transmission line owner. Both of whom who have technical standards and procedures for compliance.

The solar challenge PV insider has conducted research with key solar stakeholders interested or currently operating in Chile and revealed the following key challenges for solar developers in Chile.

Permits As with any country, permits relating to the environment, land and to the grid must be obtained. In Chile a project may need as many as 60 regulatory approvals divided between the environment and the grid. Typical approval processing periods for a new

generation facility are around 333 days,)with one of the most lengthy being the permits for environmental impact assessment which features the impact on human geography and communities as well as the land and animal ecosystem.

Finance To date only 3 plants have been financed in Chile. Whilst there is a slight down-turn in PV financing globally this alone cannot be understood as the reason for a lack of finance. For companies with a PPA, finance should be more forthcoming if the cost of electricity is competitive, and if the developer and plant owner demonstrate experience and credibility. That being said, the choice of technology can affect the decision to invest with many banks and investors preferring certain modules over others. Furthermore, there may also be a case of overoptimism with some of the larger plants in Chile’s solar pipeline. Plants larger than 100MW without PPAs would be a risky investment regardless of location. When larger and well established developers have success with these financing and PPAs, this should establish the safety and reassurance needed to improve investor confidence. For developers without a PPA, financing a plant on the “spot market” is much more difficult due to concerns over price fluctuation. Some developers with grid-connected plants to the grid on the spot market, have successfully self-financed their projects. Traditionally, the large multilateral finance corporations may be the first to invest in plants having invested in energy innovation and pioneering plants before. Currently an 18MW plant being developed in Arica by Sky Solar is being financed by the Chinese Development Bank, the first multilateral to finance solar in the region. Chile’s national and regional banks have also been more tentative because, with little experience in funding solar. However local banks are now assessing possible opportunities in solar financing and they may soon enter into part financing or as collateral agents without financing the full project costs. It is possible that banks such as Banco BCI, Banco BICE and Santander will be soon involved in PV plant financing.

The spot market in Chile The spot market in Chile operates through purchasing for immediate delivery of energy rather than through fixed price agreements which can last for sometimes as long as decades. The spot market allows utilities to benefit from changes in price and pick from multiple producers. However the spot market can be an insecure market for solar, vulnerable to other energy price fluctuations.


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PV in Chile - A guide to opportunities

PV and mining report: Chile Jason Deign, May 2013 Chile’s potential as a market for mining-based PV demand is starting to become apparent as mineral extraction companies gradually exit from restrictive power supply contracts. A fall in grid energy prices this year has not dampened enthusiasm for PV in the Chilean mining industry. Growing concern over the long-term stability of hydrocarbon imports has caused the sector to take the lead worldwide in the adoption of renewable power, with solar PV emerging as obvious choice for first-time clean energy deployments on account of its low cost and maturity. This lead is set to grow substantially throughout 2013 as new projects come online. Foremost among these is a 25MW plant being built by the Spanish contractor Solarpack for Compañía Minera Doña Inés de Collahuasi, a mine owned by the UK mining companies Xstrata and Anglo American plus a group of Japanese investors, led by Mitsui Group. The plant will generate 60,000MWh per year of clean energy and “demonstrates the competitiveness of this type of generation in this part of the world,” according to Pablo Burgos, Solarpack’s chief executive.

Grid operators, meanwhile, are open to such joint ventures because under current legislation, introduced in 2008, energy producers with an installed capacity in excess of 200MW are obliged to get 10% of their power from renewable sources.

Chilean mining Paradoxically, however, this law is potentially holding up the introduction of PV in the Chilean mining sector. Contracts drawn up with grid operators before 2008 do not include any renewable power provision and in fact may hold the customer to taking only nonrenewable energy. Challenges in sourcing renewable energy at the current time may mean these contracts are difficult to renegotiate without major expense. However, most are set to expire between 2015 and 2020, which could spark a rush for PV.

Research and development

Certainly, the case for solar seems clear-cut for most Chilean mine operators. Lizanas says Collahuasi expects to get a USD$20 million benefit over the term of its contract with Solarpack.

Solarpack is also planning a 300kW PV research and development plant on land in Collahuasi Port in the Patache area, which will be used to test different advanced photovoltaic technologies under real operating conditions, as well as to supply power for the port’s operations.

Meanwhile Daniel Oqueteau, head of legal and public affairs at Quiborax, says the company hopes to cover 30% of its energy needs with El Águila. “There is not enough power to meet the demands of the mining sector,” he notes.

The honour of having the first grid-connected PV plant in the Chilean mining sector, however, will go to the world’s third-largest boric acid producer, Quiborax, which is scheduled to inaugurate its 2MW, five-hectare El Águila plant in Arica, Northern Chile, this July. El Águila is being built by GDF Suez as part of a strategic alliance between Quiborax and the local power company, E-CL. It will deliver power to the northern electricity grid (Sistema Interconectado del Norte Grande) to help cope with the mining company’s energy requirements. Grid-connected plants are likely to become the norm in future, believes Diego Lizanas, an energy efficiency specialist at Collahuasi, because it gives mine owners greater flexibility to integrate PV with traditional power generation.

Collahuasi awarded bid to Solarpack


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PV in Chile - A guide to opportunities Where to find the biggest solar opportunity

Arica • 15 39 27 40 60 3

Find out how PV Insider LATAM 2013 could turn your project from red to green by getting you a PPA and keeping your plant within budget.

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PV in Chile - A guide to opportunities Planned Capacity (MW)

Status

1.5

Operational

1

Operational

1.2

Operational

Pozo Almonte Solar 2

8

Under construction



17

Under construction

Solar Plants

Company

Planned Capacity (MW)

Status

1

Arica I

Arica Solar Generación 1

18

SEIA approved

2

Atacama Solar

Atacama Solar

250

SEIA approved

3

Calama Solar 1

Calama Solar

9

SEIA approved

4

Calama Solar 2

Calama Solar 2

9

SEIA approved

5

Canto Del Agua

Canto Del Agua

21

SEIA approved

6

Coya

Solventus Chile

80

SEIA approved

7

Crucero Este

Helio Atacama

128

SEIA approved

8

Crucero Oeste

Helio Atacama

160.4

SEIA approved

9

Crucero Solar

Fotones De Chile

180

SEIA approved

10

Denersol Ii

Denersol

7.5

SEIA approved

11

Denersol Iii

Denersol

30

SEIA approved

12

Diego De Almagro (Mainstream)

Mainstream

162

SEIA approved

13

Domeyko 2

Helio Atacama

160

SEIA approved

14

Domeyko Este

Helio Atacama

112

SEIA approved

15

El Águila

Mainstream

70

SEIA approved

16

Encuentro Solar

Fotones De Chile

180

SEIA approved

17

Huayca

Selray

7.56

SEIA approved

18

Huerta Solar Fotovoltaica

Fotovoltaica Sol Del Norte

8

SEIA approved

19

La Tirana Solar

Solar Chile

30.24

SEIA approved

20

Laberinto Este

Helio Atacama

76.7

SEIA approved

21

Laberinto Oeste

Helio Atacama

69.8

SEIA approved

22

Lagunas (Element Power)

Element Power

30

SEIA approved

23

Los Andes

Aes Gener

220

SEIA approved

24

Pedro De Valdivia

Ibereólica

360

SEIA approved

25

Pica

Element Power

90

SEIA approved

26



9.3

SEIA approved

29

Pv Dos Cruces

Solventus Chile

36

SEIA approved

30

Pv Salvador

Solventus Chile

40

SEIA approved

31

Salar De Huasco

Element Power

30

SEIA approved

32

San Pedro De Atacama I

Element Power

30

SEIA approved

33

San Pedro De Atacama Ii

Element Power

30

SEIA approved

34

San Pedro De Atacama Iii

Element Power

30

SEIA approved

Operational Solar Plants

Company

1

Huayca

Selray

2

Calama Solar 3

Calama Solar

3

Tambo Real I

Kaltemp

4


5


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PV in Chile - A guide to opportunities Planned Capacity (MW)

Status

Element Power

30

SEIA approved

Sol Del Loa

Ventus Solaris

110

SEIA approved

37

Tocopilla

Eosol New Energy

192.6

SEIA approved

38

Aguas Blancas I

Etrion

8.8

SEIA pending

39

Almonte

Mainstream

75

SEIA pending

40

Ampliación Huayca

Selray

30

SEIA pending

41

Arica Ii

Arica Solar Generación I

15

SEIA pending

42

Azapa

Mainstream

104

SEIA pending

43

Calama Sur

Element Power

30

SEIA pending

44

Carrera Pinto

Fotones De Chile

90

SEIA pending

45

Das

E.E. Diego De Almagro

9

SEIA pending

46

Diego De Almagro (Emelda)

Emelda

52

SEIA pending

47

Diego De Almagro (Fotones De Chile)

Fotones De Chile

90

SEIA pending

48

Genpac

Genpacsa

14

SEIA pending

49

Huatacondo

Desarrollos Fotovoltaicos De Chile

98

SEIA pending

50

Inti

Pacific Solar

69.5

SEIA pending

51

Lagunas (Intervento)

Intervento

38

SEIA pending

52

Lalackama

Enel Green Power

129

SEIA pending

53

Llano De Llampos

Sunedison

93.6

SEIA pending

54

María Elena (Ibereólica)

Ibereólica

400

SEIA pending

55

María Elena (Sunedison)

Sunedison

72

SEIA pending

56

Sol De Lila

Enel Green Power

122

SEIA pending

57

Solar Sky 1

Sky Solar

26

SEIA pending

58

Solar Sky 2

Sky Solar

26

SEIA pending

59

Usya

Acciona Energía Chile

25

SEIA pending

60

Valle Del Sol

Enel Green Power

143

SEIA pending

61

Wara Iii

Araucaria Solar Services

45

SEIA pending

62

Willka

Desarrollos Fotovoltaicos De Chile

98

SEIA pending

63

La Tirana Solar I

Solar Chile

34

SEIA pending

Solar Plants

Company

35

San Pedro De Atacama Iv

36

PV Insider Latin America Taking place on 10-11 September 2013 in Santiago Chile, PV Insider Latin America will give companies the strategies to develop, finance and build commercially successful PV plants to secure your share of the solar opportunity in Chile With speakers from the Inter-American Development Bank, CDEC-SING, Ministry of Energy, Ingenostrum and many more- the event is a mustattend for anyone looking to develop a successful solar venture in Chile.

For more information on how you’ll benefit from PV Insider Latin America visit: www.pv-insider.com/chile To make sure you get a competitive edge in the race for operational plants, go to www.pv-insider.com/chile

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