Solar power – Chile

The electricity industry is seeing a huge disruption, which is happening much faster than expected. Solar power is taking over the industry at an extremely rapid pace and that too without using its clean and green credentials. The price of solar energy is falling so fast and so deeply that it is out competing fossil fuels by a huge margin. Recent free electricity auctions are seeing solar energy prices coming cheaper than every other fossil fuel. Chile recently saw an all-time low price of just 2.9 cents/kWh for solar power being bid which was approximately half that of coal power, bid at 5.7 cents/kWh. This was a huge power auction with all major fuel sources competing to get capacity from the Chilean government.

The dramatic fall in solar energy is changing not only the energy industry, but also entire economies. Chile used to get very expensive electricity power due to a lack of fossil fuel sources and the industry was ruled by a oligarcy of large utilities, which used to keep prices high. However, not only the industry structure has changed with a large number of indepenedent power producers entering the sector, but the econonmy has also changed. Chile has a natural advantage as its Atacama desert is one of the best places to generate solar energy, due to a hot and dry condition which makes it ideal to build solar PV power plants. Chile has been at the forefront of solar energy, with many developers building plants to supply its mines. Now the power plants are being used to supply the power to its main urban centres as well and the government is building transmission infrastructure from remote regions to the main consumption areas.

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Solarpack which already has got a couple of solar plants running in the country has bid an all time globally low price of 2.91 cents/kWh, which is even lower than the Dubai tender price of 2.99 cents/kWh that was seen earlier this year. The main driver of this low price is the sharply reduced price of solar equipment with solar panel prices reaching 43 cents/watt and the high insolation in Chile. Developers are confident of achieving low prices, thanks to the running experience of existing solar power plants.

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Solar power is disrupting the massive power industry much faster than expected. Incumbents around the world need to take notice and make changes rapidly otherwise they could be left behind in the dust.