10 trends transforming Chile’s energy market by 2025

 “We are in the right industry. We are the promoters of the change towards a cleaner and more sustainable matrix by 2025,” said Ana Lía Rojas, Executive Director of the Chilean Association of Renewable Energy and Storage (ACERA), during her participation in the Future Energy Summit (FES 2024) held recently in Santiago. 

Rojas presented sector leaders from Chile and Latin America with a photograph of Chilean the energy market in the country, accompanied by a deep analysis of the topics that ACERA says will mark the conversation in 2025 and years to come.

Current panorama of Chilean energy market

On February 13, 2021, Chile enacted an Energy Efficiency Law for the first time in its history. The standard is vital for the country’s ambitious plan to achieve carbon neutrality by 2050. 

According to the country’s Ministry of Energy, by applying the measures contemplated in the law, energy intensity will be reduced by 10% by 2030, representing an accumulated savings of US$15.2 billion and a reduction of 28.6 million Tons of CO2. 

The government of President Boric introduced indications into a bill in 2023 to increase the participation goals of renewable energies in the energy matrix. “This initiative considered reaching 40% production with renewable energy by 2030, but according to our analysis of the available evidence, we believe that it is possible to achieve 60% production of renewable energy by 2030, as well as a minimum of 40% in each time block,” explained Energy Minister Diego Pardow.

The Green Energy in Latin America study, carried out by Broadminded, the research centre of the multi-award-winning communications agency Sherlock Communications, indicates that the country is well on its way to its goal, even exceeding expectations. The research highlights the region’s great potential and Chile’s notable role in leading the global energy transition, one of the central topics on the agenda of the G20 and COP30 summits.

According to the study, which used data from the International Energy Agency (IEA), 60% of the region’s electricity is already generated from renewable energy, positioning it as one of the cleanest networks in the world. Countries like Brazil, Mexico, and Chile are leading the way; the agency estimates that the latter will contribute 14% of renewable capacity by 2030. 

According to Ember data, Chile recorded an increase of more than 1,300% in its solar capacity, taking advantage of the great potential of the Atacama Desert, which has some of the highest levels of solar energy in the world. Schreiner Parker, managing director for Latin America at the energy intelligence firm Rystad Energy, said:

“Latin America, especially Brazil and Chile, could become an important exporter of this vital energy source. But the region’s success will depend on navigating regulatory complexities, securing adequate financing and balancing the shift away from fossil fuel revenue generation and new opportunities for green energy exports.”

Her analysis coincides with that of Ana Lía Rojas, who broke down the Chilean panorama and its prospects in the following ten trends:

1. Storage as a driver of change

Following the approval of the Storage Law of 2022, the development of storage projects has exceeded the most optimistic expectations:

• 5,600 MW in qualification
• 3,300 MW approved
• 1,500 MW under construction

However, operational risks persist in integrating large storage volumes into the market, especially in a system still adapted to this technology.

2. Advances in coal removal

Chile currently has 3,900 MW of installed coal capacity in operation, of which 1,600 MW have already been retired. As long as system stability conditions allow, another 1,000 MW is expected to be disconnected by 2025. In addition, technological alternatives such as asynchronous condensers are being evaluated to replace this capacity.

It will be crucial to evaluate the efficiency of these technologies in the long term.

3. Electricity prices under debate

After four years of frozen rates, generators began normalizing their charges this year. The current discussion focuses on designing public policies that finance subsidies for vulnerable consumers without discouraging private investment. According to Rojas, the measures proposed by the Executive generate uncertainty and make FDI (foreign direct investment) more complex. 

Furthermore, although the basis for bidding to regulated clients has improved, it is still not an effective mechanism to encourage investment in renewable energy. 

4. Public bidding and their role in investment

Public bids are a key way to introduce renewable energy to the energy market, but potential investors face high costs, so participation is currently lower than in previous years. 

The challenge for 2025 is: “How do we as a country and sector make this mechanism, which was key in the introduction of renewable energies in 2014-2016, once again be an investment mechanism to facilitate the insertion of more of them?”

5. Management of electrical disposal

Chile loses between 4.5 and 5 TWh per year due to discharges, equivalent to a month and a half of renewable energy generation. Faced with this challenge, one of the solutions proposed by the specialist is the creation of markets for transferring waste between agents. These markets would allow affected agents to exchange discharge levels through transactions limited to a specific node or geographic area. 

This would not alter the operating rules of the system, but it would offset the risks of one agent in favour of another, significantly reducing this waste.

6. Electrical stability technologies

Implementing power electronics and grid forming is underway, stabilising the network without rotating machines. What is pending is the generation of comprehensive remuneration mechanisms for these technologies.

7. Permits and use of the territory

Although Chile has made progress towards decarbonisation, the challenge remains accelerating electrification to reduce dependence on fossil fuels, which still represent 64% of the energy matrix. 

Delays in environmental and construction permits slow down projects. More efficient processing is required to unlock strategic investments. 80% of expansions and 60% of new transmission works are behind schedule.

Institutions such as the National Monuments Council and the Ministry of National Assets must streamline processes to unblock strategic projects.

8. Systemic costs

In 2025, the debate will focus on optimizing and redistributing systemic costs, which currently affect the sector’s competitiveness. The discussion will address the level of these costs: how much is paid and who bears that payment. Currently, costs fall primarily on free clients, raising the need for a more equitable approach.

9. Transmission delays

Transmission delays limit the ability of the electrical system to integrate renewable energy. Only 20% of the expansions and 40% of the new construction works have met their deadlines.

Strengthening the execution capacity of the National Electricity Coordinator (CNE) will be essential to overcoming this barrier in 2025.

10. Structural reforms

Despite advances in decarbonization, the electricity market represents only 22% of the Chilean energy matrix. With 64% dependence on fossil fuels, the country must accelerate electrification and reduce its annual import cost, equivalent to 6-8% of GDP.

The country has two pending reforms in distribution and the wholesale market. First, in distribution, the goal is to improve efficiency and adapt to a more decentralized system. Then, in the wholesale market, the goal is to encourage competition and the integration of renewable energies.

This article about Chile’s energy market is Sherlock Communications’ second insight into some of the country’s most prosperous sectors. If you interest to learn more, check out our article about micromobility and logistics,