Climate Change

26 May 2022

How Gas Interests Slowed Chile’s Clean Energy Transition

26 May 2022  by   

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)

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%. It was one of the first countries to declare a target for renewable energy, in 2008.

Yet even as solar farms have spread across the north and center of the long, narrow nation, imported natural gas, a polluting fossil fuel, has been able to sideline the clean electricity they provide thanks to a sweet deal won from the government.

Marcelo Mena, a former environment minister in Chile, witnessed that waste of clean power before he took the helm at the new Global Methane Hub, a nonprofit aimed at reducing 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 became disillusioned as he saw renewable energy pushed out by fossil fuels in the north of the country, where sunshine is most plentiful.

“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 provides a view into the way fossil fuel companies can manage to stay on top, even under governments that try to pursue clean energy.

The shock that led to an energy transition in Chile came in the mid-2000s, when Argentina drastically reduced gas exports to Chile to focus on its domestic market. Chileans faced strict power rationing and regular blackouts.

After scrambling to come up with an alternative, the nation saw an opportunity.

Chile receives some of the strongest and most consistent sunshine on the planet, especially in the Atacama Desert, in the north. So it was natural for the country to seek investment in solar and wind projects through public auctions and quotas that required electricity companies to offer a minimum amount of renewable energy.

Investors heard their call. Developers built out hundreds of solar, wind and geothermal plants throughout the country, which stretches 4,300km (2,700 miles) from north to south.

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

Natural gas importers and owners of gas-fired plants successfully argued that to secure long-term contracts for gas, they needed a guarantee that the Chilean power grid would take their gas-fired electricity even when other, greener generators were making plenty of power.

Chilean power generator Colbun, a large consumer of natural gas, said international contracts in which LNG importers must pay for gas whether they need it or not, along with a lack of storage, leave the sector vulnerable.

“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 electricity into the market is that it lowered electricity prices for all providers, meaning they got paid less, said Alfredo Solar, a solar plant manager with over 20 years of experience.

“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.

Emissions from burning gas, oil, and coal for electricity, transportation, and other uses are the chief driver of climate change. 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.

Natural gas or methane is a powerful greenhouse gas that has an even stronger 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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