How Gas Interests Slowed Chile’s Clean Energy Transition

RIO DE JANEIRO

Chile presents itself as a world leader when it comes to climate change. Nearly 22% of Chile’s electricity is generated by solar and wind farms, which puts it far ahead of the world 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 this long, narrow country, imported natural gas, a polluting fossil fuel, has been able to sideline the clean electricity they provide thanks to a concluding agreement with the government.

Marcelo Mena, Chile’s former environment minister, witnessed this clean energy waste before heading the new Global Methane Hub, a non-profit organization aimed at reducing global methane emissions. Natural gas is essentially methane.

“They’re actually hampering the power that we can provide from renewables,” Mena said of her experience with natural gas in an interview with The Associated Press. “It’s more of an opposition to the 100% renewable energy target.”

Mena was disillusioned seeing renewable energy being crowded out by fossil fuels in the north of the country, 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 heat themselves with wood and choke on it. It was such a big contradiction,” Mena said. “It’s my personal journey.”

Chile provides insight into how fossil fuel companies can successfully stay on top, even under governments trying to pursue clean energy.

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

After rushing to find 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 to the north. It was therefore natural for the country to seek investment in solar and wind projects through public auctions and quotas that required power companies to offer a minimum amount of renewable energy.

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

But the devil was in the details. To provide electricity when the sun was not shining, the government also invested heavily in fossil fuel infrastructure.

Natural gas importers and gas-fired plant owners successfully argued that to secure long-term gas contracts they needed a guarantee that the Chilean electricity grid would take their electricity from gas even when other greener generators produced a lot of electricity.

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

“It is important that regulations recognize this condition so that the electricity market has enough natural gas to keep the system safe and competitive,” the company said in an email response to the AP.

The government has allowed them to declare electricity from LNG imports as “forced gas”, meaning that gas-fired electricity has been prioritized in the electricity market, which otherwise favors renewable energy.

“Any situation in the electricity market that favors fossil fuels, taking space from renewable energies, is a loss for the environment and for the energy transition,” said Ana Lía Rojas, who heads the Association. Chilean renewable energy and storage company.

Another consequence of the forced introduction of gas-fired electricity into the market is that it has lowered electricity prices for all suppliers, which means that they have been paid less, said Alfredo Solar , a solar plant manager with over 20 years of experience.

“I’ve worked in solar power plants that, for example, were in default because the market price was much lower than expected,” Solar said, pointing out that renewable energy providers operate without contracts and depend on of these revenues.

Emissions from burning gas, oil and coal for electricity, transportation and other uses are the main driver of climate change. Last year, researchers calculated that nearly 60% of the world’s oil and gas reserves and 90% of coal reserves must remain underground by 2050 in order to meet the Paris Agreement targets. climate.

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

In November, at the United Nations climate summit in Glasgow, Scotland, the Biden administration, the European Union and dozens of other countries pledged to reduce overall methane emissions worldwide by 30% by 2030.

Last year, the Chilean government reduced the advantage granted to natural gas electricity suppliers. Their electricity still enters the grid at a reduced price, but is not meant to replace renewables. Yet the concept of “forced gas” still exists, and advocates for renewable energy in Chile say the changes are not enough.

In other countries, battery storage is rapidly replacing new gas-fired power plants, as they can supply power to the grid when the sun is down or the wind is not blowing. In the United States, this type of stored electricity has increased by 1200% in five years. An amount equal to what three nuclear power plants can supply was installed in 2021. This was double 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 consulting firm EnergiE. “Chile has several projects, but they are always high cost solutions that do not compete with other options,” Salazar said.

Even Rojas of the Chilean Renewable Energy Association supported the role of natural gas. “Natural gas is the fuel for the energy transition, the technology that will allow us to make these adjustments, as long as it never takes space away from renewables,” she said.

In many other countries, the idea of ​​natural gas as a fuel enabling the energy transition is fading. Indeed, the fuel is no more climate friendly than coal if it does not leak out and is deliberately released from wells and infrastructure along its way to the power plant. But studies and satellite images show that both things are happening.

By 2030, solar energy is expected to represent 30% of the total electricity capacity installed in Chile, according to the Association of Electricity Generators. This would make it the largest source of energy in the country.

Mena, the former environment minister, said established energy companies tell him that phasing out fossil fuels takes a long time. Five years ago, he says, people were telling him that the price of solar power could never drop. But he did. “My take home message is that change comes from unreasonable people,” he said, ready to face the supposedly impossible, pointing to Chile’s large and growing clean energy sector. “We need unreasonable people to make this change.”

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