Chilean Electricity Industry: Local Impediments Persist in the Incorporation of Renewables to the Grid

Which are the local restraints curbing successful renewable grid-integration?
Published: Sat 13 Jul 2013

Brought to you by:

Co-authored by Martín Cataife, Industry Analyst and Gustavo Stainoh, Research Analyst – Energy & Environment Practice, Frost & Sullivan - The Growth Partnership Company

The Chilean electricity industry has surpassed the gigawatt (GW) of renewable installed capacity during the first quarter of 2013. The corollary of this benchmark was the effective supply of 57.4% of add-on electricity demand with green energies. Accordingly, in our previous articles we reported on the variables that motivated RE development in detriment of conventional power technologies, and we especially considered the positive correlation with the regulatory framework. Recent discussions in local public opinion invite us to provide an insight on RE grid connection issues. In the first place, we would like to point out a series of general impediments in the incorporation of renewables to the grid.

While most power generation devices achieve a stable frequency of 50 Hz by means of equilibrium between supply (prime mover) and demand (magnetic resistance), not all technologies available in the market are able to regulate imbalances. Therefore, a frequency drift is produced.

Although this alteration is easily adjustable in generators and turbines featuring primary fuel input, this is not the case of renewable power plants that are characterized by the intermittency of the primary source. This intermittency accentuates the frequency drift phenomenon and while the power generation system is connected to the grid this problem will be transferred therein.

It is clear that the main challenge that renewables present is linked to their optimal integration into the electric power system, namely the uncertainty in the prediction of the primary resource. In other words, the inability to regulate intensity affects project’s strategic planning.

For instance, wind power is associated to a low capacity factor due to irregular wind influxes. In fact, to secure electricity production wind turbines entail a minimum wind speed (which ranges between 3.0 and 5.0 m/s). This startup requirement is called connection speed or cut-in speed. Henceforth, wind turbine’s electricity output is proportional to the cube of the wind speed. Wind speed values between 12.0 and 15.0 m/s usually attain turbine’s rated power. Heavy wind influxes in the interval of 20.0 and 25.0 m/s (cut-out speed) automatically trigger wind turbines breaking system to prevent structural damage. Regardless of the power curve estimations, cut-out-speed timing is difficult to predict due to weather variability.

A second impediment of renewable energy systems is the impossibility of storing their primary input resource (except for biomass). Therefore, power generation companies employing RE technologies are unable to foretell both the amount and the timing for the commercialization of their electricity production. Consequently, grid injection occurs when their primary energy resource is available. Intermittent step up reduces firms’ capacity to manage their resources efficiently and thus a preferential access to the grid should be granted to RE. Considering this fact, grid integration activities should focus on both a coordinated action in the load dispatch center and new research and development to improve predictability systems for renewable resources.

Regardless of the aforementioned complications in renewable energy systems, Chile presents some particularities which are related to issues within transmission and distribution networks. The interconnection between the SIC and the SING grids is a longstanding and unresolved matter, that in spite of recent efforts by the National Energy Commission (CNE), the Panel of Experts ruled out, and thus limited the grid’s expansion plan. To date, grid segmentation is just one of the obstacles in RE integration, but its impact is lower than existing dynamics in the spot market.

Under the actual regulation for the spot market which is based on the General Law of Electrical Services (Decree-Law No. 4/2006 of the Ministry of Economy), RE is not a competitive option for purchasing electricity. Although the spot market represents just one of the possible interactions between a power generation firm and its customers, RE power prices are still high and selling electricity at the marginal cost. In addition, buying electricity without a PPA is not convenient since the cost is based on the equation between demand and supply, which is chiefly affected by the variable cost of fossil fuels and hydrology cycles.

Moreover, except for geothermal and biomass fueled thermal power that operate as base load power sources, RE firms are concerned with generating power when the spot price is higher. As long as these dynamics prevail within the Chilean electricity industry, RE integration will be limited to bilateral contracts among interested parties.

On a micro-level, RE confronts heterogeneity of technical standards as the applicable regulation differs if the power generation company chooses to step up into a power transmission or a power distribution network. The former is systematized by the Technical Standards for Safety and Quality of Service (NTSCS) and the latter is supervised by the Technical Standards for Connection & Operation at Medium Voltage (NTCO).

The use of both transmission and sub-transmission systems is subject to an open access regime, where the transmission company is compensated and the approval of three agencies is required (the load dispatch center, the CNE and the Fuel and Electricity Superintendence). Transmission and sub-transmission systems step up will increase the result of the Renewable Portfolio Standard (RPS) for large power generators. Still, similar regulations are needed for power distribution companies to accredit RE utilization.


Martín Cataife is an Industry Analyst for Energy & Environment Practice, Frost & Sullivan - The Growth Partnership Company

Gustavo Stainoh is an Research Analyst for Energy & Environment Practice, Frost & Sullivan - The Growth Partnership Company