New opportunities and the future of the Chilean electric system

What challenges and opportunities face the Chilean electric system today? Distribution needs and incorporating new technology into the system create new areas for business development.

Chile has undeniably positioned itself as a regional leader in solar and wind energy development over the last decade, and the figures ratify the country’s “green seal”: 68% of the energy Chile generated in 2024 came from renewable sources.

The energy generation sector’s accelerated growth poses a new challenge by far outstripping the expansion of the country’s power grids.

To address the issue, the Energy Ministry launched the “second phase of the energy transition” in 2023.

This second stage of the country’s electricity development requires strengthening the networks and enhancing system flexibility to achieve 100% renewable generation and carbon neutrality by 2050 and to ensure a safe, stable operation that meets the Chilean market’s growing needs.

The recently published Energy Transition Law will accelerate the strengthening of the transmission system and ensure adequate sector modernization using technology to enhance flexibility and response, in turn driving new investments in transmission.

However, there are also gaps and opportunities in another part of the system: the distribution network, which forms the basis of the national power grid and connects a large portion of the system’s end users (consumers).

Key flexibility

International evidence suggests that value chain flexibility (i.e., the capacity to adapt in real-time to the demand and system requirements) is essential to achieving decarbonization at the lowest possible cost.

This flexibility is necessary in the distribution of electric power, the consumer and the so-called distributed energy resources.

The results of the study entitled “Integrating Flexibility into the Chilean Electric System from the Demand Side to Make Carbon Neutrality Feasible for the National Energy Sector” were published in late 2024.

The study, commissioned by the Energy Ministry and conducted by the Universidad de Chile’s Institute of Complex Systems and Imperial College London, quantified the total cost of developing the national electric system (SiEN) at all levels based on the demand growth projections in the ministry’s Long Term Electricity Planning (PELP) and under various potential system development scenarios.

Analyzing the study is interesting because it reveals the magnitude of investment in the national electric system that will be necessary in the coming years; the system’s long-term flexibility needs as a result of increased penetration of variable renewable energy, the electrification of consumption and developments in the green hydrogen and derivatives industry.

The study also analyzes the costs of developing the entire system, including distribution, which had not previously been identified or quantified for Chile.

Investments required by 2050

These are the study’s primary conclusions regarding investments required by 2050:

1. Renewable generation and storage investments

• Investment is needed to develop considerable solar and wind renewable generation capacity, more than five times the current installed capacity. This includes opportunities for offshore solutions, which would reduce stress on the North-South transmission system and make developing the total projected onshore wind capacity feasible. On its own, this projected capacity is equivalent to two to three times the total currently installed solar and wind generation capacity in the National Electric System, which stands at approximately 15 GW according to the CNE.
• Investments are also necessary to develop sources that provide high flexibility, especially in BESS-type storage systems. The need is at least double the amount currently under development or operational, approximately 3 GW. Estimates for 2050 requirements are up to ten times the current total storage power capacity, i.e., 30 GW, depending on the demand-side flexibility achieved.
• There is also excellent investment opportunity in distributed generation and storage systems, which use consumers’ generation to reduce the time and costs of supplying energy from the grid and even provide flexible services if the regulatory model allows.

2. Reinforcing and expanding transmission and distribution networks

• In terms of network investments, they will need to at least double the total transfer capacity for inter-zonal transmission sections (currently 14 GW), and this requirement could increase if achieving demand-side flexibility proves impossible.
• In addition to the significant investment in transmission networks, further investment in electricity distribution systems is also necessary, particularly given the deployment expectations for distributed solar generation for purely economic reasons and other technology associated with the electrification of consumption. Importantly, the required investment may be considerably more significant if grid development does not involve investments in technology to digitalize the grid, i.e., transform it into a smart grid. This basic enabling factor makes energy demand and resources a source of flexibility for the system as a whole.

3. Consumer investment opportunities in ICT and automation technology, control systems and demand-side response (DSR) systems

• Based on the study, several equipment-associated technologies and demand control and response systems offer consumer investment opportunities. Technology can reduce consumption and entitle consumers to economic rewards for the flexibility they provide in the power system at the local and national levels. This, in turn, creates an opportunity for other types of businesses and companies, like energy aggregators and traders.
• Demand-side flexibilization offers significant investment opportunities in chiller technologies, HVAC systems, hydraulic pumps, lights, electric vehicle chargers and smart appliances. The same applies to the ICT technology and control, automation and response systems that make it possible to manage such equipment, particularly in high-consumption industrial and commercial user facilities, without affecting productivity or consumer comfort.
• The study concludes that demand-side response (DSR) systems could cut the total cost of developing the national electricity system by approximately US$2 billion per year as they reduce the need to develop generation, distribution and transmission networks (listed in order of importance).

These investments could be great opportunities to implement technology currently scarcely present or completely absent in Chile.

Service implementation also offers significant opportunities for private investment that contributes to economic development and job creation, particularly since all generation, transmission and distribution companies in Chile are privately owned, with a significant presence of foreign companies.

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