Chile’s most recent electricity auction achieves a landmark record price and 100% renewables

Last 2 November the Chilean government officially announced the Award of the National and International Public Tender to Supply Electrical Power and Capacity 2017/01, which offered 2,200 GWh/year of energy and will cover the electricity needs of regulated clients (homes and SMEs) of the National Electrical System over 20 years as from 2024.

The planning of this “National and International Public Tender to Supply Electrical Power and Capacity to cover the consumption of clients subject to price regulation (Supply Bid 2017/01)” started in December last year with the issue of the preliminary bidding terms to electricity distribution companies and continued with the publication of the definitive terms of the tender process in January this year.

24 national and foreign power companies submitted tenders under this auction, mainly for renewable energy. According to the CNE, around 20,700 GWh of energy was bid under this auction, almost 9 times the energy demand. Companies presented prices that started at 21.48 US$/MWh, with an average price of 32.5 US$/MWh finally awarded, incorporating new players into the electricity market most of which come from the renewable energy sector.

This supply bid is the third carried out by the government via its Tenders Law No. 20.805 and comprises seven supply blocks amounting to 1,700 GWh, with quarterly blocks totalling 500 GWh of energy, all effective as of 1 January, 2024 until 31 December, 2043.

This time around, 100% of the energy awarded was renewable, equivalent to some 600 MW of installed capacity in new renewables projects and which, in line with government sources, could attract around US$1 billion in investment in new infrastructure for the country.

Two auctions have already taken place under the current government. The first auction took place in October 2015 for 1,200 GWh/year, in which 30 tenders were submitted, all for renewable energy. This auction reached an average price of 79.3 US$/MWh, 40% lower than the 2013 auction that achieved 129 US$/MWh. In the second auction for 12,430 GWh/year, held in 2016, 84 tenders were received and an average price of 47.6 US$/MWh was awarded.

The price of the energy achieved in this tender is a landmark for the sector, given that it is the lowest price ever awarded in Chile. Thanks to these auctions, the price of energy for Chilean households has dropped by 75% in the last three years. The price of energy currently being paid by homes is 90 US$/MWh, the result of contracts entered into up until 2014. With this latest tender, it is hoped that new contracts will gradually bring down prices to around 50 US$/MWh, directly benefitting households.

The winners

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