Chile: Phasing Out Coal

Sunday, April 28, 2024
With the closure of nearly a dozen coal-fired power plants in recent years—including three that were disconnected from the grid this month—Chile is getting less and less of its electricity from coal. The government wants to accelerate that trend, but first it is looking at how the country can best address the technical, regulatory, and even societal challenges that can come with decarbonization.


For the past several months, energy officials have been meeting with representatives of industry, academia, and environmental groups, among others, to forge consensus on a Decarbonization Plan. National policy now calls for eliminating coal-generated electricity by 2040, but the idea is to shorten the timetable, according to Energy Minister Diego Pardow.

“But I want to be clear,” he said. “As important or more important than setting a goal to close power plants is to clearly lay out the steps and create the enabling conditions for the investments that are needed to reach that goal.” 

Chile has already made significant strides in decarbonizing its electric grid, thanks to the rapid expansion of photovoltaic solar and wind resources. In fact, non-conventional renewables accounted for more than 41% of the electricity generated during the first quarter of this year—a larger share than coal, according to Pardow, who provided the Energy and Climate Partnership of the Americas (ECPA) with written responses to several questions.

When hydroelectric power is factored in, more than half the electricity generated in Chile in the past two years has come from renewables. Statistics from Chile’s National Energy Coordinator show that from 2018 through 2023, annual wind energy production more than doubled, while solar nearly tripled. During that same period, the proportion of coal-generated electricity dropped from 38% to under 17%.

The incorporation of large amounts of solar and wind energy into the grid marked a first period of the energy transition, Pardow said, and the country has now reached an “inflection point.”

“Now we are facing what we have called the second period of the energy transition, which involves having renewable and clean sources represent 100% of our energy mix by 2050, as established by consensus in the current National Energy Policy,” he said.

Chilean Energy Minister Diego Pardow, speaking here at a energy conference held in March in Santiago, has talked about the challenges of what he calls the second period of the energy transition. Source: Energyear

Last year, the Ministry of Energy published a document called the Initial Agenda for a Second Period of the Energy Transition, which lays out a series of proposed short- and medium-term steps to enable the country to reach that goal. The development of a Decarbonization Plan is one of those steps, and Pardow said the results of the dialogue that has been underway will be made public soon.

Chile is hardly the only country trying to get rid of coal power, but it ranks among the top 10 countries with the fastest reductions seen so far over any eight-year period since 2000, the World Resources Institute reported last year. Greece topped the list, followed by the United Kingdom, Denmark, Spain, Portugal, Israel, Romania, Germany, the United States, and Chile.

Only Denmark replaced 100% of that coal power with zero-carbon power sources, but Chile ranked a close second, at 95%. 


Long-Term Policies


The process of phasing out coal plants reflects a national policy enacted in 2015 and updated in 2022.

“One of the advantages of our country is the stability of its public policies on energy, regardless of what administration is in office,” Pardow said. He noted that the phase-out of coal is one of the international climate commitments the country has made in its nationally determined contributions under the Paris Agreement.

One aim of the dialogue on the Decarbonization Plan has been to more clearly define the responsibilities of every player involved in the phase-out of coal, according to Pardow.

Last August, he and other government officials launched the dialogue during an event at the Economic Commission for Latin America and the Caribbean (ECLAC), a United Nations regional agency based in the Chilean capital, Santiago.

Chilean officials launched a dialogue on the country’s Decarbonization Plan last year at the headquarters of the Economic Commission for Latin America and the Caribbean. Source: ECLAC

At that event, experts from the Energy Ministry gave some background information on the phase-out of coal, talked about the timeline, and discussed the challenges ahead. In 2018, they said, there were 28 coal-fired plants in Chile, and the government and the plant owners reached an agreement not to build any more. In 2019, they signed a voluntary binding agreement to gradually shut down all the plants by 2040.

Eight plants were shut down between June 2019 and July 2023, seven more were scheduled for closure by 2025, and five other plants were earmarked for possible conversion. In the case of the remaining eight, no dates had yet been set for their closure, other than the 2040 deadline. 

Since that presentation was made, the company AES Andes, which generates and sells electricity in Chile, Colombia, and Argentina, shut down its two-unit Norgener Power Plant in Tocopilla, in the northern region of Antofagasta.

The units, which had a total capacity of 276 megawatts (MW), were disconnected from the national electricity system on April 16, ahead of the previously scheduled target of December 2025, the company announced in a press release. (The early shutdown was authorized by national regulators.)


New Complexities


The Chañares solar plant, with an installed capacity of 40 MW, is located in the Atacama Desert, which has some of the highest levels of solar radiation on the planet. Source: Enel

The closure of coal-fired power plants helps to solve some problems—especially air pollution—but it also introduces new complexities as an electric grid becomes more reliant on intermittent sources of energy. Chile’s national policy calls for 80% of the country’s electricity to be generated from renewable sources by 2030, with 2 gigawatts (GW) of storage added to the system by that date.

During the event at ECLAC, speakers from the Energy Ministry referred to some of the regulatory and technical issues that must be considered in order to make the transition as smooth as possible: What incentives can policy-makers create to encourage investment in 24-7 generation of clean energy? What changes should be made to the permitting system? How can the grid be modernized to handle more variability and uncertainty?

What alternatives are available for converting plants to run on other fuels? What should the role of natural gas be in the energy transition?

What new technologies are needed, such as storage, to modernize the electricity market? What mechanisms might be needed to assess and assign risk? How can the transmission system be improved? What needs to happen to ensure open access for the use of transmission or distribution lines?

One very basic question: At a time of rapid change, what is the best way to ensure that the system can meet the country’s growing demand for electricity? What regulatory mechanisms can be put in place to mitigate the effects of any disruptions?

Then there are the societal factors to consider. When a power plant shuts down, people lose jobs. In an interview last year on CNN Chile, Pardow said it’s important for the government to provide support not only to ensure that individual workers are compensated in some way or given the opportunity for new sources of income but also that the needs of the local economy as a whole are taken into account.

“When a coal plant is shut down in a certain place, that has clear positive effects on public health, but you’re also shutting off an economic activity,” he said. “And we have to take care of that.”

To do otherwise, he said, would be to ask people in areas that depend on these plants to make a “double sacrifice”; not only would they have to deal with the health effects of long-term exposure to air pollution but they would also face greater economic hardship.

Pardow told ECPA that President Gabriel Boric’s administration has established the Inter-Ministerial Committee for a Just Socio-Ecological Transition—made up of the Ministries of Environment, Energy, Social Development, Labor, Economy, Mining, and Health—to coordinate the institutional transformations that will be necessary in the years ahead.

Cover Image: In 2021 and 2022, the French company ENGIE carried out the dismantling, demolition, and final disposal of its five coal-fired units in Tocopilla, Chile.