Renewable energy transition: a market-driven solution for the energy and environmental concerns in Chile

Abstract

Chile is undergoing a remarkable energy matrix transition to renewable energy. Renewable energies are expanding extraordinarily fast, exceeding earlier predictions. As a result, the country is expected to meet its 2025 goal of generating 20% of its electricity from renewable energy sources quite before. Chile has become one of the first countries in the world with subsidy-free markets, where renewable projects compete directly with other conventional sources. Favorable market conditions and successful policy reforms were keys to fostering this renewable energy development. Although the country has achieved a substantial growth in renewable energy investment in a relatively short period of time, this optimism should be treated with caution. A successful transition requires a combination of a clear decision making, persistent and consistent government policies, and a clear commitment to tackling challenges to accommodate renewable energy in the power system. In this context, this paper analyses the Chilean renewable industry and the required government policies to succeed in this transition. For this purpose, we identify several critical factors that have attracted and that could attract investment to the renewable energy sector and propose key recommendations to effectively address the major challenges faced for the future development of the industry.