Chilean Government Q&A: What’s next for geothermal?

From our Editorial Team

Gabriel Prudencio FlañoQ&A with Gabriel Prudencio Flaño, Head of Sustainable Energies Division, Ministry of Energy, Government of Chile

Following the 2017 commissioning of South America’s first geothermal power plant, Chile continues to look for ways to expand its geothermal portfolio. Chile’s Ministry of Energy shares thoughts on the sector and how a government effort to remove regulatory hurdles will ease the way for new projects.

New Energy Events: How does geothermal fit alongside other sources of generation, e.g. natural gas, solar and storage, in terms of the government’s plans for electricity generation?

Ministry of Energy: The cost of renewable technologies is falling and Chile has abundant renewable resources. Those factors taken together help explain why we have moved so ambitiously in recent years to diversify our energy matrix. Certainly, a significant component of the diversification will come from variable renewable sources, such as solar PV and wind. In order to integrate variable sources in a secure and cost-efficient manner, however, we need to develop a flexible power grid with a strategic mix of different technologies. There are several alternatives we can turn to for this flexibility. Geothermal is clearly one of those alternatives.

What is the government doing to promote the development of Chile’s geothermal resources?

Even though Chile´s policy is to allow the development of all energy sources that contribute to an economic, efficient and more sustainable energy mix, we are particularly aware of the benefits of renewables, in particular geothermal, and are keen to promote its development.

Particularly in view of the future need for flexibility in the power system, the Ministry of Energy is working on a regulatory measure to properly recognize the contribution of each asset – and to value them accordingly. With this new regulatory framework, we believe there will be a significant opportunity for the development of flexible technologies, such as geothermal, CSP, storage, among others.

Additionally, you should note that geothermal is currently the only technology that has a special clause in the terms of reference for supply tenders for regulated clients, where the failure to prove geothermal resources could be used as a non-imputable cause to delay the contracted supply or apply for an anticipated contract termination. In essence, we understand the particular challenges of geothermal and we are working on them.

Do you believe there is a future for direct uses in Chile? Is the government actively supporting direct use initiatives?

Yes, I am convinced that there is big potential for direct or thermal uses of geothermal energy that have been unexplored so far. Based on data on secondary energy consumption, the share of “heat” consumption in Chile amounts to 36% and is produced from several different sources, such as biomass, oil and natural gas. Geothermal direct-use could contribute to current thermal demand and could promote independent, local, renewable thermal energy generation. As a component of the Ministry of Energy’s initiatives to support the transition to an economic, efficient and sustainable energy system, we are promoting direct-use initiatives through four working lines: capacity building, potential development, technical studies, and regulation. With regard to the latter, last April the Ministry of Energy sent to the National Congress a proposed amendment to Law 19.657 on Geothermal Concessions. This modification intends to remove an important existing regulatory hurdle for direct-use and geothermal heat pump projects by enabling and expediting the permitting process.

What are the biggest hurdles you anticipate for the development of geothermal?

The biggest hurdles for high enthalpy geothermal energy projects are threefold. The first is geographic. Chile’s geothermal resources are located mainly in the high Andes, located far from transmission lines and in areas which experience challenging weather conditions. Development costs, then, are higher. The second hurdle is financial: as you know, there is significant upfront risk associated with exploration for geothermal. The third hurdle is sometimes overlooked and relates to the lack of a consolidated ancillary service industry.

For direct-use we have identified two main hurdles. The first is regulatory but, as identified above, we are dealing with this and this will be a non-issue moving forward. The second is the maturity of the market. Although direct-use is a proven and reliable technology, it hasn’t been put to test at scale in Chile. As a market, then, we are still on the learning curve as it relates to the implementation of direct-use.

Gabriel Prudencio Flaño, Head of Sustainable Energies Division, Ministry of Energy, Government of Chile will be a featured speaker at the upcoming 6th Geothermal Congress for Latin America & the Caribbean