Results of Chile s Geothermal Roundtable 2018: Implications for other Developing Markets

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1 Results of Chile s Geothermal Roundtable 2018: Implications for other Developing Markets GRC Annual Meeting Reno, October 2018 Presented by: Gonzalo Torres Macchiavello

2 Chile The Country Population: 17.6 Million (2017) GDP PPP: $ 477 Billion (2018 est) GDP per Capita PPP: $ 25,700 (Largest in LA) (2018 est) Largest Cities: Santiago (Capital 6.3 mm), Vina del Mar/Valparaiso and Concepcion Economic Activity: Mining, Agribusiness, Forestry, Fishing, Wine, Tourism Chile Credit Rating 2018: S&P : AA- Stable Moody s: Aa3 Stable Fitch: A+ Stable Chile has over 50 free trade agreements with other countries

3 Electricity Market in Chile: Description Source: National Energy Commission 6% MW 13% MW 22% MW 2% 447 MW 20% MW 8% MW 12% MW 15% MW 2% 447 MW 0,0021% 48 MW Source: World Bank

4 Geothermal Energy in Chile Chile has 25% of the active volcanoes in the world Early explorations in El Tatio by Italian Colony Geothermal Exploration by the Chilean Government Geothermal Concession Law Geothermal Exploration by the Private Companies Geothermal Roundtable Inactivity Source: CEGA. UChile Source: Energía Andina

5 Geothermal Energy in Chile Snapshot In the Past 10 Years: Over USD 400 MM invested in exploration From 2,200 to 3,500 MW high enthalphy exploitable potential Some IPP s already left (Mighty River Power, Alterra, Ormat, Origin) Current Projects: Cerro Pabellon (ENEL) 48MW in operations + 33MW expansion Peumayen (TRANSMARK) 100MW Tinguiririca (Energia Andina) 100MW Mariposa (EDC) 100MW

6 Chile s Geothermal Roundtable Requested by the Industry to the Minister of Energy. Funded by the ESMAP/WB and organized by the Ministry of Energy. 18 Months (01/2017 to 07/2018), 13 Workshops, 40 participants average. Led by the Geothermal Council of Chile. Participation of the academy, NCRE trade associations, IPP s, service providers and multilateral agencies. The main topics discussed were: CAPEX, OPEX, geothermal insertion in the future energy Matrix, Public Policies and Potential Incentives. Final Report released in July 2018 by Chile s Minister of Energy, Mrs. Susana Jimenez.

7 Chilean Context Chile Energy Sector Main Legal Paradigms Free Market Economy. No FIT. Technological Neutrality Chile Energy Sector Main Drivers 100% Renewables by 2040 (at least 70% by 2050) Decarbonization Itermittency Traceability OECD Member COP 21 Regional Development Geothermal Energy Challenge: Compete for Base Load & Ancillary Services Supply Against: Natural Gas, CSP, Pump Storage and PV+Wind+Batteries Other Challenges Location, T-Lines, Water, Communities, Services Providers

8 Geothermal Roundtable Results I Base flexible 60% Base convencional 40% Source: Geothermal Roundtable Ministry of Energy. Chile Base-load technologies are needed to address residual load DECARBONIZATION

9 Big Hydro Dams Geothermal Roundtable Results II LCOE s from the Roundtable Coal Carbon Capture LNG Solar CSP Solar + Batt. Geothermal

10 Geothermal Roundtable Results III Potential for high enthalpy power generation projects: 3,500MW s. High introduction of solar PV projects are expected. Future operation of the system depends of base load technologies. Flexible generation to compensate intermittency. Geothermal energy is base load and flexible. Geothermal can economically compete with other base load technologies. The CNE (Government) can call PPA auctions for security and flexibility criteria. Drilling of a well prior to bid will be substituted by a QP independent report under the Canadian or Australian Codes (3G s). VAT and Import Duties Exemption. Capacity Payment and Ancillary Services will be reviewed by the Government to provide better conditions to base-load technologies. Real option to substitute coal (Decarbonization). Cascade business. GDF/KfW and IDB risk mitigation a MUST HAVE. The ENERGY ROUTE recently released by the Ministry of Energy used the Geothermal Roundtable Report outcome in its preparation.

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12 Final Report released in July 2018 by Chile s Minister of Energy, Mrs. Susana Jimenez.

13 Implications for the Future in the World Drivers. World Direction in Energy Matrix Development No FIT. Renewables Commitment. Intermittency. Traceability. World agreements. Government/Regulators Approach Build political will. Public Policies. Necessity of renewable base load attributes in PPA auctions (capacity/security, ancillary services, regional supply). Off Takers Commitment to clean energy. Other related business/developments THE GEOTHERMAL ROUNDTABLE REPORT IS A CONTRIBUTION TO THE DEVELOPMENT OF GEOTHERMAL ENERGY IN A COMPETITIVE SCENARIO

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