- Chile’s plan to triple electricity subsidies raises concerns over potential negative impacts on renewable energy investments and the I-REC market.
- Renewable energy groups warn the bill could create uncertainty, threaten new projects, and undermine investor confidence.
- Experts predict the legislation could reduce I-REC supply and increase certificate prices, affecting Chile’s renewable energy growth trajectory.
Chile’s government introduced a bill to triple its electricity subsidy, raising concerns about its impact on renewable energy investments and the renewable energy certificate (I-REC) market. The Ministry of Energy aims to shield consumers from rising energy costs but risks harming the renewable sector.
Tariffs have surged under the Electricity Tariff Stabilization Act, prompting the government to act. The bill also proposes stricter penalties for electricity distributors, including doubling fines and increasing compensation for service interruptions.
Industry experts warn that this plan could create economic challenges. Eduardo Perez, an analyst at Scientiis, a firm focused on electricity market risks, highlights that tariffs may jump by 30% to 40%, disproportionately affecting various population groups. He believes political motivations might speed up the bill’s approval, especially during an election season.
Renewable energy organisations worry that the legislation will disrupt investment. Critical groups like the Asociación Chilena de Energía Solar and the Asociación Chilena de Energías Renovables y Almacenamiento argue that the bill jeopardises both new projects and revenue from existing ones. They fear the uncertainty could erode investor confidence and slow the renewable sector’s growth.
Reducing renewable energy production could also shrink the number of I-REC certificates. Since 2020, Chile’s I-REC market has rapidly expanded. The I-TRACK Foundation reports that I-REC emissions in Chile hit 23.5 million MWh by August 2024, up from 17.9 million MWh in 2023. Slower renewable energy projects could limit future certificate issuance.
Valentina de Vidts from Cero Trade emphasises that a dip in renewable energy production could tighten I-REC supply, pushing prices higher if demand remains strong. Platts recently valued 2024 I-REC certificates at 67 cents/MWh, compared to 60 cents/MWh for the 2023 vintage.
Energy industry leaders are watching the bill closely. Many worry that the proposed changes could destabilise the regulatory environment, discouraging investments in new energy projects. Shifting financial burdens within the sector could also hamper growth and weaken Chile’s competitive edge in renewable energy.
Chile has built a strong reputation in green energy development. However, the future of its renewable energy sector depends on the government’s ability to balance consumer protection with fostering investment. The outcome of this bill will shape Chile’s investment climate and influence the ongoing success of its renewable projects and I-REC market.