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The opportunities for PV are growing daily in Chile, but for now the country still relies on product imports to satisfy demand.

By Jason Deign

It is no coincidence that this year’s PV Insider Latin American PV conference and exhibition will be held in Santiago, Chile.

With a power-hungry mining industry driving demand for green energy, opportunities for PV developers are opening up on an almost daily basis in the country, making it the prime focus for solar companies eyeing the Latin American market.

“Whilst the whole region is becoming an exciting market for PV, the fastest growing and largest market for utility-scale solar power is Chile,” states PV Insider’s guide to opportunities in the country.

“With nearly 100 developers now established in the country, the global PV community has quickly realised that Chile presents a solar opportunity like no other in the world.”

Although the country does not have a feed-in tariff, expensive grid power and high solar insolation levels in areas such as the Atacama Desert in the north of the country mean that PV development makes sense even without incentives.

What nobody is certain about at the moment is quite how much development makes sense. To date, Chile’s Environmental Evaluation Service has approved 63 projects totalling 3.1GW. Expecting all of this to become a reality would be optimistic, to say the least.

Power from PV

It would mean, for example, that 36 per cent of the power coming into the country’s Large Northern Interconnected System grid would be coming from PV within seven years.

This in turn would make Chile the fastest-growing solar market the world has ever seen, and would likely overwhelm its current grid infrastructure.

And while nobody doubts the mining industry’s appetite for low-cost power, it is unlikely its round-the-clock energy needs could be met to this extent by an intermittent source such as PV.

Difficulties in judging the speed and extent of PV demand growth in Chile is a major challenge for developers pondering whether or not to establish local supply chains in the country.

Right now, says Josefin Berg, IHS Emerging Energy Research solar power advisory analyst: “Everything is shipped in and there is no local content requirement in terms of modules and inverters. We have seen a lot of Chinese activity, and also from the US.”

Developers wanting to source items from closer nearby might have a task on their hands, she adds. “The main manufacturing sites in Latin America are in Mexico at the moment, mainly catering for the US.

Manufacturing sites

“There are a few manufacturing sites planned for Argentina and some more prospects for Brazil. But until demand picks up it will be challenging to justify such an investment.”

If companies did want to set up their own manufacturing operations in Latin America, then Chile would not be a bad location to choose, Berg continues. “Brazil is a pretty protective market, whereas Chile is open and easy to do business with.”

But for Lux Research analyst Matthew Feinstein, it probably makes little sense to linger too long over the value of local manufacturing while cheap products can easily be sourced from abroad. “Why add capacity?” he asks. “There has to be a good reason to do it.”

Chile already has a good trade relationship with China and the current spat between Ontario in Canada and the World Trade Organization over local content weakens the case for developing in-country manufacturing capacity.

A further consideration is the strategic approach favoured by different developers. Chinese companies might have good reasons to want to keep their factories back home ticking over, for example.

Businesses such as First Solar, meanwhile, have more of a track record of getting close to the markets they operate in.

Awaiting a large market

The thin-film leader has already set up shop in Santiago on a commercial basis, although Alan Bernheimer, public relations director, earlier this year confirmed to PV Insider that the company would not consider local manufacturing unless a “very large” market was confirmed.

So for now, it seems as though the local supply chain for PV in Chile will be largely restricted to basic construction, operations, and maintenance duties rather than manufacturing.

However, if the market begins to take off in a big way it should not be a problem for the country to develop a supporting industry.

Chile’s universities are among the most respected in Latin America and institutions, such as the Universidad Pontificia Católica de Chile, are already taking an active role in the development of solar power. The mining industry ensures engineering skills are highly prized.

All of which means it is not inconceivable for manufacturing to get started in a modest fashion as PV demand picks up not just in Chile but right across the Latin American region.

“Most Latin American countries need more power, and PV solar is cost-competitive with all diesel generation and some wind and gas generation, so we believe the appetite is there wherever the economics make sense,” said Bernheimer.