Solar Shining Bright

BMI View: Extremely high Q114 solar installation rates and a strengthening project pipeline in Chile are testament to the country's attractive solar market, which is tempting a swathe of international investors. We have long-highlighted Chile's sizeable solar power growth potential and it appears that this is beginning to be realised. Additionally, news that SunEdison has filed an environmental impact declaration for the development of a 117MW solar power plant near Santiago reinforces our view that US solar manufacturers are well-positioned to capitalise on this rapidly expanding market.

It has been reported that solar photovoltaic (PV) capacity installations in Chile surged in Q114, with over 150MW installed during the first three months of the year - outperforming any other Latin American country significantly. Furthermore, roughly 380MW of solar projects are currently under construction across the country and the project pipeline continues to strengthen. For example, SunEdison announced in late April 2014 that it has filed an environmental impact declaration for the development of a 117MW solar power plant near Santiago. As such, we believe that Chile's substantial solar potential is beginning to be realised, in line with our long-held positive view of the market.

Our optimistic outlook for the Chilean solar market is based on a number of key fundamentals. These include robust power demand, supported by Chile's energy-intensive mining industry, strong government conviction towards power mix diversification, a mostly stable businesses environment and geographically advantageous conditions for renewable electricity generation. In fact, solar irradiation levels in the Atacama Desert are some of the highest in the world, this - coupled with the fact that electricity prices in Chile are already relatively elevated - has meant that large-scale solar projects are increasingly cost competitive compared with other energy sources. For example, Total's 70MW solar PV farm in the Atacama Desert, is the largest solar project in the world to be built without relying on government subsidy support.

Renewables Expanding
Chile Non-Hydro Renewables Capacity By Type (MW), 2013-2020

BMI View: Extremely high Q114 solar installation rates and a strengthening project pipeline in Chile are testament to the country's attractive solar market, which is tempting a swathe of international investors. We have long-highlighted Chile's sizeable solar power growth potential and it appears that this is beginning to be realised. Additionally, news that SunEdison has filed an environmental impact declaration for the development of a 117MW solar power plant near Santiago reinforces our view that US solar manufacturers are well-positioned to capitalise on this rapidly expanding market.

It has been reported that solar photovoltaic (PV) capacity installations in Chile surged in Q114, with over 150MW installed during the first three months of the year - outperforming any other Latin American country significantly. Furthermore, roughly 380MW of solar projects are currently under construction across the country and the project pipeline continues to strengthen. For example, SunEdison announced in late April 2014 that it has filed an environmental impact declaration for the development of a 117MW solar power plant near Santiago. As such, we believe that Chile's substantial solar potential is beginning to be realised, in line with our long-held positive view of the market.

Our optimistic outlook for the Chilean solar market is based on a number of key fundamentals. These include robust power demand, supported by Chile's energy-intensive mining industry, strong government conviction towards power mix diversification, a mostly stable businesses environment and geographically advantageous conditions for renewable electricity generation. In fact, solar irradiation levels in the Atacama Desert are some of the highest in the world, this - coupled with the fact that electricity prices in Chile are already relatively elevated - has meant that large-scale solar projects are increasingly cost competitive compared with other energy sources. For example, Total's 70MW solar PV farm in the Atacama Desert, is the largest solar project in the world to be built without relying on government subsidy support.

In addition, renewable energy developers in Chile appear to be gaining greater access to financing, particularly from international financial institutions (IFIs) and development banks. Considering that Chile's conventional power sector is frequently threatened by project delays due to environmental opposition, there is seemingly a growing gap in the market which renewable energy is well-placed to fill ( see 'Creating A Space For Renewables Expansion', February 17 2014).

Renewables Expanding
Chile Non-Hydro Renewables Capacity By Type (MW), 2013-2020

SunEdison has a growing solar power portfolio in Chile and news that the company is set to develop a 117MW solar power plant in the Metropolitan region of Santiago highlights the company's continued focus on the market as a key area of growth.

We believe that US solar manufacturers are well-positioned to capitalise on the rapidly expanding solar market in Chile. Chile's power network is highly inefficient in the country's remote desert regions and therefore provides scope for a decentralised approach to power generation ( see 'Solar Turnaround Taking Hold', April 29 2014). We have previously stated that distributed generation solar solutions present a considerable growth market at both a residential and industrial level for US manufacturers, and considering Chile's restricted transmission and distribution (T&D) infrastructure and growing demand from the mining sector (which are often located in remote regions such as the Atacama Desert), this is one area in particular that could benefit these companies. SunEdison has already targeted the mining sector in Chile, and signed an agreement in January 2013 with the Chilean mining and steel firm CAP Group for a solar PV project which will produce roughly 15% of CAP's energy requirements.

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Related sectors of this article: Renewables, Solar - Renewable, Solar - PV - Renewable, Regulatory/Policy, Technology, Manufacturing/Technology
Geography: Chile
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