The pending challenges in the energy transition
July 23, 2024
The energy transition is due to the re-evaluation of the value of fossil fuels compared to renewable energies. The former have lost value, due to the accumulated evidence about their role in global warming, their negative impact on air quality and the perception of insecurity in their supply chains. In contrast, renewable energies, such as solar and wind, have gained value by significantly reducing their development costs, producing nearly 20 times fewer CO2 emissions in their life cycle and contributing to energy autonomy.
In Chile, the potential to develop renewable plants has positioned these technologies as the main option for the expansion of the electrical matrix for almost a decade. This approach has been central to public energy policies, promoting decarbonization, lower supply costs and less dependence on international fuels. This has allowed the rapid development of renewable supply sources in the renewable electricity generation industry, the entry of new players into the market and the accelerated retirement of coal plants.
However, events such as the outbreak of 2019, the pandemic and the rise in fuel prices at an international level increased the pressure on electricity rates and other basic services. This panorama led governments – since 2019 – to put emphasis on mechanisms to protect vulnerable populations and price stabilization, which sought to bring to the present the rate reductions projected for the future due to the entry into force of low-cost renewable supply contracts.
At the same time, the agenda to promote the necessary changes to the design of the electricity market took a backseat, which delayed the implementation of enabling conditions for the efficient operation of the electricity grid with high renewable penetration. The benefits were anticipated, but not all measures were taken to ensure that they actually materialized. The fable of the goose that laid the golden eggs comes to mind as an appropriate metaphor for this process, in retrospect.
Currently, we are experiencing a second phase in the transition. The perceived value of renewables has suffered a setback, as the system does not adequately manage the geographic diversity and temporal variations of renewable generation. This has affected operational efficiency and progress towards carbon neutrality, forcing the dumping of large volumes of renewable energy and resorting to fossil generation to maintain system security.
The solutions to these problems are known, but not easier to implement: the development of transmission corridors for spatial management, storage projects for temporal management and new infrastructure and control protocols are needed to ensure the security of the system without fossil fuels.
These solutions require investments of tens of billions of dollars in the coming decades to achieve carbon neutrality goals. However, delays in implementing enabling conditions have not allowed solutions to arrive in time.
Added to this is the fact that our society is increasingly opposed to the solutions that the energy sector is prepared to offer in the energy transition. All of this results in greater uncertainty about development costs and timeframes and, ultimately, generates higher costs for all users.
While there are energy development alternatives that could take charge of the opposition to large-scale projects, based on distributed resources, surely the economically efficient balance for Chile must incorporate the large-scale use of the enormous renewable potential in specific areas of our country.
Since 2014, there has been a clear focus on the massive integration of renewable generation. Now, the decade ahead must focus on the integration of efficient technologies for the temporal and spatial management of energy. However, above all, the contradictory duality that exists in our society must be resolved: aspiring to a clean and low-cost energy matrix and, at the same time, opposing the development of technologies that precisely allow the former.