SeeNews Renewables — Solar capacity installations in Chile could surpass 1 GW this year, but drop to 500 MW in 2016 and 400 MW in 2017 mainly due to grid constraints, Deutsche Bank (DB) says in a report from Tuesday.

Solar power is now the cheapest source of electricity generation in the country, as showed the energy auction held in October. Module prices in Chile stand at about USD 0.52 (EUR 0.48) per Watt, and as low as EUR 0.50/W for big projects. DB says the overall project costs have gone below USD 1 per Watt.

The bank said the longer term outlook looks promising, but over the next two years, solar developers will face significant challenges when it comes to access to good transmission lines. All big projects are planned or built in the Northern Chile/Atacama desert region where interconnection is the main issue.

“Chile has approved about 2.1 GW of projects, but it does not have any place to put them in. Many of these projects are unlikely to get built until the transmission lines get fixed,” says the report.

In the near-term, US majors SunEdison (NYSE:SUNE) and First Solar (NASDAQ:FSLR) are expected to benefit from the solar growth in Chile.

DB noted that getting a power purchase agreement (PPA) will be the other major challenge for developers. They need to either negotiate with mining companies or sell power on the spot market where prices have fallen as low as USD 60/MWh in the past 12 months.

SeeNews Renewables
SeeNews Renewables goes beyond the familiar renewable markets of Western Europe and the US to encompass the potential of BRIC counties and emerging investment destinations in North Africa, the Asia Pacific, Central and Eastern Europe. SeeNews Renewables is covering all renewable energy sources: wind, solar, hydropower, biomass, geothermal and marine energy.

Derick Lila
Derick is a Clark University graduate—and Fulbright alumni with a Master's Degree in Environmental Science, and Policy. He has over a decade of solar industry research, marketing, and content strategy experience.

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