Policy Makers’ Perspectives on the Expansion of Renewable Energy Sources in Chile’s Electricity Auctions

Shahriyar Nasirov, Eugenio Cruz, Claudio Agostini and Carlos Silva
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Shahriyar Nasirov: Facultad de Ingeniería y Ciencias, Universidad Adolfo Ibañez, Avenida Diagonal Las Torres 2640, Peñalolén, Santiago 7941169, Chile
Eugenio Cruz: Facultad de Ingeniería y Ciencias, Universidad Adolfo Ibañez, Avenida Diagonal Las Torres 2640, Peñalolén, Santiago 7941169, Chile
Carlos Silva: Facultad de Ingeniería y Ciencias, Universidad Adolfo Ibañez, Avenida Diagonal Las Torres 2640, Peñalolén, Santiago 7941169, Chile

Energies, 2019, vol. 12, issue 21, 1-17

Abstract: Chile has become one of the first few countries where renewable sources compete directly with conventional generation in price-based auctions. Moreover, the results of energy auctions during the last few years show a remarkable transition from conventional fossil fuels to renewable energies. In fact, the energy auction in 2017, to provide energy to customers from distribution companies, achieved a massive expansion in renewable technology at one of the lowest prices in the world. These positive results prompted the question if such results were permanent or temporal due to factors with limited effects. In this regard, this paper studies the key factors that drove the significant rise of renewable technologies in Chilean energy auctions, obtaining valuable lessons for regulators, not only in Chile, but also in the region and the world. For this purpose, we considered a well-proven method based on a hybrid multicriteria decision-making model to examine and prioritize the main drivers of the expansion of renewables in auctions. The results showed that some specific characteristics of the auction design, particularly the hourly supply blocks, the lead time for project construction, and contract duration, were the most significant drivers for the expansion of renewables in energy auctions. Moreover, the results showed that, provided that the auction design accommodates for such drivers, solar energy ends up as the most attractive technology in the Chilean auctions. The research also shows the main findings are robust by the application of a probabilistic sensitivity analysis.

Keywords: renewable energy; auctions; regulator’s perspective; Chile (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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