Atlas Renewable Energy is implementing a large-scale BESS in Chile

In this interview, Atlas’ Head of Execution Alex Monzo discusses the company’s entry into the Chilean energy storage market, the types of projects it is implementing, the challenges it faces, and his views on the current BESS supply landscape. Atlas is targeting 1.5-2 GW of BESS deployments in Chile.

Introduction to storage and two types of BESS projects being implemented

“We are an IPP, so we focus on serving our customers with renewable energy solutions. We have found that our customers are facing a growing energy price gap in the north of Chile. This is due to the high penetration of solar combined with high industrial demand that is growing, creating an imbalance in the system,” Monzo said.

This led to huge price differences between day and night. The trend in the energy market, combined with the rapid evolution of BESS technology, created a viable business plan for energy storage in Chile: “We all realized that BESS could be a solution to this imbalance.”

As Monzo explained, there are two types of opportunities for large-scale BESS projects in Chile.

One type is grid reinforcement with BESS, which effectively act as transmission infrastructure assets, unrelated to the power plant. These projects are commercialized through tolling agreements with distribution companies (or distribution companies/DISCOs).

It is these DISCOs that are responsible for operating the project, marketing it to the capacity market or other available sources of revenue, while Atlas receives a monthly availability fee regardless of whether the assets are used or not.

The aforementioned CJR/Sungrow project, which Monzo says is 50% complete, falls into this category. It shares land and grid connection with a PV plant, but operates completely independently, with a separate, existing PPA for the solar component.

The second type of project involves adding BESS to existing plants and selling the combined buy-back to a renewable energy buyer looking for a flatter solar generation curve. In this case, Atlas is the one operating the project, providing the customer with a median power price that is somewhere in the middle of the huge imbalance Monzo mentioned earlier.

“We serve our customers via the grid during the day while we charge the battery, and then, in the evening and at night, when energy production drops, we serve them via the battery.”

In both types of projects, Atlas enters into long-term contracts covering the entire BESS project, typically lasting 10 or 15 years. During that time, the BESS’s role can change significantly, he said.

“In five years, the system could be sustainable by more closely matching daytime and nighttime prices. It’s currently $10-$20 during the day and $150-plus at night, and could end up at a flat price of around $75. Then the game will be about fighting for lower costs, playing with solar plus BESS, etc.”

The solar-plus-storage project with state mining company Codelco as offtaker, announced in March this year, falls into the second category. It will also have 200 MW/800 MWh.

Challenges of implementing BESS on a large scale in Chile

Monzo identified two main challenges hindering the implementation of the project in Chile: supply chain bottlenecks and engineering, procurement and construction (EPC) workforce issues.

“There are always supply chain risks, this is mainly the Chinese market. We continue to see disruptions in international freight transport and the EV market is pushing for some CATL/REPT cells in huge volumes. We still expect prices to fall by 15% over the next two years, but the EV market could change that,” Monzo said.

“When it comes to integrators, we choose those we think are most likely to survive. We typically use Telsa, Fluence, and Sungrow.”

When it comes to batteries and BESS, Chile, especially the arid north, has some unique geographical features that need to be taken into account. Batteries available on the market are sufficiently robust in terms of humidity, altitude and operating temperature, but the lack of water in terms of thermal management is a challenge.

But the biggest challenge is the shortage of contractors willing to take on projects, Monzo said.

“There has always been a shortage of contractors in Chile and many left after the very strict Covid-19 measures were introduced. You are competing with mining companies for workers and they have a completely different range of conditions, so that is always a challenge.”

“Most contractors are foreigners, local companies are quite small and do not want to do big projects. It is difficult to deploy many people at once. In our solar-plus-storage project, we will have a total of 1,500 people in 11 months. It is really difficult to do it in a shortened time.”

BESS Supply Landscape

Chile’s similarity to California in terms of its electricity market helps major system integrators already well-versed in how to operate it from a BESS perspective, Monzo added. As in California, most projects in Chile are 4-hour systems.

The market seems to be returning to AC blocks, meaning BESS containers with power conversion systems (PCS) and inverters already integrated. This gives more flexibility in scaling up the project size, Monzo said.

“Chinese companies are investing a lot of money in this, they came to the same conclusion in the AC vs. DC block debate. We also see module suppliers pushing hard for BESS as the PV market is commoditized.”

“Inverters are also more or less fully optimized, while batteries seem to avoid commoditization for now. I foresee more evolution of technology in the battery space, and margins for them will be good for some time to come.”

See the latest Energy-Storage.news coverage of the Chilean market here, including Grenergy securing financing for the first two phases of what it claims is the world’s largest BESS project, the large-scale launch of fellow independent energy provider Innergex and the government opening a tender for land for 13GWh of storage projects.

Energy-Storage.news publisher Solar Media will host 3rd Annual Latin America Energy Storage Summit in Santiago, Chile, October 15-16, 2024This year’s events bring together leading investors, policymakers, developers, utilities, grid operators, EPCs and others in Latin America to discuss the energy storage landscape in the region. Visit the official website for more information.