Cerro Dominador, one of the most innovative solar generation plants in Latin America, is preparing to start operations during the second half of this year.
The project, in northern Chile’s Antofagasta region, combines a 100MW photovoltaic unit with a 110MW concentrated solar power (CSP) unit that will use the sun’s energy to heat salts. The heat can then be used to create steam and generate power.
The salts will also store energy, giving the plant the ability to inject into the grid consistently 24 hours a day.
On the occasion of the imminent startup of the US$1.4bn plant, which is something of a reference for the region, BNamericas spoke with Cerro Dominador CSP CEO Fernando González to discuss the project and learn about the company’s future plans.
González says the US-owned company’s portfolio of projects is growing and reaffirms its commitment to Chile. Cerro Dominador, he adds, will bring new projects to the 2020 regulated supply tender, which will take place in November.
BNamericas: The start date for Cerro Dominador, a one-of-a-kind project in Latin America, is approaching. What have been the main challenges in its development?
González: This project has had many challenges. And the fact we’re above 90% completion and waiting to connect in the second half of the year, is the result of the effort and commitment of our team and our stakeholders.
One of the most important challenges was financing. When we took control of the project [in 2016] and had to work to reactivate it, we had to incorporate an additional construction company to the one we already had and work with the banks to get financial closure, which was achieved in 2018.
This is the first CSP plant in Latin America and there is a process of education and explanation of what the technology is, we had to live through that in 2018 and we hope we’ve paved the way so those that follow will find a better reception.
Reactivating construction and working to meet deadlines was another very important challenge, because it’s much easier to start a project from scratch and finish it than to take a project that was suspended for a while and reactivate it, negotiate with all the contractors and bring it to life. Those were the main challenges.
BNamericas: Concentrated solar technology is just beginning to be developed in the region. What are the barriers it faces at this time and what are the main benefits of the technology?
González: This is the first CSP project in Latin America and we’re working so that it’s not the only one. This technology is ideal specifically for Chile, which is going through a decarbonization process, because this type of technology has a generation profile very similar to that of the fossil fuel plants it’s going to replace.
I believe that the role of technology is key in Chile’s decarbonization. Chile’s resources are unique in the world to continue developing and implementing this technology. And there is an additional topic that has been discussed in recent years, not only in Chile, but worldwide, that’s related to the penetration of variable renewable energies, which is flexibility.
This type of technology provides a lot of flexibility to the system which increase stability. I think this helps the grid’s robustness, paving the way for more investment in variable renewable capacity.
Obviously, spreading knowledge of the technology is something that we’re constantly working on. Two years ago, three years ago, this technology was hardly talked about, and now it’s being presented as a clear option for countries seeking decarbonization. So, explaining what the technology consists of to potential clients, the government and relevant institutions is our challenge, our constant task. We’re convinced that it’s a key technology and that it has a great future, a lot of potential in Chile and we’re working to ensure that this is recognized.
BNamericas: How do these projects become economically viable and what factors can contribute to lowering your costs in the future?
González: In recent years there has been a great deal of work put into making plants more efficient. Cost reductions have put CSP technology in excellent condition to be competitive in this market.
The truth is, it’s important to recognize not only the contribution in price competitiveness, but also the contribution in flexibility.
BNamericas: Cerro Dominador has an energy storage component. What regulatory and market aspects are pending to take advantage of the full potential of storage?
González: Storage in salts is the best option we have to store large volumes of energy for long periods, mainly because the salts don’t degrade during the life of the plant, which is over 25, 30 years.
The first step is to recognize the need to make a change. Storage and flexibility are issues that five years ago were not part of the agenda and that it’s important to start addressing now. And I agree that there are changes that are necessary, work is beginning on that, an example is the flexibility law, but I think the important thing is to be clear about the objective and to design measures that are really efficient and aligned with the fulfillment of that objective.
The truth is that those measures and those regulatory changes have to result in new investment in storage. If you want something and the goal, the methods you use to achieve that are not adequate, you’re not going to get there. We’re at a good moment to begin the discussion and it’s important, from my point of view, that the market signals that are given are such that this objective is achieved, that new investment in flexible renewable plants is achieved, plus investment in storage plants, because that’s what is going to allow the accelerated decarbonization targets to be met, which I think can be accelerated further, as well as the carbon neutrality targets.
BNamericas: The company is also developing the 450MW Likana project with estimated investment of US$2.4bn. What is the status of this project and do you expect to look for a PPA in the next 2020 supply tenders?
González: This is one of the main projects that we’re developing. It reflects our commitment to technology and to continue our growth in Chile. The investment amount is now lower, as prices have become more competitive.
We’re actively working to participate in the public tender this year. It’s a shame that it was postponed for about five months because if it had been on the original date, you could have seen the market prices we’re achieving even earlier.
Furthermore, we’re working on private tenders, on private contracts. We have competitive offers and we’re open for business, actively searching and working in the private market to get contracts, and the fact that last year we announced a contract with Copec shows that we’re on the right track, starting a process of focusing on customers and presenting value-added offers for them.
Today we’re in a position to make very competitive offers and in line with current market prices.
BNamericas: What is the strategy the company uses to deal with the financing of projects of this size? What do financial entities seek and value in projects like Cerro Dominador and Likana?
González: For our projects, the main attraction is to offer a combination of technologies that allows us to deliver energy for a complete 24-hour block. This is what mining and big industry really need.
What does it take to finance a project of this size and this type of investment? I think there are three things: first, obviously you have to have a PPA.
The second, and this is more related to technology, is that the constructor be a company that has the financial backing to carry out the project. And that is expanding, the number of companies that have knowledge of this technology and that are investing to learn has increased in recent years.
And the third point, which for me is one of the most important, is that the developer needs to have experience and knowledge of the technology, and that the partners, those who invest the capital, also have financial capacity and also have experience with the technology. I think that’s a factor that makes a project more attractive from the point of view of its financing. Banks are looking for someone who knows what he’s doing and who has the financial backing, enough capital to develop it.