Chile is closing coal plants faster than any other developing country, including Asian renewables giant China. Environmental movements and the first carbon tax in South America have triggered the installation of wind and solar energy in Chilean territory.
Unparalleled. 10 years ago, Chile produced half of its electricity from coal. In the first 10 months of 2024, the figure stood at 15.8%. The world’s southernmost country is stopping burning fossil fuels at a frenetic pace thanks to an early commitment to wind and solar.
Renewables now account for 66.8% of Chilean electricity generation. Chile is now the leading nation in photovoltaic integration with 20.9% of the mix, well ahead of wind production with 12.8%.
Change of course. At the beginning of the last decade, environmental organizations and other Chilean civil society groups managed to stop the installation of new coal mines and hydroelectric plants in regions particularly sensitive to this industry, such as Patagonia.
Opposition to traditional energy projects laid the foundations for a pioneering regulation in the region that would strengthen environmental protections and encourage investment by companies in new renewable sources.
A favorable framework. Chile put a Price on pollution, becoming the first country in South America with a carbon tax. The government also introduced new emissions standards, which made the construction of coal plants more expensive by 30%.
Once operational, coal plants also had to pay the carbon tax. So, in short, Chile turned coal power plants into a ruinous business, and renewables into their cheapest and most profitable alternative.
A risky bet. The effect was brutal. In 2022, Chile had to spend around 1% of its GDP on fossil fuel subsidies to stabilize the price of the electricity bill. But costs have leveled off and running a wind or solar farm is cheaper than running a coal plant.
“Our energy transition is based on market principles,” former Chilean Environment Minister Marcelo Mena-Carrasco, who is now CEO of The Global Methane Hub, told The Progress Playbook. “It’s a story that can be replicated in other parts of the world.”
Next steps. Chile plans to complete its coal phase-out by the end of the decade. Some of the country’s newest coal plants will close just six years after coming online. By 2030, renewables will represent between 80 and 90% of the country’s energy mix.
Image | Ministry of Energy of Chile
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