Market framework

Definition of ‘renewable energy’

Is there any legal definition of what constitutes ‘renewable energy’ or ‘clean power’ (or their equivalents) in your jurisdiction?

Chilean legislation on electricity refers to ‘renewable energy’ or ‘clean power’ with the term ‘non-conventional renewable energy’ (NCRE). Chilean legal framework define this concept as the electrical energy generated by non-conventional renewable means of generation, which are those whose primary source is biomass energy, hydraulic energy below 20MW, geothermal energy, solar energy, wind energy, ocean energy and other means of generation determined by the CNE that use renewable energies for the generation of electricity, contribute to diversify the sources of energy supply in the electrical system and cause low environmental impact.

Framework

What is the legal and regulatory framework applicable to developing, financing, operating and selling power and ‘environmental attributes’ from renewable energy projects?

The legal framework governing the Chilean electricity market consists of the following:

  • general regulation of the electric sector: the main regulation is the General Law of Electric Services (Electricity Law), which comprises the incentives for the development of NCRE projects. The Electricity Law, in its article 150-bis regulates the NCRE attributes. There is a Regulation of the Electricity Law that details the norms contained in the Electricity Law in order to facilitate its application;
  • geothermal norms: a separate law that regulates geothermal energy concessions, owing to the fact that a different legal status applies. This is the case because, unlike other renewable energy sources, the legislature considers geothermal energy to be a public asset, and it may only be explored and exploited after a specific concession is granted;
  • technical regulations governing the installation, operation and maintenance of electrical facilities: these are mainly the decrees of the Ministry of Energy, as well as the Ministry of Economy, which regulate the implementation of the Electricity Law and similar regulations; but also the technical provisions issued by the CNE, such as the Technical Standard with Safety Requirements and Quality of Service dictated by the National Electric Coordinator, which ensures the coordination of the electrical system;
  • regulation of the institutional framework in the electricity sector: this comprises the laws, decree laws and regulations that deal with the existence and functions of the main institutions and authorities involved in the development and operation of the electricity sector, such as the Ministry of Energy, the CNE, the SEC, the Electricity Law Experts Panel and the National Electric Coordinator; and
  • other relevant regulations: include the law that regulates the payments for residential generators, the regulation that created a subsidy for transmission lines in order to facilitate access to NCRE projects, the tax exemption for solar collectors; the relevant environmental statutes that must be applied to certain projects, applicable antitrust norms, among others.
Government incentives

Does the government offer incentives to promote the development of renewable energy projects? In addition, has the government established policies that also promote renewable energy?

In Chile, a quota system requires electrical companies that have an installed capacity of more than 200MW and that withdraw energy from the electrical systems for trading with distribution companies and final consumers to certify that a certain percentage of their energy withdrawal comes from NCRE sources. This percentage will increase every year until it reaches 20 per cent in 2025. However, this goal has almost been reached since, up to December 2018, NCRE were the 18 per cent of the national energy system. Further, the government has recently launched its decarbonisation programme that aims to replace coal with other sources of energy by 2040, so the 100 per cent of the energy comes from NCRE. This may imply a greater development of hydroelectric plants and energy storage solutions.

Among other relevant issues, the current regulation provides several advantages for NCRE projects over conventional sources. One of those advantages provided to NCRE projects is the exemption from paying tolls for using the main electrical transmission system. NCRE plants that generate less than 9MW are completely exempt, and NCRE plants that generate more than 9MW but less than 20MW are partially exempt.

Additionally, measures were established to facilitate the connection of the electrical system to NCRE plants with a capacity of less than 9MW, guaranteeing their access to the distribution facilities.

An annual tax on the polluting emissions of MP, NOx, SO2 and CO2, produced by facilities that reach a thermal capacity equal or greater than 50 MWt was approved in 2014.

Furthermore, in May 2017, the Public Property Ministry published several general instructions regarding concessions for onerous use of fiscal property in order to incentivise the development of NCRE projects on such public land. The Public Property Ministry may take the necessary measures so that NCRE projects make up 60 per cent of generated electricity by the year 2035 and at least 70 per cent of generated electricity by the year 2050.

Also, the development of NCRE projects has been promoted through the allocation of the Corporation for the Promotion of Production (CORFO) subsidies for conducting investment feasibility studies and following stages of the NCRE projects. In addition, CORFO has approved a long-term credit line for financing NCRE projects with an installed capacity of up 20MW.

Are renewable energy policies and incentives generally established at the national level, or are they established by states or other political subdivisions?

The laws that create policies for the development of NCRE projects are established at the national level.

Legislative proposals

Describe any notable pending or anticipated legislative proposals regarding renewable energy in your jurisdiction.

Currently, there are bills of law that aim to encourage the development of NCRE projects are being processed in Congress:

There are several bills under processing that promote the develop of NCRE projects by including:

  • promotion by the state of the small companies whose productive processes include the use of NCRE; and
  • promotion by Ministry of Energy of the use of NCRE in the economic activities of small and medium-sized companies by granting subsidies to them.
Disputes framework

Describe the legal framework applicable to disputes between renewable power market participants, related to pricing or otherwise.

There is a specialised body that solves conflicts related to electrical and gas matters in Chile, the Electricity Law Experts Panel (Panel), whose responsibilities and functions are regulated by the Electricity Law.

When companies require the intervention of the Panel, the latter must issue binding opinions resolving discrepancies and conflicts arising from the application of the electric legislation. This Panel is highly technical, non-jurisdictional, collegiate and independent. It is formed by five engineers and two lawyers.

Some of the most important aspects of the Panel are the short time-frame in which its expert opinions are issued and the very technical approach of these opinions. In addition, the parties may choose to submit their dispute to a common arbitration procedure or to appeal to ordinary courts.

Additionally, the SEC has the faculty of ruling the disputes that arise in relation to the open access principle.