Chile: Approval of Significant Changes in Recognition and Compensation of Energy Storage Systems and Hybrid Plants

Supreme Decree No. 70 of 2023 (DS 70) has been recently approved, modifying Supreme Decree No. 62 (DS 62), which regulates the capacity payment, also called sufficiency power, in Chile. This modification introduces significant changes in the recognition and compensation of energy storage systems and hybrid plants with storage capacity.

Recognition of capacity for storage and energy projects

Since 1982, the Chilean market has recognized capacity payment for plants that contribute adequacy to the electrical system. With Law 20.936 of 2016, the existence of energy storage systems (Energy Storage Systems or SAE) and hybrid energy systems (Renewable Plants with Storage Capacity or CRCA) was recognized in the law. Later, Law 21.505 of 2022 explicitly incorporated storage systems, including stand-alone, into the capacity market.

The current law recognizes two types of storage:

• Energy Storage Systems (SAE): Technological equipment capable of withdrawing energy from the system, transforming it into another type of energy (chemical, potential, thermal, etc.), storing it, and subsequently, through a reverse transformation, injecting it back into the electrical system, contributing to the safety, adequacy, or economic efficiency of the system.
• Renewable Plants with Storage Capacity (CRCA): Renewable generation plants that use variable primary resources, composed of a generation component and a storage component, both connected to the same point of connection to the electrical system. The generation component transforms primary energy into electrical energy, while the storage component transforms electrical energy into another type of energy for storage and then injects it back into the electrical system.

Capacity payment

Although Law 21.505 established the recognition of capacity for storage systems, it was necessary to modify the regulatory regulation to enable capacity payment for stand-alone storage.

The capacity payment for all generating units, including storage, is determined based on the most efficient technology capable of providing energy during peak demand, generally represented by diesel units due to their ability to rapidly increase production and meet demand.

The capacity payment mechanism, regulated by DS 62 and unchanged by the new regulation, establishes that this is determined by each plant's contribution to system reliability, its availability during periods of peak demand, and the general needs of the electrical system to maintain an adequate reserve margin. Capacity payments are calculated annually by the coordinator to adjust for changes in the electricity market, demand forecasts, and the entry or exit of generating units.

The CNE (National Energy Commission) regulates the majority of the parameters used to calculate the capacity payments through successive short-term node price decrees and the technical standards issued by that body.

Modifications introduced by DS 70 for recognizing storage in capacity payment

The main modifications are as follows:

• Incorporation of energy storage systems: New regulations now explicitly address the integration of energy storage systems within the existing framework. A methodology has been introduced to evaluate and recognize the power capacity of stand-alone energy storage systems.
• Payment for renewable plants with storage capacity: Updated rules outline a method for determining the payment specifically for renewable energy plants equipped with energy storage capacities.
• Improved data for determining peak hours: Modifications have been made to improve the availability of relevant data and studies that help accurately identify the peak hours that determine the calculation and subsequent capacity payment.

Capacity recognition table for storage

The proposal includes a table specifying capacity recognition for storage based on the hours it can provide power:

This table will be applicable exclusively for a period of 10 years from the publication of the new decree, for all storage installations, both existing and new.

Impact on solar plants

The proposed regulation will not change the capacity recognition rules for solar or wind plants, so the current rules will continue to apply even after the issuance of the new regulation.