Chile's National Electric Coordinator (CEN) criticized Small Distributed Generation Projects (PMGDs) for the gap between the stabilized price and the development costs of these projects. "Since 2020, we have pointed out that the stabilized price presents competitive distortions in the market, which must be corrected because it is not consistent with the law, which established the stabilization of the marginal cost of energy and targeted those plants that did not have contracts," stated Juan Carlos Olmedo , president of the CEN's Board of Directors. "That is to say, today, the stabilized price does not conform to what the law establishes," he insisted during a session of the Mining and Energy Committee of the Chamber of Deputies regarding the bill to expand subsidies for the electricity bills of 4.7 million users. It is worth recalling that this initiative from the Ministry of Energy stipulates that PMGDs (Small Distributed Generation Projects) will finance energy withdrawals from the system through a temporary charge called the "FET Charge" (Tariff Stabilization Fund) for the years 2025 to 2027, amounting to $1.8 per kWh. This charge is financed by withholdings equivalent to the compensation for stabilized prices paid in accordance with the transitional regime of Supreme Decree No. 88/2019. If, in a given month, the FET Charge payment exceeds the amount payable for stabilized price compensation, the withholding amount equivalent to the resulting difference will be applied to the following month(s) until it is fully exhausted, regardless of the FET Charge's application period. Furthermore, the National Electric Coordinator of Chile warned that price stabilization produces surpluses in investment and generation supply, primarily during solar hours, and that this will not necessarily cease upon the entry into force of Supreme Decree No. 88. "Although DS No. 244 has already been replaced by DS No. 88, we will still see the effects until 2034 during its 10-year transition period."
This is because the price of energy decreases, systemic and transmission costs increase, and as the marginal cost falls, this results in utility solar plants seeing a price of zero in the market, while PMGDs (Small Distributed Generation Projects) see prices between USD 70-80/MWh,” noted Paulo Oyanedel , director of the Competition Monitoring Unit at CEN. “This problem will continue, since if PMGDs enter the market under DS 88, they will only receive a slightly lower price in compensation, of USD 20-40/MWh.”
In addition, although the PMGD market is quite decentralized, it is becoming more concentrated, given that from 2021 to the present, ten companies held 37% of the market share, and today they hold 50%,” he added. Therefore, the entity that operates the National Electric System indicated the need to evaluate current incentives and mechanisms to ensure they are aligned with the country's current situation; although the fact that PMGDs subsidize tariffs implies risks of default , or that the very continuation of subsidies would compromise the stability of the sector and raise energy costs in Chile , according to various renewable energy sector associations in the country.
