AES Accelerates 1 GW of Coal Plant Retirements in Chile

By Jul 7, 2021 by Sonal Patel

AES Corp. will retire four coal-fired power plants—a total 1,097 MW—in Chile “as soon as” January 2025 if supported by grid requirements under an agreement the Virginia-headquartered company signed with the Chilean government on July 6.

The coal closures, which are outlined in what AES described as a “voluntary” retirement plan, represent the “single largest coal retirement announcement by any power company in Chile to date” and includes roughly 20% of the country’s installed coal capacity, AES said.

The plants are all located in Mejillones, on the northern coast, and Puchuncaví, in central Chile, in areas of “high industrial concentration,” Chile’s Ministry of Energy said on Wednesday.

AES’s accelerated 2025 closure schedule is notable because while Chile has set a goal to achieve carbon neutrality by 2050, the government had already reached specific agreements with the power industry to phase out coal generation by 2040.

In June 2019, the government and the country’s four largest generators—AES Gener, Colbún, Enel, and ENGIE—reached a voluntary agreement to close their coal units by 2040, though, under that agreement, the power companies agreed to a “schedule” that would see the retirement of the nation’s eight oldest coal plants—a total 1,047 MW—by 2024: Tocopilla; Puchuncaví; and Coronel. As originally planned, the power companies agreed to revisit the schedule in new working groups formed every five years.

“We have been accelerating the original schedule signed in 2019,” noted Minister of Mines and Energy Juan Carlos Jobet on Wednesday. By 2025, of the 28 coal plants Chile had in 2019, “18 will no longer be in operation,” closures that represent 65% of coal-fired units in Chile, he said.

Plans to Sell, Mothball, and Permanently Close all But 831 MW of Chile Coal Capacity

In 2019, AES had 3,015 MW of coal-fired generating assets in Chile, Ricardo Roizen, AES Andes Chief Financial Officer, told POWER on Wednesday. Last year, it mothballed the 114-MW Ventanas 1 unit. Of the current 2,901-MW fleet, 764 MW will be sold, and 1,305 MW will be retired, he said. That includes the 208-MW Ventanas 2, which could go offline as early as August 2021; Ventanas 3 and 4, a combined 539 MW; and both units at the Angamos plant, a combined 558 MW, which could be retired by January 2025. (The $1.3 billion Angamos Plant, which began operations in late 2011, was POWER magazine’s 2012 Plant of the Year.)

The remaining 831 MW, which includes the Cochrane and Norgener plants “have yet to be committed for retirement or sale,” Roizen said.

The new retirements, however, must be approved by the National Electric Coordinator (SEN) and the National Energy Commission. “We do not expect the retirement of our plants to have a negative impact on the grid as their retirement is subject to preserving the security, sufficiency and economic requirements of the system,” said Roizen. 

To replace the power lost by the retirement of its coal assets, AES Chile is developing or building a pipeline of 2,039 MW of new solar, hydropower, wind, and energy storage, he noted.

Coal Generated a Third of Chile’s Power in 2020

At the end of 2020, Chile’s total gross installed capacity stood at 26,406 MW. According to data from the National Electric System (SEN), in 2020, the country’s plants produced 77,751 GWh. While the majority, 34.7%, was generated by coal plants, the share of coal plant generation has fallen dramatically compared to five years ago, when coal made up a 44% share of overall generation.

In 2020, renewables generation share grew to 46.5%, even though its overall hydropower generation was diminished owing to a persistent drought.

Chile’s generation profile since 1996. In 2020, hydropower generation made up 26.5% of the 77,751 GWh generated in Chile. Solar PV constituted a 9.8% share; wind, 7.1%; biomass, 2.4%; geothermal, 0.3%; coal, 34.7%; natural gas, 17.6%; and oil, 1.2%. Courtesy: Generadores de Chile

For AES, the retirement of its Chilean coal assets bolsters an interim goal to reduce its coal generation to below 10% of its total generation worldwide by the end of 2025. As explained in a recent climate scenario report, the move decouples AES’s long-term revenue from fossil fuels, reducing exposure from carbon policies. Along with positioning AES as a leader in developing zero-emissions energy sources—which are backed by public sector incentives—it said the effort will allow the company to diversify across “multiple dimensions,” allowing it to introduce new product lines and transition to a broader portfolio of renewable assets.

As part of its sustainability initiatives, the company has also notably sought a decisive shift in its corporate identity. This April, AES Gener changed its name to AES Andes to reflect its new climate-conscious focus—a marked shift for the fossil-heavy generation giant that has served Chile, Columbia, and Argentina since its establishment in 2000.

AES, notably, also carved out subsidiaries that retain a country focus. Its Chilean operations, for example, will be run by AES Chile; its Columbian operations fall under AES Columbia; and its Argentinian operations will be run by AES Argentina.

Under its newly issued customer-centric and low-carbon “Greentegra strategy,” AES Andes wants to become the main provider of energy solutions in South America, AES Andes CEO Ricardo Falú has said. “By 2024, AES Andes will have increased its renewable capacity by 165%, which, added to a gradual and responsible decarbonization process, will reduce the carbon intensity of its portfolio by 44%,” the company said.

Sonal Patel is a POWER senior associate editor (@sonalcpatel, @POWERmagazine)