‘Scarcity of contractors a huge issue’: Atlas Renewable Energy on deploying large-scale BESS in Chile

In this interview, Atlas’ head of execution Alex Monzo discussed its entry into energy storage in Chile, the types of projects it is deploying, the challenges it faces, and his views on the BESS supply landscape today. Atlas is targeting 1.5-2GW of BESS deployments in Chile.

Entry into storage and the two types of BESS projects being deployed

“We’re an IPP so we’re focused on serving our clients with renewable energy solutions. We found our clients were facing an increasing energy price gap in the north of Chile. The root of that is a large penetration of solar combined with a high industrial demand, which is growing, causing an imbalance in the system,” Monzo said.

That led to huge price spreads between day and night. The energy market trend combined with the rapid evolution of BESS technology to make a viable business case for energy storage in Chile: “We all realised BESS could be a solution for this imbalance.”

There are two types of opportunities for large-scale BESS projects in Chile, Monzo explained.

One type is reinforcing the grid with BESS that effectively act as transmission infrastructure assets, not linked to a generation plant. These projects are commercialised via tolling agreements with distribution utilities (or distribution companies/DISCOs).

Those DISCOs are then the ones that operate the project, entering it into the capacity market or whichever other revenue streams are available, while Atlas receives a monthly fee for availability whether the asset is used or not.

The CJR/Sungrow project mentioned earlier, which Monzo says is 50% complete, comes under this category. It shares land and grid connection with the PV plant but acts totally independently, with a separate, existing PPA for the solar portion.

The second project type is adding BESS to existing generation plants and selling the combined offtake to a buyer of renewable energy that is looking for a more flat solar generation curve. In this case, Atlas is the one operating the project, providing the client with a median energy price that somewhere in the middle of the huge imbalance Monzo cited earlier.

“We serve our client from the grid during the hours in the day while we charge the battery, then we serve them from the battery when generation tails off in the evening and night hours.”

In either type of project, Atlas enters into long-term agreements covering the whole of the BESS project, generally 10 or 15 years long. In that time, the role of BESS could change substantially, he said.

“Within five years the system could become balanced by more closely aligning those daytime and nighttime prices. Right now it’s US$10-20 in the day and over US$150 at night, it could end up at a flat price of around US$75. Then, the game will be about fighting for lower costs, playing with solar plus BESS etc.”

A solar-plus-storage project with state-owned mining company Codelco as offtaker, announced in March this year, comes under the second category. That will also have a 200MW/800MWh.

Challenges to deploying large-scale BESS in Chile

Monzo highlighted supply chain and engineering, procurement and construction (EPC) labour bottlenecks as the two big challenges to project deployment in Chile.

“The supply chain always has risks, it’s a mostly Chinese market. We still see disruptions on international freight and the EV market is pushing for some of the CATL/REPT cells in huge volumes. We still expect a price decrease of 15% over the next two years but the EV market could change that,” Monzo said.

“When it comes to integrators, we choose those we think are most capable of surviving. We generally use Telsa, Fluence and Sungrow.”

When it comes to batteries and BESS, Chile, particularly the dry north, has some unique geographic characteristics that need to be taken into account. The batteries available on the market are robust enough when it comes to humidity, altitude and operating temperature but water scarcity, as it pertains to thermal management, is a challenge.

But the big challenge is the scarcity of contractors to work on projects, Monzo said.

“There’s always been a scarcity of contractors in Chile and many left Chile after after its very strict Covid-19 measures. You compete with mining companies for labour and they have a totally different range of conditions, it’s always a challenge.”

“Most contractors are foreign, the local companies are quite small and don’t want to do these big projects. It’s hard to deploy lots of people at one time. For our solar-plus-storage project we’ll have a total of 1,500 people on it over 11 months. It’s really hard to do that in a condensed timeframe.”

BESS supply landscape

Chile’s similarity to California in terms of its electricity market helps with the largest system integrators already being well-versed in how to serve it from a BESS point of view, Monzo added. Like California, most projects in Chile are 4-hour systems.

The market appears to be reverting to AC blocks, meaning BESS containers with power conversion systems (PCS) and inverters already integrated. This creates more flexibility on increasing the size of your project, Monzo said.

“The Chinese companies are investing a lot of money in that, they’ve reached the same conclusion in the AC block versus DC block debate. We are also seeing the module suppliers make a big push into BESS because the PV market is commoditised.”

“Inverters are also more or less fully optimised whereas batteries appear to have escaped commoditisation for now. I foresee more technology evolution in the battery space and the margins for them will still be good for a while.”

See recent Energy-Storage.news coverage of the Chile market here, including Grenergy securing financing for the first two phases of what it claims is the largest BESS project in the world, a large-scale commissioning by another IPP Innergex, and the government opening up land bidding for 13GWh of storage projects.

Energy-Storage.news’ publisher Solar Media will host the 3rd annual Energy Storage Summit Latin America in Santiago, Chile, 15-16 October 2024. This year’s events bring together Latin America’s leading investors, policymakers, developers, utilities, network operators, EPCs and more all in one place to discuss the landscape of energy storage in the region. Visit the official site for more info.