By El Mercurio (Written Press) [B] Economy and Business, Sunday January 3, 2021.

Desalination, green hydrogen and tourism, the alternatives that AES Gener is considering for its coal-fired plants after the withdrawal

January 4, 2021

If it were up to them, Julián Nebreda and Ricardo Falú, president and CEO of the Company, respectively, would prefer to permanently disconnect all their plants, but for reasons of security in terms of electricity supply they had to resort to the Strategic Reserve Status (ERE), for which —they explain— in the case of the two Ventanas units, they will receive a total of US$10 million per year. Jéssica Esturillo O.

This week, AES Gener took a concrete first step towards the withdrawal of coal from its generation mix by shutting down one of the four power plants at the Ventanas complex in Puchuncaví.

A second unit will be shut down once the works to reinforce the transmission system by distributor Chilquinta are completed. This will make it possible to bring from other areas some of the energy used by the Valparaiso Region, which, until now, was almost exclusively supplied by these plants.

There is no doubt that with respect to other players sector whose matrices are more diversified, the path of decarbonization for AES Gener is more challenging.

Eighty-five percent of its capacity in Chile comes from coal-fired units, most of which were built in the 2000s, in response to the Argentine gas crisis.

These are about 3,000 MW that the US-owned company has to replace with its equivalent in low- or zero-emission renewable generation.

“This company was very successful in helping Chile find an alternative electricity supply to address the gas crisis.

At that time, we had to circumvent an enormous problem that this country had and today we want to achieve that same success, taking advantage of Chile’s competitiveness in renewable resources.

That is why I was very excited to see that we were able to complete the withdrawal of Ventanas 1 and 2 very early,” stated AES Gener president Julian Nebreda, telematically from Miami.

The representative of AES Corp., the controller of AES Gener, assured that this week’s milestone does not imply that they will give up, but that they will continue to try to bring forward as much as possible the dates that they committed in the voluntary agreement that the electric companies and the Government executed in June 2019.

On Tuesday, at the ceremony that took place simultaneously at Palacio de la Moneda and in the Puchuncaví site, it was the CEO of AES Gener, Ricardo Falú, who activated the controls to shut down Ventanas Unit 1, together with the Minister of Energy and Mining, Juan Carlos Jobet.

He explained that the equation behind this goal is not simple.

First, he stated, it is necessary to remove coal from energy sales contracts and replace it with renewable generation, but this requires complex negotiations with customers such as large mining companies.

In this sense, he advanced that the efforts so far have paid off, since in 2025 two thirds of its coal-fired generation capacity, that is, about 2000 MW, will be free of contracts and financial commitments and, therefore, in a position to be withdrawn.

But whether this happens “will depend on the electrical system and not on AES Gener,” he clarified, alluding to the fact that this decision not only depends on the Company, but also on whether the system as a whole has the capacity to replace this generation at that time.

Another of the work fronts of the electric company is to establish the destination of all the facilities that will be withdrawn in the next few years.

“They are extremely valuable facilities and we are evaluating how we can make them continue to be useful for the society and we believe that seawater desalination is one of the main uses that we could give to most of the plants that we are going to disconnect. With this, we will help reduce the use of continental water in industrial or mining processes,” explained Nebreda.

Without going into details, the president of AES Gener stated that in Ventanas they are working on a project of this type and are evaluating alternatives to make the treatment more efficient. With this, they would reduce the price of treated water, with which they hope to reach the Metropolitan Region, through a pipeline that they already have in environmental evaluation.

He also confirmed that AES Gener is participating in the process that Anglo American is carrying out to supply desalinated water to the processes of Los Bronces mine.

“Desalination is the clearest goal we have and we are promoting today by talking to potential off takers, the governors and the health companies.

Around the Ventanas area there are many water needs, not only for mining processes, but also for agricultural purposes. This sector may also be in need to purchase water. Nevertheless, we have to continue working to reduce the cost of that water.

There are also other ideas that we have in mind, there are even some facilities, such as Laguna Verde power plant, that could have a tourist purpose.

Of course, we have to be humble, we are not the ones to determine the future of a community; this process must take place together with the authorities and especially with the communities themselves,” stated Nebreda.

Like other generators, AES Gener is also considering the option of reconverting some of the coal-fired plants it will withdraw and, in that case, the alternative would be the incipient green hydrogen industry.

“It is a technology that is developing very fast, that we see entering a downward price spiral that will make it much more competitive, and Chile has a great potential for green hydrogen development.

We are already working on some pilot projects that we will announce during this year to see if they can finally be an option for the units that we will withdraw,” stated the president of AES Gener, who specified that even these new uses for the sites and facilities can combine desalination and green hydrogen or desalination and stability services for the system.

“Even in some places, such as London, these plants have become museums,” Nebreda pointed out.

“The ERE will in no case mean an income or a profit for us”

Nebreda assures that if it had been up to the company alone, they would have preferred to disconnect all their units permanently, but this is not possible in all cases, because the electricity grid is not in a position to withstand such a withdrawal.

This happened to the two Ventanas units, which, as determined by the National Electricity Coordinator (CEN), could be necessary in some specific scenarios in which there would be a risk of supply, especially in the Region of Valparaiso, an area to which much of the Ventanas generation has been allocated.

“The ERE works only for plants that are very critical to the system and that depends on their proximity to the large consumption points. The ERE payment only covers the cost of maintaining the units so that they can be turned on and start to generate in the event of an emergency, and in the case of the Ventanas 1 and 2, the power payment will be, taken together, about US$10 million annually.

“The ERE will in no case mean an income or a profit for us,” assured Falú.

He added that the deadline for shutting down Ventanas 2 could move from the first to the second quarter of this year, since Chilquinta would have adjusted the deadlines to complete the reinforcement works of one of the lines that carry energy from the system to the Region of Valparaiso.

Desalination is one of the clearest alternatives that AES Gener has with respect to the use that will be made of the decommissioned complexes, since there are many water needs in the Ventanas area both for mining and agricultural purposes.