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Renewable energy

S.Korea to build solar power plants in Chile for $130 mn

The project is expected to earn $625 mn in 30 years, and boost S.Korean firms' renewable energy businesses globally

By Nov 29, 2021 (Gmt+09:00)

A map of South Korea’s solar power plant project in Chile
A map of South Korea’s solar power plant project in Chile

South Korea is planning to build solar photovoltaic power plants in Chile, investing $130 million, in a move to help local companies expand their renewable energy businesses in South America.

The government has been working on a project to establish a solar power plant complex in a 1.2 million square-meter farm owned by the Korea International Cooperation Agency in Teno in Curicó Province, Maule Region, according to a report by the Ministry of Trade, Industry and Energy to the country’s lawmaker. The project is expected to cost 155 billion won ($129.9 million).

South Korea bought the farm in 1982 for the emigration of farmers but has almost neglected the land as the Chilean authorities did not approve the plan.

The Asian country plans to build two solar photovoltaic power plants with a capacity of 3 megawatts (MW) each in the first phase of the project and a 140 MW plant in the second phase.

The project is expected to earn $624.5 million over the 30 years of the project with an average annual yield estimated at about 15%, according to the government. It is predicted to generate $30.1 million in profits from phase one, including $22.3 million from electricity sales and $7.8 million from certified emission reduction (CER). The profits are predicted to snowball to $594.4 million from phase two  -- $405.3 million from electricity sales and $189 million from the CER.

Dohwa Engineering, Hanwha QCELLS Co. and OCI Power will join the project. Dohwa will be responsible for 30% of the project’s equity capital, while the rest is set to be financed by loans from banks in the South American nation.

OPTIMAL COUNTRY FOR SOLAR POWER GENERATION

Chile is considered one of the most optimal countries for solar photovoltaic power generation thanks to its abundant sunlight. But the country has been heavily relying on other resources for power generation. In 2017, it produced 76,647 gigawatt hours (GWh) of power and 39% was made from coal power plants. The nation generated 30% of the total from hydroelectric power plants, 17% from natural gas, and 5% each from solar and wind power generators.

The government aims to raise the power production out of renewable energy sources such as solar and wind to 60% by 2035 and 70% by 2050.

South Korea hopes the success of a landmark renewable energy project will help the country’s companies win other deals in global markets.

“If we build up an experience of success from the solar power energy business, we will have many more chances to participate in global projects,” said an energy industry source. “We have high hopes for the Chilean project.”

The project is one of the Clean Development Mechanism (CDM) that issues certified emission reductions (CERs), tradable carbon credits for emission reductions achieved by such projects. The credits obtained from the project may ease the burden of South Korean companies’ carbon reduction efforts.

Chile aims to convert 4,023 MW to renewable energy through CDM projects in the long term.

Write to Ji-Hoon Lee and Eu-Jin Jeong at lizi@hankyung.com

Jongwoo Cheon edited this article.
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