Why reducing socio-environmental externalities of electricity system expansions can boost the development of solar power generation: The case of Chile

Abstract

In recent years, the transition towards low-carbon electricity systems has increased the development ofrenewable generation and, in turn, of transmission infrastructure. Importantly, developing low-carbon technologies(that are generally located far from load centers) and their associated network infrastructure, mayconflict with land uses that are valuable by society (e.g. the presence of national parks, indigenous development,touristic zones, etc.). Appropriately addressing this conflict is key for policy makers and regulators to foster aneffective, sustainable, and socially acceptable system expansion. In this context, this work analyzes the effects ofaccounting for these land-use, socio-environmental externalities on the expansion of the entire power system. Fora more effective mitigation of system expansion impacts on land uses, we propose to coordinate the neededinvestments among the various market participants such as generation developers and network planners. Toassess this proposal, we develop a two-stage stochastic program that determines the future generation andnetwork expansions considering both (i) a balance between monetary/investment costs and their correspondingsocio-environmental externality costs (derived from the land-use impacts of new electricity investments), and (ii)different levels of coordination among market participants. Hence, we can assess the benefits of various coordinationstrategies against the actual approach to system expansions with no coordination among developers. Byrunning various case studies based on the Chilean electricity system by 2030, we show that recognition of socioenvironmentalexternalities at the moment of deciding system expansions can have a significant impact on thelocation of future infrastructure and, remarkably, on the entire mix of new generation projects. Particularly, wefound an increase in bulk, transmission-connected solar power generation capacity by circa 25% when land-useexternalities are considered in the system expansion problem. This is so because bulk solar power generationprojects tend to present less socio-environmental impacts (since the solar power potential is generally higher indeserts and arid regions, away from populated areas) and, up to a certain extent, have the ability to displace theneed for other generation technologies, particularly hydropower, located in areas with significantly conflictingland uses. We also demonstrated the benefits of investment coordination in supporting both an increasedpenetration of solar power generation, and an economically effective and sustainable development of a lowcarbonpower system in Chile.