A 5 GW battery pipeline is set to enhance solar project viability, reduce curtailment, and offer greater flexibility in Chile.
SANTIAGO (AURORA ENERGY RESEARCH)—As solar deployment reaches scale, Chile is turning its attention to energy storage as a key enabler of higher renewable returns and deeper decarbonization. A recent analysis by Aurora Energy Research, a global power market analytics provider, examines the economic drivers of battery storage in Chile, including optimal duration, cycling, and deployment timelines.
In northern regions, battery storage projects remain consistently profitable throughout 2026–2060, Aurora says. However, in southern regions, building storage now can unlock higher revenues before major interconnection upgrades, which are expected to reduce local price volatility driven by diesel generation.
Aurora’s analysis highlights co-locating 5-hour batteries with solar installations can potentially double revenues through load shifting. It finds that 5-hour batteries cycling once per day offer the most cost-effective solution by capturing over 70% of zero-price hours. Crucially, under current regulation, 5-hour batteries qualify for full capacity payments through 2034. This allows them to monetize intraday spreads effectively while also fully benefitting from existing capacity payment mechanisms—making them a cost-effective alternative to longer-duration solutions.
While 8-hour batteries allow for greater trading volumes, their higher costs mean profitability depends on the structure of capacity payments, particularly derating factors and future capital expenditure (CAPEX) trends.
Alternative business models
Current discussions around potential changes to the PMGD (Pequeños Medios de Generación Distribuida) stabilized pricing mechanism have raised concerns over evolving risks of standalone PMGD solar projects in Chile. Co-locating storage with solar offers a solution, providing protection against curtailment and allowing projects to capture value during higher-priced periods, Aurora assesses.
Unlike other global markets, where ancillary services can contribute up to 30% of battery revenues, Chile’s market design does not incentivize batteries to provide these services, says the report. However, introducing a new ancillary services framework or adjusting the way in which storage participates could improve battery economics, reduce reliance on expensive gas and diesel, and help optimize hydro dispatch during dry seasons.
Inês Gaspar, Research Lead at Aurora Energy Research, says:
“In Chile, adding batteries to solar projects can actually double its revenues by storing energy when it’s cheap, and selling it when prices are high. Today, 5-hour batteries offer the best value. They are cost-effective and qualify for full capacity payments. For those who are betting on battery costs dropping further and capacity payments to reward longer durations, going for 8-hour batteries might be a smarter move.
“If Chile changes its ancillary services market framework, batteries could become an (even more) attractive option. It would also mean using less expensive gas and diesel and making smarter use of hydro during dry periods. It is a strategic move that would help the system operator, speed up decarbonization, and, no doubt, open the door to new investment opportunities.”
Chile is quickly emerging as a global leader in battery storage, ranking third when benchmarked against Aurora’s ranking of European countries—by storage pipeline relative to system size. A 5 GW battery pipeline is poised to enhance solar project viability, reduce curtailment, and offer greater flexibility.
The authors of the study will present detailed findings during the upcoming public webinar “Charging Ahead: The Future of Battery Storage in Chile,” scheduled for 3 April from 10:00 AM–11:00 PM SMT. Register here to attend the webinar.
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Zina Fragkiadaki, EMEA Press Officer
zinovia.fragkiadaki@auroraer.com
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Established in 2013, Aurora Energy Research is a leading global provider of power market forecasting and analytics for critical investment and financing decisions. Headquartered in Oxford, we operate out of 16 offices worldwide covering Europe, North & South America, Asia, and Australia. Our comprehensive services include market outlook packages for energy industry participants, advisory support, and innovative software solutions. We foster diversity with a team of 900 experts with backgrounds in energy, finance, and consulting, offering unparalleled expertise across power, renewables, storage, hydrogen, carbon, and fossil commodities. Our mission is to ease the global energy transition through widely trusted quantitative analysis and high-quality decision support.
