Evaluation of incentive mechanism for distributed generation in Northern Chile

Chile is committed to the development of non-conventional renewable energies, so to create the necessary incentives, several laws has been issued. One of the most recent actions was the Net billing law, which seeks to promote the integration of renewable technologies in the distribution segment. Because Chile has chosen not to use subsidies, only cost-efficient technologies are incorporated in the market. The net billing law has not shown much impact so far, therefore further incentive mechanisms are under discussion. This paper reports on the integration scheme for residential photovoltaic generation within net billing and net metering context. Different options of photovoltaic plants are analyzed: a) self-consumption, b) self-consumption and feeding into the grid, c) self-consumption and storage. Discrimination of the best options has been determined based on the economic benefits of each alternative, which are determined by performing calculation of Net Actual Value (VAN). Growth rates for each of sizing options have been also determined and compared with the price of energy for the residential segment (BT1) in order to find the optimal choice. The results obtained show that for the existing market conditions in Chile and the net billing scheme the size of the photovoltaic plant in northern Chile should be about 1 kW. Furthermore, the option of using storage is not yet economically feasible.