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The encyclopedia · Strategy & Leadership · Strategic decision · 2016

Chile's time-block power auction cut electricity prices 63% in one round

Chile auctioned 12.4 TWh in five 20-year time blocks; renewables won, solar set a $29.1/MWh record, and average prices fell 63% below 2013.

Chilean National Energy Commission (CNE)

the move

Chile entered the decade with some of the highest electricity prices in Latin America. Its National Energy Commission redesigned long-term supply auctions to split demand into time blocks, including a daytime block from 8:00 to 18:00 where solar could compete.

In August 2016 the auction awarded 12,430 GWh per year in five blocks for 20 years of supply starting in 2021, drawing 84 bids from local and foreign companies.

The median price was $47.59/MWh — 63% below the 2013 auction's $129/MWh and 40% below 2015's $79.30 — with renewables winning more than half the volume and wind taking about 40% of the capacity.

Solar set the headline number: Solarpack won the daytime block at $29.10/MWh, at the time the lowest solar price ever recorded in an auction, and roughly $3bn of new investment was attached to the winning projects.

why it works

  • Time blocks let solar bid only the hours it can generate.
  • Renewables competed against each other, not against 24-hour baseload.
  • 20-year contracts with big volumes gave bidders certainty to price low.
  • A single auction for a third of regulated demand created scale.
the payoffSplit demand into blocks so each technology bids its hoursclever

what transfers

Disaggregate the product: let each supplier bid only the slice it can deliver, and prices collapse because nobody must price a capability they lack.

what came after

Chile repeated the design in 2017, where the average fell further to $32.5/MWh with a record-low bid of $21.48/MWh, and time blocks became a template for renewable procurement across Latin America.

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