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Turmoil in the Chilean electricity sector: A failed attempt at using advanced contracts for differences to support the energy transition?

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  • Ansede Ferreiro, Jesús
  • San-Martín González, Enrique

Abstract

The Chilean electricity market is at a critical moment. Some renewable energy generators that signed regulated power purchase agreements with distribution companies are experiencing financial distress. Generators assume locational basis risk under these contracts, which can be considered advanced contracts for differences. As price decoupling appeared in the network, some generators filed for bankruptcy. The Chilean government is studying measures to weather the storm, and an expert panel has been set up to assess them. The European Union is betting on advanced contracts for differences, but the Chilean empirical evidence calls for caution when adjusting plain contracts for differences.

Suggested Citation

  • Ansede Ferreiro, Jesús & San-Martín González, Enrique, 2025. "Turmoil in the Chilean electricity sector: A failed attempt at using advanced contracts for differences to support the energy transition?," Utilities Policy, Elsevier, vol. 93(C).
    • Handle: RePEc:eee:juipol:v:93:y:2025:i:c:s0957178724001760
    DOI: 10.1016/j.jup.2024.101882
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