Decarbonizing the Chilean Electric Power System: A Prospective Analysis of Alternative Carbon Emissions Policies

In this paper, we investigate potential pathways for achieving deep reductions in CO 2 emissions by 2050 in the Chilean electric power system. We simulate the evolution of the power system using a long-term planning model for policy analysis that identifies investments and operation strategies to meet demand and CO 2 emissions reductions at the lowest possible cost. The model considers a simplified representation of the main transmission network and representative days to simulate operations considering the variability of demand and renewable resources at different geographical locations. We perform a scenario analysis assuming different ambitious renewable energy and emission reduction targets by 2050. As observed in other studies, we show that the incremental cost of reducing CO 2 emissions without carbon capture or offset alternatives increases significantly as the system approaches zero emissions. Indeed, the carbon tax is multiplied by a factor of 4 to eliminate the last Mt of CO 2 emissions, i.e., from 2000 to almost 8500 USD/tCO 2 in 2050. This result highlights the importance of implementing technology-neutral mechanisms that help investors identify the most cost-efficient actions to reduce CO 2 emissions. Our analysis shows that Carbon Capture and Storage could permit to divide by more than two the total system cost of a 100% renewable scenario. Furthermore, it also illustrates the importance of implementing economy-wide carbon emissions policies that ensure that the incremental costs to reduce CO 2 emissions are roughly similar across different sectors of the economy.