Chile’s electricity sector is entering a new phase of its energy transition. Having rapidly expanded solar and wind generation over the past decade, the country is now focused on strengthening the electricity system to accommodate much higher levels of variable renewable energy. While investment is increasingly directed towards transmission, battery energy storage and grid flexibility, hydropower continues to provide the dispatchable renewable generation needed to maintain system reliability.
According to the Chile Power Outlook, Update 2026 by GlobalData, installed generating capacity is expected to almost double from 37.6GW in 2025 to 74.2GW by 2035. Solar PV will remain the dominant technology, increasing from 11.7GW to 37.9GW over the period, while onshore wind is forecast to grow from 5.9GW to 15.2GW. At the same time, annual electricity demand is projected to rise from 83.6TWh to 117.8TWh, driven by mining expansion, industrial electrification, green hydrogen production and increasing electricity consumption from transport and data centres.
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Against this backdrop, hydropower is taking on a different role. Rather than expanding through major new projects, the existing fleet is becoming increasingly important for balancing renewable generation, providing reserve capacity and supporting grid stability.
Hydropower’s changing role in Chile
Large conventional hydropower remains one of the foundations of Chile’s electricity system. It accounted for 18.6% of installed generating capacity in 2025, making it the country’s second-largest generation technology after solar PV. However, unlike solar and wind, hydropower capacity is expected to remain largely unchanged over the next decade.
GlobalData forecasts that installed large hydropower capacity will increase only marginally from 7.0GW in 2025 to around 7.1GW by 2035. The report attributes this to limited opportunities for new large developments, with environmental considerations, permitting requirements and the availability of suitable sites restricting future expansion.
Although installed capacity is expected to remain relatively stable, annual generation continues to fluctuate according to hydrological conditions. Large hydropower generation increased from 18.9TWh in 2020 to 23.9TWh in 2024 before falling to 17.9TWh in 2025. Output is forecast to recover gradually to around 19.3TWh by 2035 as utilisation improves.
The report describes large conventional hydropower as a cornerstone of system reliability, providing essential flexibility alongside the rapid expansion of solar and wind generation. As renewable penetration increases, dispatchable hydroelectric generation becomes increasingly valuable for balancing supply and demand, maintaining reserve capacity and supporting grid stability.
Hydropower also continues to play an important role despite the country’s long-running drought. GlobalData notes that more than a decade of below-average rainfall has reduced reservoir levels in central Chile, affecting hydroelectric output during dry years and increasing pressure on system flexibility. Water shortages are also driving greater use of desalination by the mining industry, increasing electricity demand further.
Renewables drive the next phase
While hydropower capacity remains relatively stable, Chile’s renewable energy sector continues to expand rapidly.
Renewables accounted for 51.2% of installed capacity in 2025 and are projected to increase to more than 74% by 2035. Renewable generation is forecast to rise from 47.1% of annual electricity production to 66.1% over the same period, while thermal generation steadily declines as coal-fired power stations are retired under the country’s decarbonisation strategy.
Solar PV remains the primary driver of capacity additions. Renewable capacity, including small hydropower, is expected to grow from 19.2GW in 2025 to 54.9GW by 2035, with solar PV accounting for almost 38GW and onshore wind more than 15GW. Renewable electricity generation is forecast to more than double during the period, reaching approximately 89.5TWh by 2035.
The rapid growth in renewable generation has shifted the focus of Chile’s energy transition from building generating capacity to improving the electricity network.
Transmission constraints have become one of the sector’s biggest challenges. The report states that more than 6TWh of renewable electricity was curtailed in 2025 because the transmission network has not expanded quickly enough to connect renewable-rich regions with major demand centres. More than 70% of transmission projects under construction were behind schedule during 2025, while the flagship 1,400km Kimal-Lo Aguirre HVDC transmission line is not expected to enter service until later in the decade.
Battery energy storage is emerging as another critical part of the solution. The report highlights rapid growth in storage deployment as operators seek to capture surplus daytime solar generation and supply electricity during evening demand peaks. The Energy Transition Law introduced in 2024 is also intended to accelerate transmission development and promote greater deployment of storage technologies.
The country’s electricity demand is expected to continue growing as mining companies expand production and electrify operations, while green hydrogen production, electric mobility and data centres create additional demand for low-carbon electricity. GlobalData forecasts electricity consumption will increase by more than 34TWh between 2025 and 2035.
Investment shifts beyond new dams
The development pipeline illustrates how investment priorities are changing.
Projects currently under construction total around 5877MW, of which more than 4000MW is solar PV and almost 1500MW is wind. Hydropower accounts for only around 100MW of projects currently being built.
The country’s largest hydropower projects in development are relatively modest compared with earlier generations of dams. These include the 109.3MW Frontera project, which is in permitting, and the 90MW Rucalhue project, which is under construction. Other schemes in development include Chupallar (19MW), Bullileo (8MW), El Manio (7.2MW), Las Nieves (6.5MW) and Don Eugenio (3MW).
Investment forecasts show the same trend. Between 2026 and 2030, GlobalData expects around US$30bn to be invested in Chile’s power sector, with almost 74% directed towards solar PV and a further 22% towards onshore wind. Hydropower is projected to account for only around 1.1% of total investment during the period.
Rather than signalling a reduced role for hydropower, these figures reflect the maturity of Chile’s hydroelectric fleet. With most suitable large sites already developed, investment is increasingly focused on maximising the value of existing assets while expanding the transmission network and storage capacity needed to support much larger volumes of renewable generation.
As Chile works towards its targets of 80% renewable electricity generation by 2030 and a fully zero-emission electricity system by 2050, hydropower is expected to remain an essential component of the country’s electricity mix. Although relatively few new dams are expected to be built, existing hydroelectric assets will continue to provide the flexibility and reliability required to support one of Latin America’s fastest-growing renewable power systems.
This article is derived from and informed by a GlobalData report. To access the full report, visit the GlobalData Power Intelligence Centre: www.globaldata.com/industries/power.
