Before we go any further, some trivia. Which part of the world has the most renewable energy potential in relation to its size? Although certain countries have tremendous potential in one area – be it solar, wind, hydropower or another source – the country punching the most above its weight is Chile, arguably.

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Around 34% of the South American country’s energy comes from hydropower and it is ranked behind Canada only in projected hydropower exports up to 2016. Chile is home to 15% of the world’s volcanoes, resulting in an estimated geothermal potential of 16,000MW, and its 115MW El Arrayan wind farm, which started up in 2014, is the largest in South America. The Atacama Desert in the north of Chile is considered as the most conducive area in the world for solar energy. According to Vaisala, a Finnish producer of environmental and industrial measurement tools, the desert enjoys solar irradiance of more than 2,500KWh per square metre each year.

Unsurprisingly, Atacama was selected for a massive photovoltaic solar power project which is set to begin construction in the third quarter of this year. More surprising is that this project will be combined with construction of a 300MW pump hydro plant, in a region that receives just 15mm of rain a year and where some weather stations have never detected even a single raindrop.

Solar and hydropower – playing off each other’s strengths

These two projects, Cielos de Tarapacá and Espejo de Tarapacá, are distinct but complementary. The work of Chilean renewable energy company Valhalla, the former envisages the construction of a $900m 600MW photovoltaic solar plant, the largest in the world, which would use tracking technology to follow the sun from east to west over the course of the day. The second project would see the creation of a $400m, 300MW pump hydro plant that during the day pumps seawater from the Pacific Ocean up to two reservoirs at 600m above sea level.

The benefit of the paired projects is that they cancel out each other’s shortfalls. During the day the pumps that bring water from the sea up to the reservoirs are powered by solar energy, removing the carbon emissions associated with the most energy intensive part of the process. At night, when the solar panels of Cielos de Tarapacá are no longer effective, stored water from the reservoir is released back down hill creating electricity through the hydro plant.

"Both projects have now received environmental approval and contracts are currently being agreed."

This allows for the production of a steady flow of renewable energy 24hr a day, eradicating the problem of intermittency. While many pump hydro plants may be driven by wind power, this project is the first to use solar power.

According to Francisco Torrealba, co-founder and chief strategy officer of Valhalla, both projects have now received environmental approval and contracts are currently being agreed with vendors, with the pump storage and underground works contracts set to be assigned in the next three weeks. Being a non-recourse project the company still has to secure power purchase agreements (PPA). Mining companies in the north of Chile and electricity distribution companies in the middle of the country are the most likely customers, although construction will begin with or without their business.

"We are negotiating that [PPA] and should have it in the next three-four months," Torrealba says. "After that we are aiming to start construction in July-September this year. Even if we don’t get the PPA we will probably start construction in Q3 of this year with the understanding that our cost structure is extremely efficient so a PPA will eventually be landed.

"We have a critical task with the pump storage — there are channels involved [through which to pump the water] and that takes a long time. So we envisage commissioning in June 2020 for which we need to start construction this year."

The company is still in the process of securing funding for the development, and has been in talks with banks over debt funding for six months with reports that it is close to reaching an agreement. Valhalla is also in advanced negotiations with a handful of potential equity partners.

Community concerns and the risks of corrosion

According to Torrealba, investors have two primary concerns that commonly arise in funding negotiations. One is that the communities that will be affected agree with the aims of the project, something that Valhalla has tried hard to make happen through several years of public consultation. Natural resource and energy projects in Latin America have increasingly faced legal action from local communities over issues such as land rights and environmental damage, causing investors to seek far more assurance than was once required. The other big demand is that measures are in place to protect the facility from corrosion. Untreated seawater will pass through a network of tunnels and electromechanical equipment, making maintenance an ongoing task.

To assuage these fears, the tunnels that channel the seawater will be lined with concrete or stainless steel in the most vulnerable areas. Also, the pump turbine manufacturers have produced a cast made of a special alloy to cover the runner inside the turbine in order to bolster its resilience to corrosion. A pump turbine that utilises seawater has been successfully used once before but this vast scale represents something of a leap into the unknown.

"The hydro head in the case of Japan is 150m, in our case its 600m so it’s another level of difficulty."

"There is a similar plant in Japan that has been operating since 1999 [the Okinawa Yanbaru Seawater Pumped Storage Power Station]," says Torrealba. "It does work with seawater but it’s a 30MW plant while ours is 300MW so the requirements are different.

"The hydro head in the case of Japan is 150m, in our case its 600m so it’s another level of difficulty. That’s something we’ve taken care of both with the turbine provider as well as all the conditions with the generation equipment and tunnels. You need to demonstrate that corrosion is not going to be a big issue."

Chile has ambitious renewables targets, aiming for 20% of its electricity to come from solar, wind and small hydro (plants of under 30MW) by 2025. The country is well on the way to achieving this. According to Carlos Finat, director of the country’s renewable energy association Acera, at the current rate it will hit the target four or five years ahead of schedule, and that is without the incentive of subsidies.

"Here in Chile we don’t have any sort of subsidies," says Torrealba. "What we do have are the best resources in the world by far and also, we think, the best conditions in the world for developing pump storage run with seawater. When you combine those two you can be extremely efficient and competitive without needing subsidies."