ATACAMA DESERT, Chile (Reuters) - Rising out of Chile’s Atacama desert, the half-built Cerro Dominador solar tower reflects the challenge the South American country faces as it races to meet some of the most ambitious renewables targets in the world.

A general view of the Cerro Dominador Solar Power Plant is pictured in the commune of Maria Elena in the Antofagasta Region, Chile, July 1, 2019. Cerro Dominador Solar Power Plant/Handout via REUTERS

Chile, readying to host a major United Nations climate change conference in December, has already pledged to phase out coal-fired power by 2040 and be carbon neutral by 2050. But in a bid to hold other countries to further-reaching pledges, it is now looking for ways to bring forward its own deadlines.

A surge in lower cost solar panels from China in recent years has helped to place it within a whisker of its target to get 20% of its power from renewables by 2025.

A key concern now is how to store and transmit its bountiful solar and wind power, spreading it over 24 hours. That would help Chile make the leap to obtaining 60% of its power from renewables by 2035 and 70% by 2050, becoming, as environment minister Carolina Schmidt described it, “the Saudi Arabia of clean energy.”

Enter Cerro Dominador, a $1.3 billion project announced in 2013, touting technology designed to make the renewable energy supply more stable.

Cerro Dominador’s unique selling point is that - unlike traditional photovoltaic solar plants or wind powered-plants, which produce as long as their source is shining or blowing - it allows the sun’s heat to be stored to generate electricity for hours afterwards, including at night.

It represented Latin America’s first venture into the technology, called Concentrating Solar Power (CSP).

The project was hailed by government and industry as a key component of Chile’s vow to wean itself off imported fossil fuels and large hydroelectric centers, which are struggling to stay online amid a persistent and deepening drought.

Cerro Dominador uses tens of thousands of pivoting mirrors to reflect the sun’s rays onto a smaller area, where they can be converted into thermal energy via a liquefied salt heat storage system to drive electric turbines.

At its launch in 2014, the then-chief executive of the company building the project, Spain's Abengoa ABG.MC, told his audience that Cerro Dominador would cut CO2 emissions by 643,000 tonnes each year and bolster the Chilean government's bid to depend on "clean, competitive and sustainable" energy.

“With 112 plants like this one, Chile would be autonomous in energy matters,” said Manuel Sánchez.

But two years later, Abengoa came close to bankruptcy and was forced to sell Cerro Dominador, slowing construction of the plant as new buyers were sought.

The delay was costly.

By the time the plant was resurrected last year with funding from banks, the Chilean state and U.S. private equity firm EIG Global Energy Partners, it was no longer competitive, or particularly sustainable.

The market had been flooded with cheap solar panels from China that had helped accelerate Chile’s targets, but meant that Cerro Dominador’s output was only useful for the half of the day not covered by the panels, according to Cristián González, solar energy projects coordinator at state development agency Corfo.

Other CSP plants have dropped off. Corfo’s Solar Committee said five plants with a planned capacity of between 70MW and 450MW had environmental permits approved in the past four years. However, three of those have since been scrapped, the companies involved confirmed to Reuters, without elaborating. A fourth had been scrapped but was recently revived by EIG, the fund confirmed to Reuters.

“Today it makes no economic sense to generate with CSP during the day, because that’s what photovoltaics are for and they are much cheaper,” González told Reuters.

He called for more modest CSP plants making up a smaller part of the energy mix, supplying power only when other sources are offline.

The prices Abengoa had agreed in a contract to supply to the national grid were three times higher than the present day’s.

María Isabel González, of Chilean energy consultancy Energetica, said the deal struck would be “unfeasible” in today’s highly competitive renewables market.

With a striking tower that looms 250 meters (820 ft) above the bone-dry desert, Cerro Dominador’s 100MW solar plant is up and running but its CSP plant, which cost $1 billion of the original outlay, will only be fully operational in 2020.

Cerro Dominador’s CEO Fernando González told Reuters during a tour of the site in July that the same plant would not be built again.

“Our expectation is that future plants will be much more competitive, both for market conditions and because of technological advances,” he said.

The investment had been made with an eye on the longer term and future government auctions, a company spokesman said, adding that falling technology and construction costs should make a second such development competitive.

STUMBLING BLOCKS

Chile’s electricity generation matrix relies primarily on largely imported fossil fuels such as coal, natural gas and oil (55%), and its own hydroelectric plants (30%). However, unconventional energy provision has surged in recent years, with solar farms representing 6.5% of the matrix, wind power 5% and biomass 2.1% in 2018, according to the power generation companies’ association.

But CSP is not the only renewables technology to have stumbled. Espejo de Tarapacá, 100km (62 miles) from Iquique in Chile’s extreme north, generated significant excitement when it was announced as an innovative pumped storage hydroelectric energy plant.

Its environmental permit was approved in 2015 and the project was due to come into operation this year, but ground to a halt as costs escalated. It is now in “financial restructuring,” Juan Andrés Camus, the head of the project, told Reuters, adding that construction should begin next year.

Analysts and experts said Chile needs small, flexible and diverse projects, which will between them provide a stable network and help cut emissions.

“They shouldn’t put all their eggs in one basket but try everything, take advantage of all kinds of technologies,” said Pablo Demarco, commercial director of the Chilean energy brokerage Plataforma Energía.

But without offering the direct subsidies other governments use to influence what comes online or investing in technological development, Chile’s government has to hope its open market approach will help it continue to reach its clean energy goals.

Energy Minister Juan Carlos Jobet told Reuters the government had no particular preference of renewables technology, provided it represents value for money.

“The challenge is that they are able to offer energy 24/7 at a reasonable cost,” he said.