The Law N° 20,257 better known as Non-Conventional Renewable Energy Law (NCRE Law), enacted on 1 April 2008, aims to fulfill future energy requirements by developing non-conventional renewable energy sources, such as geothermal, wind, solar, tidal, biomass and small hydroelectric plants.
The law requires electricity providing companies, withdrawing electricity to supply their contract commitments, to demonstrate that a certain percentage of their total energy committed was injected in the system by non-conventional energy sources. The energy can be produced by their own plants, or by contracting from third-parties.
This quota came into force at the start of 2010, and until 2014 will require 5% of electricity to come from non-conventional renewable energy sources. Starting from 2015, the obligation will be increased by 0.5% annually, reaching 10% in 2024.
The law will apply to all agreements executed as of 31 May 2007 (new agreements, renewals, extensions, or similar arrangements). Non-compliance with the law will result in fines of 0.4 UTM (Monthly Tax Unit), equivalent to approximately CLP 16,179 per MW not obtained from NCRE sources per year.
The obligation will last for 25 years (2010-2034). Hydro is considered as a non-conventional source if the capacity is below 20 MW. However, for a plant producing between 20 and 40 MW, a portion of the energy can be considered non-conventional based on a decreasing function, with the non-conventional energy content of a 40 MW plant equal to zero.