Utilities Unbundled issue 13

Chile's power challenge

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Chile’s power sector will struggle to meet demand if it cannot find a constructive way to resolve environmental opposition to mega-power plants.

The real issue now for Chile is reconciling environmental concerns with the increasing demand for power.

With a growth rate of 5.9% last year, Chile was a bright spark in a gloomy world economy, largely due to strong copper exports. But the country’s ability to support sustained growth could be limited by its need for more reliable and competitive power supplies.

Challenges to energy supply

The past decade has seen a number of challenges to Chile’s energy supply, including:

  • A prolonged drought that affected hydro output
  • Interruptions to pipeline supplies of natural gas from Argentina
  • A major earthquake in 2010

But the real issue now for Chile is reconciling environmental concerns with the increasing demand for power. According to Chilean think tank Libertad y Desarrollo, more than US$22b and over 8,000MW in energy investment in Chile have been suspended due to regulatory disputes and litigation.7

Also in August 2012, the Supreme Court rejected plans for a US$5b thermoelectric power plant in the copper-rich Atacama region, saying that Castilla could “harm the constitutional guarantee that one can live in an environment free of pollution.”8

With electricity consumption in Chile projected to increase at an annual average rate of between 6% and 7% to 2021, and no major power plants scheduled for completion in the foreseeable future, how will the country meet demand?

Decisive role for government

Authorities have announced plans to construct a Public Electric Highway, “a new transmission line parallel to the current almost fully utilized system,” says Mario Manríquez Kemp, Secretary Director of the Chilean Association of Renewable Energy (ACERA).

The project will include a north-south trunk transmission line and several transverse lines carrying non-conventional renewable energy (NCRE) between remote areas and principal networks.

The new national energy plan also targets an increase from 17GW to 25GW in the country’s installed base. “Currently, NCRE sources contribute no more than 4% of Chile’s total power generation,” says Manríquez Kemp, “and corresponding development incentives have proved insufficient.”

However, high electricity prices combined with decreasing NCRE costs are good news for clean energy pioneers: “Developers are now expected to produce NCRE at costs similar to those of thermal plants,” Manríquez Kemp comments.

In addition, the Chilean Government’s new energy policy also includes the so-called “20/20” law, targeting 20% NCRE generation by 2020 while promoting further developments.

Chile faces some very difficult challenges ahead in meeting its economy’s thirst for power: “No doubt about it, this is definitely the way forward but we have yet to solve the problem,” he concludes. For now, we must wait and see.

For more information, contact Marek Borowski.

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