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The Future of Chile's Energy Sector Lies with Renewable Energy, New Report Shows

The Chilean Renewable Energy Center recently released its annual report for 2013, and the numbers send a clear message: Chile’s non-conventional renewable energy sector is where the action is. (In Chile, the term “non-conventional renewable energy” is used to exclude large hydroelectric plants, i.e. hydroelectric plants with an installed capacity over 20MW, from the category. Large hydro is considered conventional energy. For the sake of brevity, I use “renewable” in this blog in place of “non-conventional renewable.”)

While conventional energy projects — coal and large hydro — linger in judicial appeals and administrative reviews, developers are advancing solar, wind and other renewable projects with gusto. If the new government can help remove some of the remaining obstacles to renewables’ growth, we can expect these numbers to be even higher next year, proving that the future of Chile’s energy sector is in clean, sustainable and renewable energy.

According to the Renewable Energy Center’s report, at the end of last year there were over 18 GW in renewable capacity on the books, meaning projects that were in operation, under construction, approved and under review. This is about a 39 percent growth over 2012’s then-impressive total of almost 11.5 GW. To put this in perspective, Chile’s two main grids (which cover more than 99 percent of the whole country’s energy generation) have a combined installed capacity of approximately 17.5 GW. So the combined capacity of all the renewable projects operating or in the pipeline at the end of 2013 was more than the installed capacity of the existing grids. That is remarkable. Here is a graph summarizing some of the results from the 2012 and 2013 annual reports:

Source: Centro de Energías Renovables

The benefits that come from a growing renewables sector are not just limited to project developers. On the contrary, a recent report conducted by the international experts at PricewaterhouseCoopers (disclaimer: the report was commissioned by NRDC and the Chilean Renewable Energy Association) found that a future with more renewable energy would generate 7,769 more jobs to Chile and would contribute US$2.246 billion more to Chile’s GDP than a business-as-usual scenario, and would have the added benefit of avoiding emissions that harm people’s health and the climate.

Meanwhile, many of the large conventional energy projects in Chile are having trouble getting across the finish line, as administrative and judicial authorities review the numerous appeals that local communities and environmental groups are filing against the projects. The massive 2,100-MW Castilla coal-fired power plant is emblematic of this situation. For a long time, the project seemed a foregone conclusion and proponents claimed it was necessary to feed the power-hungry mining industry in Chile’s north. Although the project received its environmental approval from local authorities in 2011, the Supreme Court canceled that approval in 2012 and the project has, by all accounts, disappeared.

Another key example is HidroAysén, a $10 billion massive hydroelectric power plant proposing to build five mega-dams on two of Chile’s wildest rivers in Patagonia. The dams received their approval in 2011, and in 2012 the Supreme Court upheld the approval in the face of several appeals. The majority of Chileans oppose the project (62 percent, according to the latest poll), and even one of HidroAysén’s two owners, the Chilean power company Colbún, recommended halting all work on the project in mid-2012 due to a lack of political and social consensus. Just today the Committee of Ministers, the highest administrative authority in the country, announced that it is going to essentially decide the fate of the project in May — something the company is not happy about, given Chilean President Bachelet’s opinion that the project “is not viable.”

Of course, not all of the renewables projects in the pipeline will reach the operational phase. Many obstacles remain that this sector will have to overcome in order to compete on a level playing field with the conventional energies. For example, the bidding process for long-term purchase contracts currently favors conventional energy projects, and without signed contracts it is more difficult for renewable developers to get financing for their projects. The geothermal energy industry in particular faces hurdles such as the longer construction period for its facilities and higher up-front costs during the risky drilling phase of the project.

If the new government, under the leadership of President Bachelet and Energy Minister Pacheco, can address some of these obstacles, they will help unlock the remarkable potential of the renewable energy sector and lead Chile towards a more stable, sustainable, and modern energy future.

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