LONDON -- In May 2011 Carlos Slim, the Mexican business magnate, predicted that Chile will be the first Latin American nation to attain the status of a developed country. Chile's GDP per capita of US$15,400 in 2010 puts it far ahead of most of its neighbours and with economic growth for 2011 slated at 6.5 percent, the country would appear to be well on course to achieve Slim's forecast.
However, if one area could prove a stumbling block in the country’s drive to become a fully-fledged developed nation, some fear it could be in meeting its energy needs.
In September 2011 around 10 million Chileans — of a population of less than 17 million — found themselves in darkness due to a blackout, which paralysed the country’s copper mines and brought the capital Santiago grinding to a halt.
Power was restored within hours but politicians have struggled to mask the fact that the power cut was a worrying sign of the questions looming large about Chile’s energy future.
Overdependence on hydroelectric sources, which account for 40 percent of Chile’s electricity, with almost all the rest coming from imported fossil fuels, has led to drought-related power shortages, a situation exacerbated by Argentina cutting gas exports.
Furthermore, according to Business Monitor International’s (BMI) latest analysis, demand looks set to increase from 58.8 TWh in 2011 to 70.5 TWh by 2015 and 87.8 TWh by 2020.
Central to the government’s current plans to meet the increase is HidroAysen, a project approved by President Sebastián Piñera in May 2011, which would see five hydroelectric plants built on two pristine rivers in Patagonia at a cost of around $3.2 billion. With an installed capacity of 2750 MW, the dams would generate more than 18 TWh a year — around a third of current consumption.
But the plans have caused a public outcry across the country as they would see approximately 5900 ha of wilderness flooded and could threaten the Huemul, an endangered Andean deer which features on Chile’s national coat of arms. One poll found 74 percent were against HidroAysen on environmental grounds. Whether or not it goes ahead will have a substantial effect on the energy Chile needs to find from other sources.
After taking office in March 2010, President Piñera went on record as saying that by 2020 he wanted 20 percent of the country’s energy needs to come from non-conventional renewable energy (NCRE) — not including large-scale hydropower — up from just 4 percent at present.
Given that the country wants to raise its installed generating capacity from 15 GW at the end of last year to at least 25 GW over the same period to sustain rapid economic growth, the so-called ‘20/20’ goal would require almost 5 GW of installed capacity from NCRE over the coming decade.
In November, a report by the Electricity Development Advisory Committee (CADE) — appointed to advise the government on how Chile can best increase its electricity generation — concluded that that the pace of development of NCRE projects is too slow and that changes are needed to give such projects better access to the market. They also came out in favour of HidroAysen, saying large-scale hydropower potential in the south of Chile is ‘a potential energy source highly relevant to the future matrix’.
Nonetheless, speaking at the New Energy Forum in Madrid in October, energy minister Alvarez, perhaps mindful of the recent blackout, admitted Chile needed ‘to strengthen supply security’ and spoke of the country’s ‘fabulous alternatives’ for renewable energy. He declared his country ready for a mass roll-out of renewables, as he emphasised that there was ‘huge room’ for investment to help develop the market.
But the fact remains that at present Chile generates around 75 percent of its energy from imported fossil fuels and the government does not as yet appear fully convinced by the potential of NCRE generation.
‘Every country that wants to be well-prepared for the next decade needs to have an important part of their energy needs coming from renewable resources,’ said Jose Ignacio Escobar, executive vice-president of the Chilean Association of Renewable Energy (ACERA). ‘Unfortunately, here we see a lack of political vision from the authorities. We are still not sure why they are continuing to support the conventional energies and the status quo.’
BMI predicts that from 2011 until 2015 Chile will see annual electricity gains of 26 percent from gas-fired supply, 7 percent from renewables, 6 percent from coal and 5 percent from hydropower. This will see Chile’s power supply shortfall gradually diminish and by 2020 that could even be scope for ‘very modest net exports’.
While this may be heralded as good news by politicians, there is concern that Piñera has already seemingly downgraded the ‘20/20’ goal from a firm pledge to an ambition. Some experts believe the government has already realised that it is unlikely to materialise.
Hugh Rudnick, professor of electrical engineering at the Catholic University of Chile, and a member of CADE, said: ‘The President said that 20/20 was a key thing to achieve but later on he said, through his ministers, that it was a wish rather than a commitment. They started to realise [meeting the goal] would mean using what is already in the pipeline and that does not necessarily mean efficient renewable energy. I would be sceptical as it is too much to achieve in only eight or nine years. 15 percent by 2020 or 2025 could be more achievable.’
At present the legal obligations for electric utilities to invest in and supply renewable energy sources are lower still, at 8 percent by 2020 and 10 percent by 2024. But rather than using the current dilemmas as an excuse to forget the 20/20 target, Escobar wants to see it written into law. ‘If you compare our targets with many other countries in similar situations to Chile in terms of growth and commodity exports, it is totally feasible,’ he insisted. ‘There are countries that in very few years with the right regulatory conditions have managed to get to a high level of renewables but it is very difficult in Chile with the current conditions,’ he says.
One of the conditions making the transformation difficult is a lack of transmission capacity between remote areas which are most suitable for many renewable projects and densely populated cities.Another common complaint is that hydropower projects of more than 40 MW do not qualify as NCRE.
In October 2011 the $450 million Chacayes run-of-river plant was inaugurated, the first of several such projects planned by the Australian firm Pacific Hydro which will add more than 600 MW of installed capacity to Chile’s national grid.
With over 52,000 subscribers and a global readership in 174 countries around the world, Renewable Energy World Magazine covers industry, policy, technology, finance and markets for all renewable technologies. Content is aimed decision makers...