Hydropower, Solar, Wind Power

Chile: A Hotbed for Renewable Energy Investment

With over 6,000 km of coastline, 123 active volcanoes and numerous deserts and mountains, Chile’s renewable energy market is teeming with potential.

And with some of the highest utility bills in the world and a history of energy crises — resulting from dependence on fossil fuel imports — the country has prioritized the development of renewable energy. Certainly, Chile is one of the first countries in the world to reform its energy market to permit renewable projects to compete directly with other sources.

Long-term Energy Objectives

The need for a global transition to a clean energy economy has been well-publicized in recent years with many governments, banks and international companies making significant investments in alternative sources.

Despite having a relatively small energy market, Chile is considered by many to be one of the world’s top renewable energy markets. Indeed, World Bank figures estimate that, since 2012, the sector has attracted US $9.2 billion in investment — almost double the figure Chile received the previous 20 years combined.

One of the key catalysts spurring Chile’s renewables growth is the Energy Ministry’s ambitious target to produce 70 percent of the country’s energy from renewable sources by mid-century. What’s more, the Chilean government has taken drastic steps to liberalize its energy market by enabling intermittent renewable suppliers to bid on specific slots corresponding to times during the day and night.

Furthermore, it has restructured its energy supply auctions, and established a tax on carbon emissions, in an effort to mitigate the barriers to entry for non-conventional sources.

Such measures have resulted in the country being placed fourth in Ernst & Young’s Renewable Energy Country Attractiveness Index (RECAI) — a quarterly publication ranking 40 countries according to a number of macro, technology and market specific indicators. Indeed, Chile’s policy enablement, renewable potential and investment in projects make it an attractive destination for foreign investors.

Renewable Energy Opportunities

With an estimated 261 projects in the pipeline, renewable energy companies thinking of branching out to Latin America should take a good look at Chile. We have outlined the following key sectors for exporters.

Already the region’s leading solar market, Chile’s Atacama Desert provides myriad opportunities for renewable energy firms. Northern Chile is also home to an expanding mining sector, which has, to date, been a key driver in renewable energy development. More recently, Chile announced plans to develop a 1,865-mile transmission line to aid the transfer of solar power to other parts of the country.

As the largest untapped form of renewable energy in the world, wave and tidal energy may also hold enormous potential for Chile. However, a lack of technological and financial capacity has stymied efforts to convert such energy into electric power so far. Given the government’s renewable energy imperative — as well its openness to international business — Chile would, therefore, be an ideal location for wave energy research and development.

Chile’s strategic position in the “Pacific-Ring of Fire” — an area of intense volcanic and seismic activity — has long been regarded as a key source for geothermal power generation, and yet it is certainly less developed than other renewable resources.

Finally, Chile enjoys excellent conditions ideal for building wind farms. Launched late 2014, the El Arrayán Wind Farm, one of the largest in the country, utilizes Siemens-produced turbines to serve the energy needs of approximately 200,000 homes per year. Following this, Chile has a further 52 wind projects in the pipeline.

The Future

Clearly, the export potential is there. But how can businesses crack international markets such as Chile? Exporting products abroad and investing in foreign projects can be a somewhat challenging process, as businesses must navigate language barriers, regulations, complex administration and international tariffs — all of which can pose significant hurdles and risks.

Indeed, for businesses thinking of venturing into global markets, research and planning are vital components for success. Teaming up with the right partner, who can provide invaluable resources and on-the-ground expertise, should also be a priority.

Certainly, businesses can benefit from accessing the reputation and network of a large bank — benefiting in particular from trade missions to key export destinations. During these guided visits businesses are introduced to key contacts — helping to build invaluable connections and even secure deals.

With unparalleled natural resources — and a government committed to improving its energy security — Chile’s energy market is set to continue attracting interest from international players and ever-larger sums of foreign investment. Renewable energy businesses should get in there early, and make their mark.

Lead image credit: Gerard Prins via Wikimedia Commons