Climate Change, Development & Aid, Energy, Environment, Global Governance, Headlines, Latin America & the Caribbean

CHILE: Stepping Up the Focus on Alternative Energy

Daniela Estrada* - Tierramérica

SANTIAGO, Nov 21 2007 (IPS) - Chile is rich in natural resources with energy potential, like the wind, ocean and rivers, the sun and biomass, but the country only began to take them into account in 2004, while importing 72 percent of the energy its population consumes.

In November 2006, the administration of Michelle Bachelet set the goal for 15 percent of new electricity generating capacity to come from renewable, non-conventional sources by 2010.

“The government’s objective can be achieved. We are on the right track, but not with the intensity we’d like,” Mario Manríquez, vice-president of the Chilean Association of Renewable Alternative Energies, told Tierramérica.

The high prices of petroleum and the restrictions on imports of Argentine natural gas since 2004 have forced two modifications of the General Law on Electrical Services.

But the problems were not resolved by these reforms. That is why the government is working on the passage of new legislation, the expansion of financial support instruments and improvement of information about the sector.

The main thing at stake is a bill that calls for eight percent of the electricity sold by the leading producers to come from non-conventional, renewable sources. It would begin with five percent in 2010, growing 0.3 percent each year until reaching eight percent in 2024. Those who fail to comply would have to pay a fine.

In Manríquez’s opinion, the portion of clean energy sources should increase one percent annually until reaching 10 percent, which he says is still too low.

The capacity of Chile’s four electrical systems is about 12,000 megawatts, of which just 2.6 percent comes from renewable sources – mostly biomass (agricultural waste) from the paper industry, and hydroelectric dams for less than 20 megawatts. Wind energy contributes just two megawatts nationally.

Since 2000, solar panels and small wind-run generators have been installed in isolated households, as part of the Rural Electrification Programme.

In 2005, the Chilean economic development agency, CORFO, inaugurated an annual contest that finances up to 50 percent of pre-investment studies in alternative sources and up to two percent of the total investment needed.

After three contests and 4.5 million dollars disbursed, there is a portfolio of more than 100 projects, most of them hydroelectric and wind, which together would provide some 800 megawatts. But it would take 1.7 billion dollars to implement all of them.

“The pre-investment support allows us to put together a portfolio of projects, but does not ensure that they become reality,” given that the banks see them as more risky, Sara Larraín, director of the non-governmental organisation Sustainable Chile, told Tierramérica.

CORFO also has an environmental credit line of 100 million dollars that lends up to five million dollars per project.

The government is negotiating donations and soft credits with Germany for the development of alternative energy sources in 2008.

“If the negative costs of traditional projects involving natural gas, petroleum and coal were internalised, such as local contamination and climate, probably the alternative sources would be much more competitive. But that isn’t done in Chile,” Matías Steinacker, consultant with the United Nations Development Programme, said in a Tierramérica interview.

Larraín believes there is a “lack of regulatory signals,” a stricter legal framework that “would punish the polluting projects and reward the clean ones.”

According to Manríquez, in order to give a true push to clean energy beyond 2010, sales and marketing taxes must be established, as is done in Spain. But Steinacker thinks the quota market proposed by the government is the best choice, because it makes projects compete among themselves so the most economically sound ones will be developed.

Several studies indicate that Chile’s wind energy potential is 10,000 megawatts. But the Alto Baguales wind park, which has operated since 2001 generating two megawatts, is the only one connected to the electrical grid, in the southern region of Aysén. At the end of this year the second one will begin operating, in the central region of Coquimbo.

It is known as Canela, a holding of Endesa Eco, affiliate of the Spanish transnational, with 11 turbines that will produce 18.15 megawatts for the Central Interconnected System, which supplies 93 percent of the population.

In the coming weeks, the results are expected of a study that identifies the irrigation works in which small hydroelectric dams could be built.

And in 2008, the government will draw up an inventory of national holdings that could be made available to private entities, through concessions, to carry out alternative energy projects.

(*Originally published by Latin American newspapers that are part of the Tierramérica network. Tierramérica is a specialised news service produced by IPS with the backing of the United Nations Development Programme and the United Nations Environment Programme.)