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The Latin American nation has limited indigenous energy resources, with the exception of hydropower. As a result, the country must import the bulk of its energy needs.
Up until 2004 Chile met most of its demand for energy by importing natural gas through an agreement signed in 1995 with neighboring Argentina, which had agreed to supply 22 million cubic meters a day. However, subsidized energy prices in Argentina boosted domestic demand in that country, which consequently saw exports to Chile fall drastically.
Currently Argentina is only sending 10% of the agreed quantity of natural gas to its Andean neighbor. Faced with an energy crisis that was beginning to impact economic growth, Chile was forced to scour the globe for energy sources says Eugenio Chinchon, a Chilean business development manager specializing in renewable energy.
“Chile provides most of the copper in the world. As China has been booming and asking for a lot of minerals, the price of copper has gone up. So they want to produce more but because there is a shortage of energy, they couldn’t produce,” says Chinchon. “Also because of historical reasons we don’t have natural resources to produce energy in the north, and the only way to [run the copper mines] has been gas. But we don’t have gas, so we must buy it from other countries. Our neighbors like Peru and Bolivia have a lot of gas, but because of historical reasons, there is a lot of rivalry and they don’t want to sell us gas. So Chile has to buy liquid gas from the Far East and it’s very expensive. So the prices are going very high and the Chilean government wants to have wind energy.”
The reduction in Argentine exports of natural gas prompted an energy policy rethink in Chile and a firm commitment by its government to diversify its energy sources. Legislation signed into law by Chilean President Michelle Bachelet last year requires that electric utilities invest in and supply non-conventional energy sources. The law is an attempt by the energy poor country to diversify supply as it tries to feed booming industry, particularly its copper mining sector.
The law mandates that NCES account for at least 10% of the energy supplied by Chile’s electric utilities by 2024. Upon signing the law Bachelet said, “the main idea is to establish conditions to attract investment to projects for non-renewable energy by accelerating the development of the market, eliminating entry barriers making those new sources compatible with the country’s electricity market.”
Historically, up to 75% of Chile’s domestic energy production came from hydroelectric projects which are mainly located in it southern regions. However, recent droughts in the region have made this energy source unreliable (rain at the end of 2008 did restore hydroelectric energy production capacity). Energy diversification has thus spread to different potential sources.
Geography has been kind to Chile with regards renewable energy sources. With many active volcanoes in its southern Patagonian region there is geothermal energy, and there is also great solar energy potential of northern Chile, where year-round clear sunny skies provide some of the best conditions in the world for this form of renewable energy. Hydroelectric capacity is set to be increased with GDF Suez building at least six new hydro plants in southern Chile, but GDF is also one of many companies now entering Chile’s exciting Wind power sector.
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Source: CleanTech Brief
