Chile – Renewable energy target attracts developers… even though there isn’t a green tariff

Our partner REEGLE has highlighted an interesting story. REEGLE is a one-stop shop and search engine for all renewable energy and energy efficiency-related information including jurisdiction and laws, policies and measures, finance and investment opportunities, reports and analyses and latest news. 

Chile is by far South America’s most stable economy. As a growing economy, the country requires electricity to power GDP growth, however Chile has been facing energy supply problems since 2004 when Argentina began reducing natural gas supplies. Argentina’s cuts in natural gas (typically during the winter months of June, July and August) have a direct impact on electricity production. The country produces electricity via natural gas power plants and hydroelectric power plants (Italian utility Endesa is currently Chile’s largest energy producer).

The country’s initial response to the energy crisis was to announce the development of a second liquid natural gas (LNG) reception port in Quintero at a cost of $1.2 billion. Chile also enacted renewable energy legislation in March 2008, requiring utilities to invest and produce electricity from non-conventional energy sources (renewables). Currently there are no support subsidies, only a target of 5% by 2010 ratcheting up by 0.5% each year to 10% by 2020.

Meanwhile, Codelco, the country’s largest copper company, decided to take matters into their own hands, holding a tender for the construction of a 20MW wind farm at their Gabriela Mistral mine. The project was awarded to the UK’s Seawind, who have since ordered 10 2MW turbines from US wind turbine company DeWind.

French utility SUEZ announced in March 2008 that they were investigating two thermoelectric plants and some wind. In July, Spain’s Grupo Enhol announced 500MW of wind in conjunction with Chilean developer Haciendas Talinay.

It’s incredible what a bit of legislation can do for a country’s renewables market. Chile’s National Energy Commission is predicting 100MW installed by 2010. Projects under development currently exceed more than 2,000MW. Naturally the financial crisis is affecting the ability for wind projects to access debt financing, but developers are hoping that by the time projects are fully permitted in two to three years, banks will be lending again.

Last summer, the Atacama Solar Platform Initiative was established by a consortium comprised of Fundacion Chile, State mining company Codelco and several government agencies. The plan is to develop solar zones over the next three years that would include both the manufacturing of solar panels and the construction of solar power plants.

In December 2008, Korean group Daekyeonsolar stated they would invest $1.3 billion for a 150MW solar farm in the Atacama Desert. An environmental permit for the project was submitted for approval in February. The first 10 MW of the Sun Rice project is expected to be built by the end of October and will require an estimated $90 million, including 600 hectares of land.

Finally, a high profile group of investors (including Al Gore) are working on the Andean Solar 200 MW solar and wind project in the Chilean region of Antofagasta. The stated goal is to become “the first self-sustainable, financially viable plant without any kind of government subsidies.” The project wants to generate enough energy to provide electricity to three mining towns in Escondida (the largest private copper producer in the country), Chuquicamata (Codelco) y El Abra (Codelco and Freeport McMoran).

In 2005, Chile joined REEEP (Renewable Energy and Energy Efficiency Partnership) and at the end of 2008 they joined IRENA (International Renewable Energy Agency).  Germany pledged $126 million to fund Chilean research into renewable energy and energy efficiency, with Chile receiving a donation of $11.5 million for renewables research in remote areas of the country with the balance to be provided as a loan.