Chile votes 2013: Bachelet says Chile is in danger of ‘major energy crisis’
Published On : Sat, Nov 16th, 2013
The frontrunner to win this Sunday’s election says Chile needs to expand its energy matrix to meet rising demand; critics claim crisis is manufactured to push mega-projects.
With the cost of fossil fuels on the rise the future of Chile’s import-dependent energy sector seems increasingly uncertain.
Government experts predict a severe power shortage as soon as 2017 if alternative energy sources are not added to the central grid, while environmentalists and critics of the major energy companies see talk of an impending crisis as a front to push for money spinning, mega-projects, such as the controversial HydróAysen.
As Chileans go to the polls this Sunday to elect a new president, the country appears at a cross roads. Much of the direction of its energy future will be determined by whoever sits in La Moneda for the next four years.
“If you look realistically at this crisis everyone says is coming in 2017, there’s only a number of technologies you can realistically look at,” Natural Resource Defense Council (NRDC) representative Amanda Maxwell told The Santiago Times.
“Whatever you build to meet that demand in 2017 is also going to be operating a number of decades after that,” she said. “You have to look at meeting the immediate demand but also what you want to put in place for the next several decades. This next administration will play a major role in how that develops.”
For the overwhelming favorite for that position, former president Michelle Bachelet, one thing is clear: something must be done to ensure the economy continues to power on.
“Expert analysis indicates that the electricity sector is approaching a critical situation, there is no clarity about the energy sources which electric supply will be based on in the mid term, because there are no projects under construction to ensure Chile will meet its energy requirements,” her policy platform reads.
The platform refers to predictions by the National Energy Commision (CNE) which project demand growth for the central grid system (SIC) and the northern grid system (SING) to almost double by 2025, greatly exceeding the capacity of the current system.
The platform offers proposals in the short and long term, with a focus on renewable energy sources and increasing energy efficiency in the long term with goals set for 2025, but rapid and aggressive action to prevent a crisis in the immediate time frame.
Bachelet urges energy sector actors to make efforts to improve energy efficiency, offset consumption and reduction systems, and proposes to fund information campaigns about home energy use and industrial energy efficiency to increase national savings and cut costs if she is elected president.
Meanwhile, clean energy companies and environmental groups are advocating for the rapid implementation of green technologies they claim could meet Chile’s energy needs without the environmental consequences and community backlash of mega-projects like new coal plants or massive hydroelectric dams in Patagonia.
High cost of renewable energy
“We had heard a thousand times, that renewables are too expensive, that they will never happen here, that it’s science fiction,” Maxwell said. “But we knew from experience in the rest of the world, NRDC has projects all over, that that’s not necessarily the case. Costs of these technologies are falling every month, every week, and so you can’t just say as a blanket statement that it’s too expensive.”
Beyond just the supposed higher cost, investors have been hesitant to back green energy projects because of the greater risk posed by the fledgling companies’ relative lack of experience and newer, less well-tested technology.
But while some debate to what extent renewables can assuage the feared crisis, others claim that demand is not truly rising at the rate government reports claim and argue that the energy crisis has been sensationalized to benefit powerful actors in the energy sector who stand to gain from constructing major energy projects and aim to bar renewable energy companies from the market.
Electricity crisis: fact or fiction?
Former coordinator of the National Program on Energy Efficiency Iván Couso confessed his doubts about the energy crisis, noting how deeply ingrained major players in the country’s energy sector have become.
“While the Chilean Association of Renewable Energies (ACERA) has nearly 100 associated national and international companies trying to enter the energy market, we have four prevalent oligopolistic actors with affirmed contracts until 2024 that do not allow clean energy companies to enter the market,” he told The Santiago Times. “In short, the Chilean energy market is in oligopolistic condition and presents a very strong obstacle to new players entering the market,”
Currently Endesa controls 35 percent of the energy market, AES Gener 18 percent, Colbún S.A. 15 percent and Suez Energy Andino 12 percent. Bachelet’s platform also expresses similar concerns about concentration of ownership in energy generation.
“Electricity generation in Chile is concentrated.,” the platform reads. “Only three companies generate 90 percent of the energy of the SIC.”
To address this concern, she proposes a review of the bidding process which currently lowers incentive for new energy companies looking to enter the market.
Renewables on the rise: what are Chile’s options in the short term?
Under pressure to provide Chile’s extensive mines with sufficient power, the government has been looking for new ways to provide inexpensive and plentiful power to the central and northern grids.
Proposals to build massive hydroelectric projects in the South have consistently met with strong opposition from environmental groups and indigenous communities, forcing the energy sector to explore other options.
According to Maxwell, the deflating costs of renewable energy technology in recent years have made many clean energy projects cost competitive with traditional sources like coal and diesel on the market, resulting in increased investor support.
Bachelet’s stated ambition on renewable energies, especially geothermal and solar options, has also bolstered investor confidence in renewable energy sources’ potential for revenue.
The incredibly short time frame of the impending alleged 2017 energy crisis, leaving only three years to meet Chile’s growing energy needs, severely limits the energy sector’s options.
Plans to avoid this feared crisis hinge on projects that can be quickly constructed and operable by 2017, excluding long term projects like the massive Aysén dam or nuclear power plants.
“If you talk about expediting projects to be built and operational by 2017, that’s three years, there are only a specific types of projects that can be built that quickly. One is coal, which a lot of communities don’t want built near them, one is natural gas, which is increasingly contributing to the grid, and then you have renewables,” NRDC advocate Amanda Maxwell told The Santiago Times. “Solar and wind can generally go online in that time frame.”
Many renewable energy projects have already been approved and, in most cases, are now just awaiting financing. These projects represent an opportunity for the country to mitigate the coming energy crisis, Carlos Finat, executive director of The Chilean Association of Renewable Energies (ACERA) told The Santiago Times.
“In reality, there are more than 1,000 megawatts (MW) of nonconventional renewable energy sources installed already an additional 700 MW in construction,” he said. “A stock of projects that are negotiating their environmental approval or have already obtained it should be added to this.”
Research analyst for Bloomberg New Energy Finance Latin America, Yayoi Sekine, told The Santiago Times that Chile was “on track” to meet its revised goal of 20 percent of all production coming from renewables by 2025.
“This year, up to the third quarter of 2013, US$1.1 billion was invested in renewable energy in Chile, of which 73 percent was invested in solar projects in the North,” he said. “Chile is currently on track with its target and we suspect solar and wind to be driving much of the renewable investment and installations in Chile to achieve that target up to 2025.”
Bachelet’s long-term plan and stance on geothermal
In the long term, Chile shows great potential for new innovations in renewable technology like small hydro, mini turbines that can be placed in much smaller waterways like streams. By linking the small turbines together, small hydro sources could potentially gather as much energy as much larger dam projects — without the negative environmental impacts.
In her policy platform, Bachelet expresses support for geothermal energy, another new renewable energy source which has great potential in Chile. Geothermal is a base load power source, meaning it runs 24 hours a day 365 days a year, differing from technologies like wind and solar, which are somewhat limited by weather conditions.
However, geothermal technology demands high initial costs in exploration and construction, upping the stakes for its implementation into the country’s energy sourcing with much of its success banked on investor confidence.
Latin American advocate for NRDC Carolina Herrera told The Santiago Times that while they may be a long term option, renewables like geothermal need to be invested in today, to reap the rewards in years to come.
“What the energy mix becomes in the next 20 or 30 years depends heavily on the decisions that are taken now, because the sort of investments that need to be made to shape that mix in 20 years need to be made right away,” she said.
By Emily McHugh ([email protected])
Copyright 2013 – The Santiago Times
This piece is part of The Santiago Times’ “Chile votes 2013” special edition:
– Chile’s parliamentary elections: a thorn in Bachelet’s side?
– Scandal sunk independent’s hopes in race for second place, experts say
– Bachelet: Chile is in danger of ‘major energy crisis’
– Lid lifted on anonymous millions spent in campaign donations
– Now voting is voluntary, there’s no excuse to stay at home
– Disenfranchised Chileans cast protest vote around the world
– Video game lightens the mood, pokes fun ahead of elections