Bachelet looks to renewables and US gas to stem surge in energy prices

By
Published On : Thu, May 15th, 2014

Energy agenda 2014-18 reveals president’s plan to pump funding into new gas terminal and ramp up renewable energy projects to tackle soaring cost of energy.

Bachelet looks to renewables and US gas to stem surge in energy prices

President Bachelet plans to build a new liquid natural gas import terminal, similar to that in Mejillones, to capitalize on the US shale gas boom. Photo via Codelco / Flickr

President Michelle Bachelet presented her government’s four-year energy agenda Thursday, revealing that her government plans to cash in on the U.S. shale gas boom as well as ambitious non-conventional renewable energy targets in a bid to lower Chile’s energy prices — the highest in Latin America.

Bachelet pledged state investment of US$650 million over the next four years, of which around two thirds will go to the National Petroleum Company (ENAP), the state-owned hydrocarbon exploration and extraction firm.The funds will finance both exploration projects for oil and gas, particularly in the Magallanes Region, and a third liquid gas import terminal to capitalize on the shale gas boom in the United States. The latter suggests that the government is pinning hopes on a surging gas supply and falling prices to bring down domestic power costs in the medium term.

Bachelet travels to Washington next month, where she is expected to discuss deepening energy cooperation with U.S. President Barack Obama.

ENAP managing director Marcelo Tokman claimed that the investment represented “a great show of confidence” in the company.

“I’ve spoken to every employee here and we’re all very enthusiastic and committed to carrying out what is being asked of us,” he said. “We’ve got a lot of ideas and we’ve been looking at the financial needs of the company, both for everyday operations and for new initiatives.”

Addressing parliamentarians and professionals from the industry involved in the compiling of the agenda gathered at La Moneda, the president also spoke of the government’s target of reducing marginal costs of electricity on the Central Interconnected System (SIC) — the country’s main grid — by 30 percent by 2017.

Bachelet outlined plans for greater electrical efficiency through improvements to public lighting, the installation of solar panels on public buildings and subsidies for environmentally efficient buildings.

Electrical energy prices have increased considerably in the last decade, doubling since 2006 — without action from the government, Bachelet warned that prices could climb by a further 34 percent in the next decade.

This has had a direct impact on the competitiveness of the country’s industrial sector as it must deal with the highest energy prices in Latin America.

The mining industry, the backbone of the Chilean economy, currently suffers with the second highest prices among its global competitors, twice as high as those enjoyed by Peru, a direct competitor. According to the National Mining Society, mining companies have postponed US$43 billion of projects as they consider rising costs and declining copper prices.

“In recent years the development of new energy projects has been below that required for the well-being of our people and the growth of our economy. This obviously has several effects,” Bachelet said. “On the one hand it impacts on our energy supply. On the other, fewer new projects means fewer companies bringing competition to the market. These factors have influenced energy prices in Chile today, with both electricity and gas among the most expensive in Latin America.”

The president also stressed the need to diversify the country’s energy matrix. The agenda stated that the government aimed to generate 45 percent of the country’s electricity from non-conventional renewable energy sources by 2025, an ambitious increase from the 20 percent target set in 2013.

This could alleviate the country’s dependence on imported energy that leaves it vulnerable to unstable and volatile prices on the international market — according to the agenda, Chile currently imports 60 percent of its primary energy.

By Eugene Malthouse (malthouse@santiagotimes.cl)
Copyright 2014 – The Santiago Times

About the Author

Eugene Malthouse
Eugene Malthouse
Eugene studies Spanish and Italian at Bristol University. He specializes in sports and is interested in international business, science and health.