Renewable Energy in Chile

An Expert's View about Electricity Generation and Distribution in Chile

Posted on: 27 Sep 2010

Chile is a net energy importer that intends to expand its capacity and diversify its energy resources and suppliers, which is an excellent business opportunity for British companies.

Renewable Energy ? Chile Sector Report Renewable Energy Chile Produced by: Monica Eggers, Trade & Investment Section, British Embassy Santiago Last revised November 2009 Whereas every effort has been made to ensure that the information given in this document is accurate, neither UK Trade & Investment nor its parent Departments (the Department for Business, Innovation & Skills, and the Foreign & Commonwealth Office), accept liability for any errors, omissions or misleading statements, and no warranty is given or responsibility accepted as to the standing of any individual, firm, company or other organisation mentioned. Published 2009 by UK Trade & Investment. Crown Copyright © Renewable Energy ? Chile Table of Contents OVERVIEW 3 OPPORTUNITIES 4 CHARACTERISTICS OF MARKET 5 KEY METHODS OF DOING BUSINESS 7 MORE DETAILED SECTOR REPORTS 8 PUBLICATIONS - WEBSITES EVENTS 9 CONTACT LISTS 9 Page 2 of 9 Renewable Energy ? Chile OVERVIEW Chile: Facts & Figures Sustained economic growth in the framework of an open and globalised economy, plus limited ? Total population: 16.5 million local primary resources such as gas and oil have ? Greater Santiago: 6 million put Chile in a very tight energy situation and have ? Workforce 6.8 million ? Literacy rate 95.7% forced the government to look into the ? Life expectancy 78.1 years diversification of its energy matrix. Electricity ? Unemployment 4Q08: 7.5% consumption has increased consistently in the last ? 2008 inflation: 7.1% 10 years, and approximately 15,000MW additional ? 2008 GDP growth: 3.5% ? 2008 GDP per capita: US$10,122 installed capacity is considered necessary by ? 2008 trade surplus: US$10.38bn 2020. Around 65% of primary resources currently used have to be imported. Energy security has become one of the government's Renewables Obligation major priorities in building sustainable economic growth. To promote new investments in generation and In 2010-2014, 5% of power sold must be generated by encourage the development of new projects using both renewable sources, increasing conventional and non-conventional energy sources, gradually to 10% by 2024. legislative amendments have been made to the electricity sector and more are planned, and a This is the present regulation Sustainable Energy Security Policy has been launched to and is subject to revision by diversify the country's energy matrix. Chile is a net the new government that will energy importer that intends to expand its capacity and take office in March 2010. diversify its energy resources and suppliers. Variation of Gross Primary Energy Consumption (teracalories) Energy consumption by Fuel 2007 2008 Variation economic sector - 2008: (%) Crude oil 106,155 110,420 4.0 Transport: 28.4% Natural gas 42,718 24,795 -42.0 Industrial & Mining: 29.2% Coal 40,861 43,695 6.9 Commercial, Public & Hydro electricity 19.576 20,898 6.8 Residential: 19.7% Wood 49,941 51,170 02.7 Transformation Sector: 22.7% Biogas 0 0 0 TOTAL 259,152 250,977 -3.2 Source: CNE Source: CNE To boost energy security and sector efficiencies, the government has embarked on a series of changes: ? The creation of an Energy Ministry. ? The creation of a Renewable Energy Centre. ? The creation of an energy efficiency programme. ? Support competitive investment in power generation projects. ? The diversification of energy sources and suppliers. ? Modification of laws and regulations to support renewable energy. ? The creation of financial instruments to support development of renewable energy projects. ? Simplification of commercial procedures for renewable energy projects of up to 9MW capacity. ? The promotion of sustainable development. Page 3 of 9 Renewable Energy ? Chile OPPORTUNITIES In general, the development of a wide range of services such as consultancy, project development, measurement equipment, analysis equipment, engineering and logistics services, assembly lines, maintenance services, R&D, capacity building are fundamental for the expansion of the renewable energy industry ? and an excellent business opportunity for British companies. Wind energy: Through the availability of large areas of land currently in no productive use, with relatively easy access and abundant wind and sunshine, onshore wind and solar are the present government?s favoured renewable sources. (Elections are held in December 2009 and the new administration will take office in March 2010). Onshore wind projects totalling over 1,000MW installed capacity in the Region of Coquimbo have received their environmental permits. There is however some doubt on the commercial feasibility of some projects in the absence of subsidies and feed-in tariffs, with a feeling that companies have taken speculative positions in anticipation of such market mechanisms. Around 570MW capacity from projects in other regions are currently in the permit process. Several collections of wind measurement data are available at Offshore wind is not presently under consideration, because of so much availability of far cheaper onshore sites and because of the very steeply sloping continental shelf off the Chilean coast. Opportunities: Grid-connected wind projects, wind studies and their certification, project development, consulting, financing, and servicing and maintenance of existing wind turbines. Hydro power: Throughout all of the country's central and southern Andean foothills, run-of- river projects hold estimated capacity of 3,000MW. Additionally, the results of a recent survey carried out by the CNE and the National Irrigation Commission (CNR; show 850MW potential from existing irrigation infrastructure. Opportunities: mini and micro hydro turbines, technologies related to the setting up of small power plants, consulting. Biomass & biogas: Pulp, forestry and agricultural companies have been at the forefront of biomass power generation projects, while large landfills and swine and poultry farms have developed a number of biogas plants. There is further potential in both sectors from smaller landfills, dairies, farms, sawmills, wineries, sewage treatment plants etc. Chile has extensive forest resources, with plantations covering 2.1 million hectares and native forests covering 13.4 million hectares. The Forestry Institute INFOR ( has developed a Forest Waste Information System with updated information on available forest waste throughout the country for energy use. The logging industry has an estimated 470MW power generation potential, with a further 900MW from industrial sawmills. Biofuels: two main consortia made up of public, private and academic members are researching biofuel production from jatropha, marine algae and forestry waste. Some regulations are already in place. Opportunities: digesters, boilers, chippers, biogas plants, pellet plants. Solar energy : the north of Chile has one of the world's highest solar energy potentials, with solar radiation of some 4,200 and 4,500 Kcal/m2/per day. In the centre and south of the Page 4 of 9 Renewable Energy ? Chile country the average is 2,100 and 3,500 Kcal/m2/per day. These outstanding resources have prompted the government and private sector players to prepare projects in the northern desert. Regarding thermal solar systems, there is a subsidy for the installation of thermal solar panels in new houses and residential buildings. Social housing projects and medium sized houses will be able to apply for a 100% subsidy. Opportunities: thermal solar panels ? development, installation and maintenance of projects -, small scale systems to provide energy to rural housing, schools, healthcare centres, which can fall under the Government?s Rural Electrification Programme; opportunities within the Government?s Energy Efficiency Programme: public lighting, information and communication systems. Ocean energy: Chile has one of the best wave resources in the world, as well as some sites of very strong marine currents. Despite technologies not quite reaching full commerciality and regulations not existing, several utilities and developers have expressed their interest. Opportunities: Marine current and wave power generation; technology transfer; links with UK universities for capacity building. Geothermal energy: Chile has large areas of geothermal activity throughout the country, and 767,000 hectares of exploration concessions were tendered in June 2009. However, the potential resource far exceeds the technical and financial capacity of companies trying to develop commercial operations of geothermal power plants. UKTI publishes international business opportunities gathered by our network of British Embassies, High Commissions and Consulates worldwide. These opportunities appear in the Opportunities portlet on the relevant sector and country pages on the UKTI website. By setting up a profile you can be alerted by email when relevant new opportunities are published. New or updated alert profiles can be set in My Account on the website. CHARACTERISTICS OF MARKET Chile's power sector underwent a radical regulatory reform in the 1980s that resulted in the country implementing a competitive market model for the generation, transmission and distribution of electricity. All players in the market are private, both local and foreign, leaving the state with regulatory responsibilities only. The regulator is the national energy commission, Comisión Nacional de Energía (CNE;, which is in charge of elaborating and co-ordinating planning, policies and norms necessary for the proper functioning and development of the sector. Given the importance of the power sector to the whole country, a number of other ministries such as those for transport, housing, economy, agriculture and mining, the environment commission and municipalities are among other state actors that give their opinions to power sector developments. Conflicts can arise. In 2008, total gross electricity generation amounted to some 55,000GWh, distributed through four grids: SING, SIC, Aysén and Magallanes. SIC generatio n mix at 20 08 SIC/SING generation mix, (9,385MW installed capacity): SING generation mix at 2008 December 2008: (3,602MW installed capacity): Hydro; reservoirs ? 36.1% ? Hydro 37.6% ? Run-of-river 16.2% ? Diesel 4.0% ? Natural gas 35.1% ? Wind 0.2% ? Fuel oil 3.5% ? Coal 15.4% ? Di ese l 9.7% ? Coal 33.5% ? Oil 10.3% ? Coal 8.9% ? Natural gas 58.6% ? Biomass 1.3% ? Natural gas 27.1% ? Wind 0.15% ? Biomass 1.8% Page 5 of 9 Renewable Energy ? Chile Installed capacity at December 2008: 13,114MW Non-Conventional Renewable Energy: To encourage new investments in renewable energy power SING: generation and the 3,602 MW development of new projects 27.4% the government amended the regulatory framework of the electricity sector to include guaranteed access to distribution networks and simplified commercial procedures for small generators SIC: (?9MW); the exemption/ 9,385 MW reduction of transmission tolls 71.4% for plants ?20MW; and access to market for any generator irrespective of their size. A renewables obligation makes it mandatory by 2024 for 10% of total annual energy sales to AYSEN: regulated and non-regulated 47.8 MW clients to come from Non- 0.36% Conventional Renewable Energy Sources. MAGALLANES: 79.5 MW 0.60% Of Chile's total installed capacity, some 13,114MW, only 367MW use non- At the end of August 09, the environmental permit conventional renewable energy pipeline showed 55 approved renewable energy projects sources (2.8%). The current totalling around 1,720MW. Of these projects, 30 were government expects to for hydro projects (approx. 255MW); 19 were for wind increase this figure to 550MW (approx. 1,345MW), and 5 projects were for biomass by the end of its term in March (approx. 112 MW). 2010. Page 6 of 9 Renewable Energy ? Chile Government funding: To facilitate the promotion of renewable energy projects, economic development agency CORFO has different types of financing instruments available, including: ? funding for pre-investment studies ? funding for detailed engineering ? funding instruments with preferential rates ? an annual international investment event to promote renewable energy projects Since 2005, CORFO has approved grants for over 200 renewable energy projects, allocating US$ 6.5 million for studies in the pre-investment phase. Currently, CORFO is supporting 133 projects, of which 61 correspond to mini hydro, 48 to wind power, and 17 to biomass, with a potential of some 1,800MW. These projects were identified through annual funding rounds, and promoted through CORFO's annual international investment event. Subsidies for transmission lines and geothermal exploration are also being offered. Furthermore, national energy commission CNE has developed a Rural Electrification Programme with the support of the United Nations Development Programme and the Global Environment Facility. Projects with strong social components are eligible for funding for feasibility studies and other activities. KEY METHODS OF DOING BUSINESS Getting started ? Try to meet your trading partners personally. Chile is a face to face culture and Chileans have a strong preference for doing business with somebody they have actually met. Written communications sent to a Chilean you know have a much better chance of being attended to than messages sent to somebody you have not met. Moreover, Chileans will often open up in personal contacts and give useful information that they are reluctant to commit to paper. Introductions by a third party, such as a bank, a lawyer or UKTI staff are often of critical importance when conducting business in Chile. ? Visit the market. This is essential if you wish to be seen as keen to compete seriously in Chile. UKTI can offer support in arranging a programme of meetings for you. ? Chileans generally take their, sometimes lengthy, summer holidays in the months of January and February. It can be extremely difficult to conduct business at this time and is best avoided. Language ? Spanish is the official language of Chile; however senior managers are usually proficient in English. In spite of this, it should not be presumed that negotiations would take place in English. Being able to converse, even in basic Spanish, is much appreciated by Chileans as a sign of courtesy. It is well worth the effort of memorising a few key phrases before you come. Remember, even if your business associates speak English, it is safe to assume that most taxi drivers, waiters, and shop keepers you encounter will not. ? Written correspondence should take place in Spanish if at all possible, at least in your first contact with a trading partner. Many Chilean companies can correspond in English and you may find that the correspondence shifts into English after the first few faxes or letters. However, there are a significant number of companies which are not able to correspond in English, and any letter not in Spanish will probably end up in the waste paper bin. On top of this, the courtesy of a well-written letter in Spanish is much appreciated by Chileans. Page 7 of 9 Renewable Energy ? Chile Other background information on doing business in Chile can be found on UKTI?s website. Simply go to the Chile country page where you will find information on: ? Economic background and geography ? Customs & regulations ? Selling & communications ? Contacts & setting up ? Visiting and social hints and tips MORE DETAILED SECTOR REPORTS Research is critical when considering new markets. UKTI provides market research services which can help UK companies doing business overseas including: ? Overseas Market Introduction Service (OMIS). Bespoke research into potential markets, contacts and support during your visits overseas. ? Export Marketing Research Scheme. Advice on market research and help to contact subsidised market research administered by the British Chambers of Commerce on behalf of UKTI. Contact your local International Trade Advisor if you are interested in accessing these services, or for general advice in developing your export strategy. When considering doing business in Chile, it is essential to obtain legal, financial and taxation advice. For further details on any aspect of Chile?s renewable energy market, contact: Karl Royce Commercial Officer UK Trade & Investment British Embassy Santiago Av. El Bosque Norte 0125 Las Condes Santiago Chile Tel: (56-2) 3704179 - 3704100 Email: PUBLICATIONS - WEBSITES ? National energy commission: ? Economic development agency: ? Environmental impact assessment system: ? National energy efficiency programme: ? Rural electrification programme: ? National environment commission: ? National irrigation commission: ? Foreign investment committee: ? Forestry institute: Page 8 of 9 Renewable Energy ? Chile EVENTS UK Trade & Investment?s Tradeshow Access Programme (TAP) can help eligible UK businesses take part in overseas exhibitions. Attendance at TAP events offers significant benefits: ? possibilities for business opportunities both at the show and in the future ? a chance to assess new markets and develop useful contacts ? grants are available if you meet the criteria ? UKTI staff overseas will be available to assist delegates Find out if you are eligible to apply to attend this event, and more about the support UKTI can offer, on the UKTI Market Entry web page. Details of TAP events can be found in the Events portlet on the Chile page. Other Market Visit Support may be available via your local International Trade Advisor. CONTACT LISTS Karl Royce Commercial Officer UK Trade & Investment British Embassy Santiago Av. El Bosque Norte 0125 Las Condes Santiago Chile Tel: (56-2) 3704179 - 3704100 Email: Jim Feeney Head of Unit ? Renewables ? Americas UKTI Energy Sector Team Tel: +44 (0)141 228 3690 Email: UKTI?s International Trade Advisers can provide you with essential and impartial advice on all aspects of international trade. Every UK region also has dedicated sector specialists who can provide advice tailored to your industry. You can trace your nearest advisor by entering your postcode into the Local Office Database on the homepage of our website. For new and inexperienced exporters, our Passport to Export process will take you through the mechanics of exporting. An International Trade Adviser will provide professional advice on a range of services, including financial subsidies, export documentation, contacts in overseas markets, overseas visits, translating marketing material, e-commerce, subsidised export training and market research. Page 9 of 9
Posted: 27 September 2010

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