Chile's Energy Future is in Renewables and Energy Efficiency

Roberto Roman and Stephen Hall
Monday, May 9, 2011

English Summary

The debate over a national energy policy in Chile is just beginning. A combination of electricity projects has created multiple conflicts and generated public questioning of their necessity and their approval process.

The absence of a national energy policy in Chile that permits diversification of the energy grid and improvement of the sector's growth and sustainability is clearly an unequivocal deficit that can no longer be ignored.

As recommended by the International Energy Agency, an exhaustive revision of energy policies with a real and effective promise on the part of the State towards a long-term, sustainable energy policy consensually agreed upon by all interest groups is necessary. The goals and objectives of such a policy must be clearly established to facilitate their evaluation and monitoring. Energy grid diversification and internalizing the social and environmental costs of energy generation can no longer be avoided. Current barriers to entry for new players must be overcome, reversing the monopolistic control of a small group of companies. Chilean society is increasingly demanding these changes. Now more than ever, a national policy with a long-term vision is necessary: one that effectively strengthens the development of renewable energy technologies and prioritizes energy efficiency (EE) as its principal pillar in the development of a sustainable energy grid.

The recent earthquakes in Japan and Chile demonstrate that energy security is essential for the development of a country. They also show that beyond the offers of energy companies and their ability to invest in the long term, it's necessary to define state policies that diversify the energy grid without sacrificing the safety and security of the environment and local economies. It's also becoming clear that around the world, the paradigms that defined systems of energy distribution from the 20th century are being revised. This transition implies far more diversified energy networks with ever-larger renewable components and an increase in the number of generation sites.

In this study, we have revised and updated the facts and analysis presented in the book, "Are Dams Needed in Patagonia?" published by Ocho Libros in mid-2009. The updated facts show us that the hypotheses presented are still valid, but that the establishment of clear State policies regarding the energy grid for the Chilean Electric System are ever more urgent.

Chile is moving towards an important tipping point between its economic development and the demand for energy, a product of technological innovations whose high cost of use requires ever more efficiency. The smaller rate of growth in energy demand by unit of each product since 2000 has been relatively stable in the past few years. Energy demand will not double by 2020 as asserted repeatedly by the media, nor are there risks of an energy crisis given that the government has already approved projects that largely surpass demand. Additionally, even with official projections that show a demand of 5.8% annual growth, the addition of non-conventional renewable energy (NCRE) and EE would make half of the already approved coal plants and HidroAysén unnecessary. Excess capacity would actually bring greater electricity costs and less productivity.

Our "green" scenario shows that demand will realistically and conservatively grow at a pace of 4.5% annually. With the removal of barriers to entry for new players into the system and the expansion of NCRE, costs will decline. This will be incentive for EE; Chile would substantially improve it's energy security and save a considerable quantity of energy, which would improve competitiveness. This would also avoid the construction of large coal-burning facilities and the "carbonization" of the Chilean economy, preventing possible sanctions of its products on the global market.

Chile will be able to power 20% of its energy grid with NCRE by 2020, complementing the proposal of President Sebastian Piñera's administration of reaching a 20% increase in EE in the same period.

In 2025, non-conventional renewable energy and energy efficiency will be capable of providing up to 35% of total demand. Naturally, the central interconnected system (SIC) should have a capacity for thermal reserves, especially with combined-cycle gas power plants to balance seasonal fluctuations or the effects of hydrologic variations.