High Capital Costs Limit Renewable Energy Projects In Chile -IEA
May 11 2012 - 1:27PM
Dow Jones News
SANTIAGO (Dow Jones) -- Despite the Chilean government's plans
to boost renewable energy sources, high capital costs remain a
significant entry barrier for renewables, the International Energy
Agency's Deputy Executive Director Richard Jones said on the
sidelines of an energy conference.
Chile, with a population of 17 million, needs to nearly double
its installed energy capacity over the next decade to keep up with
projected demand.
While renewables became an important energy source in some
developed countries, in Chile they only represented 3% of the
Andean country's 2011 installed capacity of 16,857 megawatts,
according to the Energy Ministry.
In a new energy bill being discussed in Congress, the government
aims to increase renewable energy sources to 20% of the country's
matrix by 2020.
Chile's largest energy consumers are mining companies, as the
production of the country's main export, copper, is electricity
intensive. Copper represents 60% of Chile's exports and 15% of the
country's gross domestic product.
If the country doesn't provide energy solutions quickly,
companies could delay mining investments, which are expected to
total $100 billion in the 2012-2020 period.
Chile refocused its energy policy after neighboring Argentina
cut gas exports to Chile in 2007. In this context, renewables
surfaced as an option to meet energy demand, but are still far from
being an important energy source to rely on.
One of the problems renewable energy projects face is the need
for a significant capital injection.
"The capital cost is higher, but then the operational part is
almost free," said Jones.
Costs to build these type of projects, along with investors'
unfamiliarity, are a big entry barrier for renewables in Chile, he
said.
To reduce high start-up costs, companies can build renewable
energy projects in different steps. "These projects are scalable,"
said Jones.
Chile has sun, wind, kilometers of coastline, biomass and
volcanoes that investors and companies could use to develop a
large-scale penetration of renewables all along the country.
"The potential for renewable energy in Chile is diverse and
substantial, thanks to the country's unique geographical and
natural conditions," an IEA report said.
Hydrogeneration is a main source of power in Chile, accounting
for 35% of the country's energy matrix. The country has many rivers
that begin high in the Andes mountains and have the potential to
move power-generating turbines.
Imported thermal sources such as natural gas, coal and diesel,
represent a combined 62% of the country's installed capacity.
In recent years, long legal battles from environmental groups
have delayed the country's biggest power projects such as the $3
billion HidroAysen project in Patagonia and the $5 billion
coal-fired Hacienda Castilla project in northern Chile.
Ecological groups would like to see the country's energy needs
met through smaller projects with less environmental damage.
HidroAysen is a joint venture between Empresa Nacional de
Electricidad SA (ENDESA.SN, EOC) and Colbun SA (COLBUN.SN) and
Hacienda Castilla is being developed by Brazilian billionaire Eike
Batista's MPX Energia SA (MPXE3.BR, MPXEY) and German utility E.ON
AG (EONGY, EOAN.XE).
While legal problems are an obstacle to developing hydroelectric
projects and coal-fired plants, renewable energy projects are also
facing opposition in Chile.
In the southern Chiloe archipelago, local communities recently
stopped Chilean-Swedish company Ecopower's proposed wind farm,
which had already received environmental approval.
-By Graciela Ibanez, Dow Jones Newswires; 56-2-715-8929;
graciela.ibanez@dowjones.com