Opportunities in Renewable Energy

As Chile moves to diversify its sources of energy, opportunities are opening up for Australian companies in the non-conventional renewable energy sector.

With concerns over the supply of natural gas from Argentina and lack of reliable supplies in the region in general, Chile is moving to diversify its sources of energy. Non-conventional renewable energy is a key tool in achieving what President Bachelet has termed "energy autonomy" by 2008. Chile's Energy Security Plan sets a target for 15% of the growth in energy generation capacity to come from renewable sources by 2010.

Minister for Mining and Energy, Karen Poniachik, has held up Pacific Hydro as an example for other foreign companies to follow in the Chilean market, and is interested in visiting renewable energy projects in Australia during a possible visit in coming months.

The Government has tasked the Commission for Development and Production (CORFO) and the National Energy Commission to attract foreign investment into this sector. The two bodies are funding feasibility studies of around 80 renewable energy projects, which will be presented to potential investors and project developers at an international workshop in October 2006. Austrade in Santiago and DITR in Canberra are working to encourage Australian participation in the seminar.

Although hydro electricity generation accounts for up to 60% of Chile’s installed energy capacity in the Central Interconnected System (SIC), in the last few years Chile has focussed on fossil fuels to facilitate growth in its energy needs. Solar, wind, geothermal, and biomass power generation have been limited to small-scale rural projects not connected to main electricity distribution grids. Hydro electricity generation comes predominantly from large-scale dam projects, now out of favour due to environmental concerns, compared to smaller, low-impact projects. The Government has begun to take the necessary steps to change this and encourage investment in renewable energy. Legislative changes made in 2004-2005, designed to create a level playing field for small scale renewable energy generators, are now coming into effect.

New generators are being encouraged to enter the market via a public tendering process to supply new energy for the regulated market from 2010 onwards. Up to 12,000 GWh per annum (80% of the distribution company demand) is available under this process for fixed price Power Purchase Agreements being offered by distribution companies. Prices offered can be up to 20% higher than the current system (node) prices which are US$48/MWh. If all the energy demand is not satisfied within the 20% cap, a further 15% price increase could be made available. A second round of public tendering is expected in 2007 for a similar amount of energy. In addition, the grid operator is now responsible for completing the additional work needed to connect new generators to the trunk system, which is particularly significant given the difficult connections for smaller remote renewable projects. The Government will also incentivise renewable energy providers' grid system toll fees for projects less than 20MWh. Adding to the attractiveness of the sector is Chile's status as a Kyoto signatory. Renewable energy projects may apply for carbon credit recognition under Kyoto's Clean Development Mechanism (For further information on opportunities in the renewable energy sector, contact Austrade Chile: [email protected]).