Although President Michelle Bachelet’s government claims to tackle climate change — implementing carbon taxes and setting UN targets — it routinely fails to press forward with renewable energy projects currently gathering dust.
The Corporation for the Promotion of Production in Chile (CORFO), a government agency, has reported that the country boasts enough approved renewable energy projects to meet national demand. But Chile still remains worryingly dependent on fossil fuels.
According to experts, entrenched interests in fossil fuels and obfuscatory management holds Chile back from what could be its saving grace.
Chile has long relied on hydroelectric power as its alternate energy source. Although hydro does generate clean energy, its environmental and social implications are staggering, as shown by Brazil’s Belo Monte dam project. Despite the growing reliance on hydro production, the cost of electricity has steadily risen and demand subsequently dropped in Chile over the last two years, according to data from the Central Interconnected System (SIC).
Renewable power has become not only an environmental sensibility but also an economically reliable source of investment. Recent Lazard publications from Wall Street list energy efficiency and renewable power— specifically wind and solar— as the most “cost-competitive” investments, with diesel — like that produced at Chile’s Antilhue power plant — sitting at the bottom of the ranking.
CORFO, a long-standing government department dedicated to diversifying economic growth in Chile, is acting upon the changing tides in the global energy sector.
Its December 2014 report on Non-Conventional Renewable Energy development shows a steady increase in the number of renewable projects being developed and cleared for construction by the Ministry of Environment. Despite the rising numbers of projects, the Ministry of Energy seems to simply ignore Chile’s energy potential.
Steven Hall, an independent energy consultant based in Santiago, spoke to Latin Correspondent about the failure of communication between Ministries within the Chilean energy sector.
“There is a real disconnect between the Ministry of Energy’s view of the world in 2025 and other government agency CORFO, which is funding the renewables industry,” said Hall. “There appears to be no policy coordination.”
Hall explained that Chile had the potential to reach a U.N. target for renewable projects a full 18 years earlier than the original anticipated date. Yet, eight years in, none of those projects have come to fruition.
“This country has one of the best renewable energy regimes in the world in terms of solar, wind, geothermal and tidal,” said Hall. “In theory, this country could power most of South America with the resources they have, let alone Chile.”
The reasons for this lag in the construction side of the renewables industry, Hall claimed, revolves around “entrenched interests” from privatized utilities companies and business families with strong links in industrial construction in Chile.
Companies like Enersis, Sigdo-Koppers, Colbún, Empresas Copec and Chilectra all benefited from nationwide privatization in the 1990s and currently dominate the Chilean energy and mining landscape with conventional, fossil-fuel-driven energy generation.
Despite the potential for renewable energy projects, Energy Minister Maximo Pacheco Matte — whose cousin, Bernardo Matte-Larrain, is the CEO of Colbún — recently told an energy conference in Houston, “We [Chile] are probably the poorest country in Latin America in terms of fossil fuels, and we need to use the resources we have.”
So why isn’t Chile investing in its renewable resources?
Carlos Finat, executive director of the Association of Chilean Renewable Energy (ACERA), the union representing renewable energy companies in Chile, pointed to bureaucratic roadblocks.
“In the case of project developers and with only a few and almost no material exceptions, no funding from the government is available for renewables,” said Finat. “Most of the difficulties this sector faces are administrative; access to transmission systems and Power Purchase Agreements (PPA) hold construction phases back. The permitting process is long and cumbersome, partly because of the risk of claims from the owners of mining rights related to land where a project is to be developed.”
Finat added that certain distribution companies may feel that there is no benefit for them in joining forces with renewable energy resources.
According to Hall, government approval is meaningless unless utility companies like Chilectra give projects clearance. Such projects face significant resistance, since renewables are cheaper and more competitive than conventional energies.
“Non-conventional energy production has become a threat to their business interests,” said Hall. “Whereas expansion of their domination in the energy market will benefit the general management, the investors and the stockholders.”
Although summits like the COP20 or U.N. climate conferences may occur with the best intentions, it is the generators and distributors of energy in Chile who hold the future of the energy sector at ransom.