Chilean Energy Strategy: A Positive Step Forward Toward A Sustainable Energy Sector

After a few years of stagnation in developing energy policies, possibly explained by the constant rotation of five energy ministries since March 2010, Chile is taking an important step forward in the development of a sustainable energy sector, through the publication of its recently presented National Energy Strategy 2012 – 2030 (http://www.minenergia.cl/documentos/estudios/national-energy-strategy-2012-2030.html).

This policy is presented after a high level commission of national energy experts did a study (http://www.minenergia.cl/documentos/estudios/resumen-ejecutivo-del-informe-de-la.html) of the challenges of the energy sector, and so this strategy includes the vision of different stakeholders, which is valuable and important to validate a plan like this.

The strategy is founded on six pillars:

  1. the promotion of energy efficiency as a priority public policy to reduce energy consumption and decouple energy from economic growth
  2. increase the participation of renewables in the energy matrix
  3. promote the development of large hydroelectric projects
  4. improve the transmission system
  5. improve the market of electricity distribution
  6. advance on international interconnections

Many of these policies will have a direct impact on future greenhouse gas (GHG) emissions in the Chilean electric sector by contributing to the reduction of Chile’s dependency on coal power generation (BAU scenario), which is expected to be the base of future domestic energy developments.

In this context, it is important to highlight some of the announcements, beginning with the goal of reducing the expected electric consumption by 12% using energy efficiency, through the Energy Efficiency Action Plan 2012 – 2020. This plan is not yet available, but will include efficient housing plans, technical assistance for industries, labeling of different products, establishment of MEPS for some products, the creation of an energy efficiency award to distinguish the best practices, technological change in public and private lighting, and the creation of an energy efficiency inter-ministry commission.

In renewables, the goal is to, at least, double the current goal of 10% generation by 2024, for which the government plans to develop an open tender process to give project developers public subsidies to improve their electricity selling conditions, thus reducing the risk of the sector. They also plan to improve public knowledge about the geographical potential on renewables and improve current support mechanisms (soft credits, insurances, financing of feasibility studies, etc.).

Regarding the development of large scale hydro and coal projects, the strategy states its support for the development of big dams. This might be, although not explicitly mentioned, an endorsement of the HidroAysen project, which was questioned due to its damage on the Chilean Patagonia´s landscape. However, the project aims to reduce GHGs and displace the need for coal plants. On the other hand, the strategy talks about the development of taxes to discourage negative externalities, most likely referring to an eventual carbon tax on coal power plants.

Although Chile is moving in the right direction, it is worth noting that some initiatives for the development of a sustainable energy sector are still missing. One being the establishment of a decoupling mechanism for distribution utilities, that today are paid based on the energy their clients consume, which is a disincentive to promote energy efficiency and net metering.

Second, the government should look to promoting the development of alternative sources of reliable generation, moving from coal to natural gas or even nuclear. However, once again the government (the previous government did the same) refuses to take position on the development of nuclear power plants. Considering that developing a nuclear project takes decades, not deciding on this and not pushing for natural gas, could guarantee a large share of the new energy capacity will be generated in coal power plants that emit tons of GHGs.

As was said before, although some important issues remain unresolved, the National Energy Strategy is moving the Chilean government away from just solving the contingency problems and looking to forward the development of a more sustainable energy sector.

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