CHILE'S ENERGY HIGHLIGHTS MARCH 2009

UNCLAS SANTIAGO 000349

STATE FOR WHA/BSC, WHA/EPSC AND EEB/ESC/IEC

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON ENRG KNNP SENV TRGY PGOV CI
SUBJECT: CHILE'S ENERGY HIGHLIGHTS MARCH 2009

REF: SANTIAGO 243


1. (SBU) SUMMARY: This cable provides highlights of activity in the
Chilean energy sector during March 2009. Energy Minister Tokman
discussed potential collaboration on renewable energy with Vice
President Biden's delegation. Expert teams from the International
Energy Agency (IEA) and the Asia Pacific Economic Cooperation forum
(APEC) visited Chile. Chile's water authorities are forecasting
sufficient water supplies for both hydroelectric generation and
irrigation. An Irish renewable power company will invest $1 billion
to build wind farms in Chile. A U.S. company acquired a concession
containing at least 275,000 tons of bituminous coal. Chile's
National Energy Commission (CNE) launched an international call for
bids to buy the rights to reductions in carbon dioxide. Electricity
demand increased by 1.7 percent in March, compared to the same month
in 2008. Business Monitor International (BMI),forecasts that Chile
will account for 5.52 percent of Latin America regional power
generation by 2013. End summary.

Energy Minister Requests MOU for Summit
--------------


2. (SBU) Energy Minister Marcelo Tokman met with Vice President
Biden's delegation on the margins of Chilean President Michelle
Bachelet's March 29 bilateral meeting with the Vice President.
Tokman proposed signing an MOU during the Summit of the Americas
formalizing U.S.-Chile collaboration on a solar pilot plant and/or
renewable energy center (reftel) to facilitate technology transfer
and funding for the projects. Tokman envisions these pilot projects
as models for the region. He argued that energy technology
transfers are the best way to convince developing countries to
reduce greenhouse gas emissions.


3. (SBU) Tokman also said Chile would welcome the opportunity to
enter into agreements with U.S. institutions, particularly the
National Renewable Energy Lab and University of California-Berkeley
labs, which could be done under the Chile-California Partnership.
He noted that if such an agreement is completed before April 24, it
could be announced at the upcoming Chile-California solar seminar in
San Francisco on that date. Both sides agreed to study ways to
advance energy collaboration in advance of the Summit. The Embassy
understands the Vice President will be in contact with Secretary Chu
to discuss Chile's interest in energy cooperation.

APEC Energy Efficiency Peer Review of Chile
--------------


4. (U) Chile and New Zealand are the first countries to submit to
the APEC energy efficiency peer review process. An international
panel of eight experts visited Chile from March 16-20. During the
visit, the team interviewed officials responsible for public policy
development and energy efficiency programs, scientists, energy
companies, and industry representatives. The results of the study
will be presented during the 37th meeting of the APEC Energy Working
Group in Santiago, April 2009.

IEA Reviews Chile's Energy Sector
--------------


5. (U) Under an agreement with CNE, the IEA is conducting an
in-depth review of Chile's energy sector and policies. The IEA team
of international energy experts was in Santiago March 30-April 1 to
meet with a wide array of public officials and private sector
representatives. The results of the study, which began in December
2008, will be shared informally with the GOC in June and formally
presented by the IEA's executive director in October 2009.

Water Forecasts Sufficient for Hydroelectric Power
-------------- --------------


6. (U) The Chilean Ministry of Public Works General Water Authority
(DGA) released a report showing sufficient water for both
hydroelectric generation and irrigation. Average water levels at
larger reservoirs are 12 percent higher than at this time last year,
but below historic levels.

Irish Firm Plans $1 billion Wind Investment
--------------


7. (U) Mainstream Renewable Power will invest $1 billion over the
next five years to build wind farms in the country as part of an
alliance formed with Chile's Andes Energy. The project is expected
to supply power to more than 300,000 homes. The first wind farm
will be built near Valparaiso and is expected to be operational by
next year.

U.S. Company Acquires Coal Concession
--------------


8. (U) Nevada-based Southern Energy Company, a publicly traded
resource exploration enterprise, agreed to pay the equivalent of
US$8,000,000 for the Lota Bay coal concession. Over the 145 years
of coal mining operations in Lota, situated on the Gulf de Arauco,
tons of coal were spilled in the bay. Net results of a 2006
drilling test show 275,000 proven tons of recoverable bituminous
coal with probable reserves of another 90,000 tons. The company
plans to dredge up the coal, process it in an adjacent site, and
sell it to nearby thermal electric plants.

CNE to Sell Carbon Dioxide Reductions
--------------


9. (U) On March 29, CNE, launched an international call for bids to
buy the rights to reductions in carbon dioxide. The program is
being handled through CNE's Country Program for Energy Efficiency
(PPEE) with technical assistance from the Inter-American Development
Bank (IDB). This new project capitalizes on PPEE's program to
distribute compact fluorescent light bulbs to promote energy
savings. Energy Minister Tokman said, "this call is unique in its
kind in Latin America and the Caribbean and aims to fund part of the
replacement of light bulbs, to quantify the electricity savings from
this project, and [provide] accurate knowledge of the reduction of
greenhouse gas emissions associated with the replacement program."
He added that, "this project will prevent the emission of 258,000
tons of CO2, equivalent to the carbon emissions of 75 thousand
Chileans." The deadline for receipt of tenders is May 4.

Electricity Demand, Generation Capacity Increasing
-------------- --------------


10. (U) Press reports indicate that electricity demand increased by
1.7 percent in March, compared to the same month in 2008. This
increase, the highest since September 2008, represents the reversal
of a five month downward trend in electricity demand.


11. (U) The March "Chile Power Report" from Business Monitor
International (BMI),forecasts that Chile will account for 5.52
percent of Latin America regional power generation by 2013. BMI
forecasts Latin America's power generation will grow to 1,417
terawatt hours (TWh) by 2013, representing an increase of 30.2
percent. According to BMI, in 2007, oil was the dominant fuel used
in Chile, accounting for 55.8 percent of primary energy demand
(PED),followed by hydroelectric at 18.7 percent, gas at 13.9
percent, and coal at 11.6 percent.


12. (U) Chile's GDP per capita and electricity consumption per
capita are forecast to increase steadily, by 43 percent and 18
percent respectively, between 2007 and 2013. During the same time
period, power consumption is expected to increase from an estimated
57.4TWh to 72.4TWh. From 2007 to 2018, BMI predicts an increase in
Chilean electricity generation of 57.7 percent, which is mid-range
for the Latin America region.