CHILE'S ENERGY HIGHLIGHTS -- APRIL 2009

UNCLAS SANTIAGO 000496 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 -- APRIL 2009 REF: (A) SANTIAGO 358; (B) SANTIAGO 349; (C) SANTIAGO 243; (D) SANTIAGO 189 ¶1. (U) SUMMARY: This cable provides highlights of activity in the Chilean Energy sector during April 2009. Ambassador Simons gave a keynote address in California at a GOC-hosted solar energy seminar, at which Chile's Minister of Energy announced bid solicitations for two solar power plants. Chile's Energy Minister met again with the U.S. Department of Energy (DOE) Secretary during the Summit of the Americas. DOE visited Santiago for the Asia Pacific Economic Cooperation (APEC) Energy Working Group (EWG) that included meetings with Chilean authorities on environmental and energy issues. ¶2. (U) The GOC expects energy demand will rise in 2009, and a number of projects are underway: A natural gas company and water company are partnering on a biogas plant. Southern Energy is considering acquiring a second coal concession in Chile. AES Gener plans to inaugurate the world's largest lithium-based power plant in 2009. A Chilean company submitted an Environmental Impact Assessment (EIA) request to Chile's national environmental authority (CONAMA) for a 99 MW wind farm. A start-up Italian-Chilean hydropower generation company inaugurated a 19 MW run-of-river hydro project. Chile is negotiating with Argentina and Paraguay to buy 200MW from Paraguay. Oil exploration and production company GeoPark is putting out 1 million cubic meters of gas daily in Magallanes. Escondida mine is planning to build power transmission lines to secure future energy supplies. END SUMMARY. Successful Solar Investment Seminar in San Francisco -------------- --- ¶3. (U) The Government of Chile (GOC) hosted a seminar, "Promoting the Development of Solar Projects in Chile," in San Francisco, California on April 24 to highlight Chile's potential for solar energy projects. Ambassador Simons and Chile's Ambassador to the U.S., Jose Goni, opened the seminar by highlighting Chile's favorable investment climate. Chile's Energy Minister, Marcelo Tokman, provided an overview of Chile's energy sector, policies, and challenges with a focus on non-conventional renewable sources. Tokman also announced that the Chilean government would be soliciting international proposals for two solar power projects, one a 1 MW capacity photovoltaic (PV) plant and one 10 MW concentrating solar power (CSP),in northern Chile (ref c). ¶4. (U) Other presentations featured Chile's Economic Development Agency (CORFO),California's Public Utility Commission (CPUC), Pacific Gas & Electric (PG&E),Lawrence Berkeley National Labs, and various solar companies. The National Resource Defense Council (NRDC),CPUC and PG&E helped organize and make the event a success. The seminar was attended by more than 100 people, including numerous executives from California solar companies, Chile's electricity generation companies and the country's mining sector. Energy Minister meets with U.S. Energy Secretary at SOA -------------- -------------- ¶5. (U) Energy Minister Tokman met with Energy Secretary Chu on the margins of the Summit of the Americas in Trinidad and Tobago. This was one of the first bilateral meetings in conjunction with President Obama's announcement of the Energy and Climate Partnership of the Americas initiative. Following the meeting, Minister Tokman announced that the U.S. will collaborate with Chile to setup the country's new Renewable Energy Center, including technical assistance and training. DOE Offers Chile an MOU on Renewables and Energy Efficiency -------------- -------------- ¶6. (SBU) DOE Deputy Assistant Secretary for International Energy Cooperation, Phyllis Yoshida, visited Santiago to participate in Asia Pacific Economic Cooperation (APEC) Energy Working Group (EWG) meetings April 20-24. She also met with Minister Tokman to discuss potential areas of collaboration. During the meeting, Yoshida presented a draft Memorandum of Understanding (MOU) outlining potential collaboration between Chile's National Energy Commission (CNE) and DOE on renewable energy and energy efficiency. In addition to offering assistance on launching Chile's proposed new renewable energy center and preparing the CSP plant solicitation, DOE officials detailed six potential areas of collaboration, including information sharing, renewable energy market analysis, public policy/best practices, researcher exchanges, energy project financing and lessons learned from other renewable energy centers. Yoshida also met with Chile's Minister of Environment, Ana Lya Uriarte, to discuss cooperation on environmental, climate change and energy issues. Results of APEC Energy Efficiency Peer Review Very Favorable -------------- -------------- ¶7. (U) The results of the APEC Energy Efficiency Peer Review of Chile (ref a) were presented during the APEC EWG. Overall, the review was positive and included praise for Chile's "amazing" response to is 2008 energy crisis (even as the economy grew 5 percent, electric use declined),its product labeling program and the country's comprehensive residential building code, which is unique in South America. The report, which included 21 recommendations in 10 areas, noted weaknesses in utility company and transportation sector participation in efficiency initiatives and the absence of a commercial building code. CNE Predicts Lower Increase in Demand -------------- ¶8. (U) CNE reduced its projection for 2009 energy demand growth to 2.1 percent from 4.7 percent; demand growth for 2010 was also reduced, from 5.1 to 4.1 percent. Minister Tokman predicted annual demand growth of around 5.6 percent starting in 2011. Gas Company and Water Company Work Together on Biogas Project -------------- -------------- ¶9. (U) Metrogas and Aguas Andinas are working together to produce biogas from the methanol generated at the La Farfana water treatment plant that equates to approximately 24 million cubic meters of biogas per year, i.e., about four percent of the city's residential daily consumption of gas. Southern Energy Considering Second Coal Concession in Chile -------------- -------------- ¶10. (U) Southern Energy announced negotiations to acquire a second Lota Bay coal concession. Adjacent to the first coal concession (ref b),the additional concession has in excess of 200,000 tons of recoverable coal. [Note: Over 80 percent of Chile's electricity is produced from coal-fired generation, and current domestic prices for coal are around $60/ton. End note.] AES to Inaugurate World's Largest Lithium-Based Power Plant -------------- -------------- ¶11. (U) According to its president, AES Gener, Chile's second largest electricity company, will install in northern Chile the largest lithium-based power plant in the world, with a generating capacity of 12MW. The plant will be inaugurated in October 2009. AES Gener is also about to start operating a 140MW diesel plant and is developing mini-hydroelectric plants to generate about 90MW. Chilean Company Submits Environmental Review for Wind Farm -------------- -------------- ¶12. (U) Chilean firm Valle de los Vientos submitted an EIA request to CONAMA for a 99MW wind farm in Region II, near Calama. The 33-turbine project will cost $201 million and take about 16 months to build. It will generate about 250 GWh/year for Chile's northern interconnected system (SING). Chile Studying Offer to Buy Power from Paraguay -------------- -- ¶13. (U) Chile is negotiating with Argentina and Paraguay to buy 200MW of electricity from Paraguay using existing Argentine electric transmission lines to route power directly to Chile's SING. Technical negotiations between Argentina and Paraguay are expected to take about 90 days. Start-up Company Inaugurates 19MW Hydroelectric Plant -------------- -------------- ¶14. (U) Hidromaule S.A., a start-up hydropower generation company owned by an Italian-Chilean consortium, inaugurated its initial project, a 19MW run-of-river hydropower project located along the Lircay River in Region VII, approximately 30 km northeast of Talca. The project takes advantage of water rights owned by a long-established irrigation association and utilizes Maule River water stored upstream. During irrigation season (mid-September through mid-April) water is available for power generation only to the extent that flow exceeds irrigation requirements. The rest of the year water is available up to the water rights (approximately 54 m3/sec) owned by the irrigation association. The plant cost about $30 million and will generate around 130 GWh per year. GeoPark Daily Gas Output = One Million Cubic Meters -------------- -------------- ¶15. (U) Oil exploration and production Company GeoPark's Fell Block -- an area of approximately 440,000 acres near Punta Arenas, in the southern region -- is putting out 1 million cubic meters of gas daily. This accounts for around 20 percent of Chile's total natural gas output. Escondida Mine to Build Power Line for Future Expansions -------------- -------------- ¶16. (U) Escondida, the world's largest copper mine, presented an EIA for a $17.3 million project to build a 28.5 km transmission line from the Angamos power plant in region II to a substation, which will be built for the mine. The purpose is to secure additional power for future mine expansions. SIMONS