Chile's new Minister of Energy makes a huge step forward by planning a national energy policy
Spurred by recent events, Chile’s new Minister of Energy, Laurence Golborne, recently made two very significant steps towards putting Chile on the path to being a leader in clean and sustainable energy. Last week, he announced that one of his priorities for 2011 is the creation of a national energy policy. This week, he publically distanced himself from the controversial massive hydroelectric proposal, HidroAysén, creating a stark contrast from his predecessor who openly endorsed the project. These are promising signals that the government is realizing that the present system guiding the energy sector’s development—a system that lies almost entirely in the hands of large private energy companies—must be changed in order for Chile to have a secure, diverse supply of energy in the future. Changing it will also ensure that the country avoids making the same mistakes as in the past, when it relied on large conventional energy plants, exemplified by HidroAysén, to solve its energy problems, and only found itself worse off.
Creating a national energy policy in Chile is not a new idea. In October 2009, the International Energy Agency’s Energy Policy Review recommended that the government do precisely that, suggesting that it “address all the issues at stake in a national public debate with the aim of fostering support for such decisions across the political spectrum.” It also said, “While investment decisions should continue to be made by the private sector, the government needs to take a more proactive position with regard to monitoring energy developments and systematic risk assessment.” Ever since that report’s release, NRDC has been advocating with our Chilean partner organizations for the government to develop a long-term strategy for the energy sector.
Why is the government making this move now? Two main catalysts are clear. First, Chile is in the midst of a severe drought, which has dried up the country’s existing hydroelectric generation. Hydro has made up about 50% of installed capacity in recent years, so the lack of rainfall quickly translates into a lack of electricity. Due to its historical reliance on just one or two main energy sources, Chile has experienced these difficulties before: in the 1990s when a similar drought occurred and in 2004 when Argentina cut off Chile’s supply of natural gas, upon which Chile depended at the time. My colleague, Doug Sims, described Chile’s recent energy history in more detail here. To quickly replace the lost hydro generation, Chile now has to turn to its coal and diesel generators, which emit harmful greenhouse gases.
Second, in early January residents in Chile’s southernmost city, Punta Arenas, protested en masse when the former Minister of Energy, Ricardo Raineri, raised the prices of natural gas in the region without warning. The results were dramatic: the death of two young women, falling poll numbers for President Piñera, and the end of Raineri’s role as Minister of Energy. Shortly thereafter, Golborne took over as Ministry of Energy (while maintaining his position as Minister of Mining). Even though he settled the unrest in the South, the event highlighted the lack of planning and long-term strategy that plagued decision makers.
Both the natural gas protests in January and the country’s current energy difficulties demonstrate Chile’s lack of a clear strategy for its energy development. Unlike most OECD countries, private companies decide what kind of generation is built and where, without having to show to regulators that their project is is the best choice for the system, for consumer prices or for the environment. This has resulted in high profits for the companies, high electricity rates for the Chilean people, increasing conflicts around large energy projects and an electrical system that lacks diversity, is inefficient, inflexible and vulnerable to failure.
HidroAysén is a prime example of a proposed mega-project that does not have to prove it is the best option for the system (or even a good one), would do nothing to diversify or modernize the grid, and would make huge profits for its owners at the expense of local communities and the environment. Furthermore, a 2009 technical study proved that HidroAysén isn’t even necessary for the country’s future energy security. But there simply is no body or entity tasked with making that distinction.
Fortunately, things may now be changing. Along with President Piñera’s call to increase renewables to 20% of total generation by 2020, Minister Golborne’s plan to create a national energy strategy will take Chile’s energy decisions out of the hands of private companies and give some responsibility to the government. The final product –a long-term, strategic energy policy– would promote real competition, fuel diversity, new and innovative technologies based in Chile’s own abundant renewable resources and modern transmission solutions. This is the direction the world is moving. And Chile, if it avoids the pitfalls of the past, can be a true leader in clean energy development.
Many thanks to my NRDC colleague, Doug Sims, for his input.