Chile Energy Policy Review 2009

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Chile Energy Policy Review 2009 CHILE ENERGY POLICY REVIEW 2009 Please note that this PDF is subject to specific restrictions that limit its use and distribution. The terms and conditions are available online at www.iea.org/about/copyright.asp CHILE ENERGY POLICY REVIEW 2009 Since 1990, Chile has been the fastest growing economy in Latin America thanks to sound economic management and integration into the global economy. Chile can also be proud of its energy policy achievements. The pioneering privatisation and liberalisation of its electricity sector in the 1980s was the foundation for a competitive energy sector, which has sustained the rapid growth of the Chilean economy over the past two decades. Nonetheless, Chile faces the continuing challenge of finding additional energy supplies to fuel economic growth. Chile has limited fossil energy resources and depends on imports to meet three-quarters of its energy needs. The country’s electricity sector has faced three periods of significant stress over the past decade. The last episode took place in 2007/2008, when the loss of natural gas imports from Argentina was further exacerbated by a drought in the central system, where hydropower normally accounts for over half of electricity generation. Drawing on the experience of IEA member countries, the Review assesses Chile’s major energy challenges and provides recommendations. Six main themes emerge: the successful liberalisation of the power sector in the 1980s; the essential role played by the state in ensuring energy security; the re-formulation of Chile’s long-term energy policy; the proposed reorganisation of the institutional framework; greater independence for the system operators; and the need for a clear framework of regulation so that long-term investment decisions integrate social and environmental costs. The Chile Energy Policy Review 2009 is essential reading for all who are interested in Chilean energy issues and in learning about the important role sound energy policy can play in developing a nation’s economic and social welfare. (61 2009 24 1 P1) -:HSTCQE=U\XVYW: ISBN 978-92-64-07314-2 €100 CHILE ENERGY POLICY REVIEW 2009 0001-00801-008 cchili.inddhili.indd 1 229/09/099/09/09 111:24:301:24:30 IEA member countries: Australia INTERNATIONAL ENERGY AGENCY Austria The International Energy Agency (IEA) is an autonomous body which was established in Belgium November 1974 within the framework of the Organisation for Economic Co-operation Canada and Development (OECD) to implement an international energy programme. It carries out a comprehensive programme of energy co-operation among twenty-eight Czech Republic of the thirty OECD member countries. The basic aims of the IEA are: Denmark n To maintain and improve systems for coping with oil supply disruptions. Finland n To promote rational energy policies in a global context through co-operative relations with non-member countries, industry and international organisations. France n To operate a permanent information system on international oil markets. Germany n To provide data on other aspects of international energy markets. n To improve the world’s energy supply and demand structure by developing Greece alternative energy sources and increasing the efficiency of energy use. Hungary n To promote international collaboration on energy technology. n To assist in the integration of environmental and energy Ireland policies, including relating to climate change. Italy Japan Korea (Republic of) Luxembourg Netherlands New Zealand Norway ORGANISATION FOR Poland ECONOMIC CO-OPERATION AND DEVELOPMENT Portugal Slovak Republic The OECD is a unique forum where the governments of thirty democracies work together to address the Spain economic, social and environmental challenges of globalisation. The OECD is also at the forefront Sweden of efforts to understand and to help governments respond to new developments and concerns, Switzerland such as corporate governance, the information economy and the challenges of an ageing Turkey population. The Organisation provides a setting where governments can compare policy United Kingdom experiences, seek answers to common problems, identify good practice and United States work to co-ordinate domestic and international policies. The European Commission also participates in the work of the IEA. © OECD/IEA, 2009 International Energy Agency (IEA) 9 rue de la Fédération, 75739 Paris Cedex 15, France Please note that this publication is subject to specific restrictions that limit its use and distribution. The terms and conditions are available online at www.iea.org/about/copyright.asp 0001-00801-008 cchili.inddhili.indd 2 229/09/099/09/09 111:24:301:24:30 FOREWORD Chile can be proud of its energy policy achievements. The pioneering privatisation and liberalisation of its electricity sector in the 1980s, ahead of almost all IEA member countries, was the foundation for a competitive energy sector, which has sustained the rapid growth of the Chilean economy over the past two decades. These policies have helped sharply reduce the number of Chileans living in poverty, and lift Chile to the middle ranking of nations in terms of GDP per capita. Following a successful rural electrifi cation programme, almost 99% of the Chilean population now has access to electricity. However, in the past decade, energy security has come to the fore of the energy agenda. In 2007 and 2008, Chile faced a double crisis of energy supply, having lost most of its gas imports from its sole supplier, Argentina, at a time when its hydroelectric production was severely aff ected by drought. The government worked with industry to achieve a rapid adaptation of the power sector to ensure the continuity of electricity supply. IEA member countries, and other countries, can learn a great deal from the experience of Chile. The IEA is very pleased to have been invited to conduct this Energy Policy Review of Chile. Given the country’s distinct characteristics, the Review takes a comprehensive look at Chile’s energy sector, including: the institutional framework, energy security, environmental sustainability, energy efficiency, as well as recent developments in sub-sectors such as fossil fuels, electricity, renewables, biomass, access to energy in rural areas, transport, and energy research and development. Chile is not a member of the IEA, although its application for membership to the OECD is at an advanced stage. An immediate challenge facing Chile is to fi nd additional energy supplies to fuel continuing economic growth and to replace the costly diesel oil that is now widely used in power stations that were built to run on gas from Argentina. Coal will also play a part in energy diversifi cation, but new investment in coal should be placed in the context of an overall national strategy for the mitigation of greenhouse gas emissions to ensure sustainability in the longer term. This recommendation is also relevant to the transport sector, a challenge shared by many IEA member countries. Chile’s National Action Plan for Climate Change, published at the end of 2008, presents a course of action for the next four years. 2009 OECD/IEA, © 001-008 chili.indd 3 29/09/09 11:24:34 The IEA supports the government’s eff ort to strengthen the institutional framework of the sector to improve policy-making instruments. Chile has recently put in place ambitious policies for the promotion of energy effi ciency and for developing its outstanding natural potential for renewable energy. These measures should be taken even further. The IEA has also suggested some measures that could further enhance competition in Chile’s gas and electricity markets. In many respects, therefore, the Review will serve to reinforce and encourage the government in the direction that it is already taking. The Chilean government’s invitation to the IEA to conduct this Review is a refl ection of Chile’s progressive and outward-looking approach to energy policy. This openness is very timely, given the rapid advances in energy policy and proposals for new Ministries of Energy and Environment before the Chilean Congress. I would like to pay particular tribute to Chile’s current Energy Minister, Mr. Marcelo Tokman, for his leadership and personal engagement in the Review and to the many offi cials of the Chilean government, as well as outside commentators, who have contributed generously with their time and ideas. Chile is due to hold presidential and legislative elections on 11 December 2009. I hope that the country’s incoming energy policy-makers will fi nd this report useful in framing the future energy policy of Chile. I am very pleased that the IEA and the government of Chile have already mapped out a programme of work for the coming two years, and I hope this presages a continued close and fruitful working relationship. Nobuo Tanaka Executive Director, International Energy Agency 2009 OECD/IEA, © 001-008 chili.indd 4 29/09/09 11:24:35 5 TABLE OF CONTENTS Foreword 3 Organisation of the Review and Acknowledgements 9 Executive Summary and Key Recommendations 13 1. General Energy Policy 23 2. Security of Energy Supply 51 3. Energy and Environment 71 4. Energy Effi ciency 89 5. Fossil Fuels 111 6. Electricity 133 7. Renewables 159 8. Biomass 181 9. Access to Energy in Rural Areas 195 10. Transport 209 11. Energy Research and Development 233 Annexes I. Energy Balances and Key Statistical Data 247 II. International Energy Agency “Shared Goals” 251 III. Abbreviations and Units 253 IV. Bibliography 261 List of Tables 1.1. Chile’s Energy Balance, 2007 (Mtoe) 27 2.1. Evolution of Price of Gas Imports from Argentina, 2000-2008 53 2.2. Capacity Currently under Construction, by Fuel Type, April 2009 (MW) 57 3.1. Priority Actions Identifi ed in the PANCC 78 5.1. Coal-Fired Power Plants, end-2007 112 2009 TABLE OF CONTENTS OECD/IEA, © 001-008 chili.indd 5 29/09/09 11:24:35 6 5.2.
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