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Cablegate: Chilean: Energy Highlights for November-December

VZCZCXYZ0000
OO RUEHWEB

DE RUEHSG #1147/01 3591634
ZNR UUUUU ZZH
O 241634Z DEC 08
FM AMEMBASSY SANTIAGO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4200
RHMCSUU/DEPT OF ENERGY WASHINGTON DC IMMEDIATE
INFO RUCNMER/MERCOSUR COLLECTIVE IMMEDIATE

UNCLAS SANTIAGO 001147

SIPDIS

E.O. 12958: N/A
TAGS: ECON ENRG KNNP SENV TRGY PGOV CI
SUBJECT: CHILEAN: ENERGY HIGHLIGHTS FOR NOVEMBER-DECEMBER
2008

REF: SANTIAGO 01140

1. Summary: This cable provides updates on developments in
the Chilean energy sector. Energy Minister Tokman announced
the national energy crisis has ended. A hydroelectric
project planned for the Patagonia region has stopped
operations while HydroAysen, the energy company overseeing
the project, addresses inquiries on the environmental impact
on the region. Opponents of the project filed a lawsuit
against HydroAysen and the Region's Governor. The National
Energy Commission (CNE) awarded contracts on November to
three companies to conduct separate studies on the
possibility of producing domestic nuclear energy in the
country. CNE announced a reduction in energy prices of up to
five percent for the next four years. Paraguay will sell
electricity to Chile via Argentina. Three new wind energy
parks are expected to contribute 38.24 megawatts (MW) to the
south of Chile while environmentalists worry over possible
negative effects on the landscape of the region. END SUMMARY.
Energy Shortage Ends
--------------------

2. Energy Minister Tokman publicly declared on November 4
that Chile's national energy crisis was officially over. He
attributed the change to measures designed to reduce energy
use adopted by the GOC and to effective public education
campaigns. Tokman indicated high levels of precipitation
facilitated the generation of hydroelectric power generation
of levels sufficient to meet current national needs. It is
still uncertain if Chile will meet the additional 12,000 MW
required over the next 10 years to meet energy needs in the
long-term. (NOTE: On average, 1 MW of energy can generate
power for 1,000 households.)
More Obstacles for Hydroelectric Generation
-------------------------------------------

3. The Chilean Regional Environmental Commission (COREMA)
reviewed an 11,000-page Environmental Impact Study (EIS) on a
proposed Patagonia dam project that generated a total of
3,150 public inquiries. The goal of the project is to build
five major dams in the south of Chile which would produce
approximately 2,750 MW of electricity and cost an estimated
$3.2 billion. HydroAysen is the company overseeing the
project and constructing the dams. The inquiries raised
concerns about the environmental impact of the dams on the
region. Construction of the five plants and supporting
operations will be halted for approximately nine months while
HydroAysen addresses these concerns.
4. The Patagonia Defense Council filed a civil suit on
November 21 against HydroAysen for illegally initiating the
construction of the hydroelectric plants. The governor of
Chile's XI region, Selim Carrasco, is also accused of
ignoring recommendations made by government entities like
COREMA on the accuracy of the EIS.
Nuclear Energy Feasibility Studies Announced
--------------------------------------------

5. Chile's recent energy shortages spurred the GOC to
consider alternatives and explore the full range of energy
sources, including renewable and nuclear energy (reftel).
CNE awarded contracts November 27th to three different firms,
Amec-Cade (Chilean-British), Stuk (Finnish), and
Technopark-Intermash (Chilean-Russian). Each firm will issue
a report on one of the following topics: the implications of
producing nuclear energy, defining the plant best suited for
Chile and designing the regulatory framework necessary for
nuclear energy technology. The studies are not likely to be
completed before the end of 2009 making it unlikely the
Bachelet Administration will reach a final decision. This
could create an issue for the presidential campaign
(elections are slated for the end of 2009).
Electricity Prices Expected to Drop
-----------------------------------

6. CNE declared on November 27 electricity prices will
decrease in the coming months by up to five percent. The
price reduction results from a review of the Value Added
Distribution (VAD) tax. The tax is calculated based on the
additional value of a given product over the cost of the
commodities used to generate that product. The new
electricity prices will post retroactively from November and
extend into 2012.
Paraguay Sells Power to Chile
-----------------------------

7. After four months of discussions Argentina, Paraguay, and
Chile reached an agreement on December 17 to sell electricity
to Chile. Paraguay will route 200MW of energy to the north
of Chile through Argentina. This will account for over 10
percent of the existing energy needs in that region. The GOP
is expecting to earn between $70 to $80 million from the

transaction. Argentina is also expecting monetary
compensation from its involvement although exact amounts are
still being negotiated. Energy Ministers from all three
nations will continue to collaborate to finalize the terms of
agreement.
Mixed Feelings over New Wind Energy Parks
-----------------------------------------

8. Three wind energy farms capable of producing a total of
38.24 MW are planned for Chile,s VIII Region. One of the
energy parks will include ten turbines and will be located
inside Pedro del Rio Zanartu national park.
Environmentalists are concerned about the possible impact on
the original landscape of the area since the park is mostly
wetland and a natural sanctuary. Zanartu park administrator
Martin Dominguez doubts the project will take off despite
approval from the National Commission for the Environment
(CONAMA).
URBAN

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