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Cablegate: Chile's Energy Highlights -- November-December 2009

VZCZCXYZ0016
OO RUEHWEB

DE RUEHSG #0108/01 0292029
ZNR UUUUU ZZH
O R 292028Z JAN 10
FM AMEMBASSY SANTIAGO
TO RHEBAAA/DEPT OF ENERGY WASHINGTON DC IMMEDIATE
RUEHC/SECSTATE WASHDC IMMEDIATE 0636
INFO MERCOSUR COLLECTIVE
RUEHCV/AMEMBASSY CARACAS
RUEHPE/AMEMBASSY LIMA

UNCLAS SANTIAGO 000108

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

E.O. 12958: N/A
TAGS: ECON ENRG SENV TRGY PGOV CI
SUBJECT: Chile's Energy Highlights -- November-December 2009

REF: 09 SANTIAGO 1180; 09 SANTIAGO 1200; 09 SANTIAGO 1148

1. (SBU) Summary: This cable provides highlights of activity in
the Chilean energy sector during November and December 2009. Chile
participated in the United Nations meetings on climate change in
Copenhagen and made a voluntary commitment to reduce emissions 20
percent below business as usual by 2010. In November, Chile passed
landmark legislation to create a ministry of energy. Implementing
regulations for Chile's renewable energy law were published on
December 1, but some electricity generators would like to see the
government expand the regulations to take other energy-saving
initiatives into account. Chilean officials hosted a solar "road
show" to outline requirements in bid solicitations for a 500-KW
photovoltaic (PV) and a 10-MW concentrating solar power plant in
Chile's northern desert. Chile launched a new energy efficiency
campaign called "Join the Good Energy of Chile" and the government
authorized future natural gas exports to Argentina and other
countries in the region. The country's year-on-year electricity
output increased in October and decreased in November. End
summary.

Chile Attends Copenhagen Summit - Announces Voluntary 20 Percent
Emissions Reduction

--------------------------------------------- ----------------------
---------------------------------------------

2. (SBU) In December 2009, Minister of Environment Ana Lya Uriarte
headed the Chilean delegation to Copenhagen, where she announced
Chile would voluntarily reduce its greenhouse gas emissions 20
percent below "business as usual" (BAU) by 2020 in the electricity,
mining, transport, and other energy-intensive industrial sectors.
Echoing what she told the Ambassador prior to Copenhagen (ref a),
Uriarte claimed Chile's goal will be achieved using domestic
resources. Subsequently, Waldemar Coutts, Deputy Director of the
Ministry of Foreign Affairs Environmental Directorate, and Alvaro
Sapag, the Executive Director of the National Environmental
Commission (CONAMA), admitted that there is still an internal GOC
debate on the baseline year to calculate BAU and intimated that the
Ministries of Energy and Finance are being cautious about
committing the country to a target.

Law Creates New Ministry of Energy

---------------------------------------------

3. (SBU) For the past several decades Chile has not had a
ministry of energy and, whenever the country has confronted an
energy crisis, it appointed a minister of energy. Since his
appointment in 2007, Energy Minister Marcelo Tokman has been a
minister without a ministry, forced to rely on the resources of
Chile's National Energy Commission (CNE) and his powers of
persuasion within the GOC's interagency processes to develop and
implement energy policy. In November 2009, the GOC enacted
legislation to create a new ministry of energy. President Michelle
Bachelet, accompanied by the Ministers of Energy, Mining (Santiago
Gonzalez) and Deputy Ministry of Economy (Jean Jacques Duhart),
signed the decree promulgating the authorizing legislation on
November 25. Tokman noted "the new ministry will not be the answer
to all problems and challenges the sector faces, but is the basis
for finding the best solutions to the complexities confronting our
society."

4. (U) The new Ministry of Energy, which will consolidate the
Superintendency of Electricity, the CNE, and the Chilean Nuclear
Energy Commission (CChEN), will establish long-term energy policies
covering the electricity sector, gas, oil, geothermal, and nuclear
energy focused on diversifying the country's electricity matrix,
developing renewable energy, and promoting energy efficiency.
Institutionally, this will consolidate functions previously
scattered among different ministries and agencies. The ministry's
efforts will be supported by the newly-created Chilean Energy
Efficiency Agency -- formerly the Programa Pais de Eficiencia
Energetica (PPEE) -- and the Renewable Energy Center Chile launched
in August 2009.

Solar "Road Show" Outlines Bid Solicitations for Two Solar Pilot
Plants

--------------------------------------------- ----------------------
---------------------

5. (U) On December 4, 2009, Energy Minister Tokman and Executive
Vice President of Chile's development agency (CORFO) Carlos Alvarez
hosted an event to outline bid solicitations (required
documentation, eligibility and selection criteria, technology
transfers, etc.) for a 500-KW photovoltaic (PV) farm in San Pedro
de Atacama and a 10-MW pilot concentrating solar power plant also
to be located in Chile's northern desert region. Alvarez stressed
the initiative is a joint effort among the CNE, which framed the
projects, and CORFO, which will provide $15 million in subsidies,
and the private sector, which will provide other funding and
technological assistance. More than 130 representatives of
national and international companies, including Mitsubishi,
Siemens, ENEL, Acciona, Endesa, and Abengoa attended the solar
"road show"
(www.cne.cl/cnewww/opencms/05_Public_Estudios /Road_Show_Solar/Road_
Show_solar.html)

6. (U) This initiative involves the Antofagasta Regional
Government, which will finance changes to the electrical system to
accommodate the PV plant, the municipality of San Pedro de Atacama,
which will provide land for the project, and the local electric
cooperative, which will purchase energy at subsidized prices.
According to CNE sources, the requests for proposals for both
projects will be published in February 2010.

Implementing Regulations for Renewable Energy Law Take Effect
January 1

--------------------------------------------- ----------------------
--------------------------

7. (U) On December 1, 2009, the CNE published regulations, that
came into effect January 1, 2010, implementing Chile's 2008
renewable energy law (Law 20.257) which requires electricity
generators produce five percent of their energy from renewable
sources by 2014, and ten percent by 2024. The regulations mandate
monthly public reporting of output from renewable sources,
transfers of surplus between firms, and pending fines for
non-compliance. They also outline procedures for verifying power
supply contracts and compliance with obligations, as well as
permissible accounting mechanisms. In statements to the press, the
CEO of Empresa Electrica del Norte Grande (EDELNOR), Juan Claveria,
claimed Chile's electricity generators want the decree expanded to
take into account other energy-saving initiatives, i.e., biomass
use in coal-fired thermoelectric plants or the use of discharged
water from thermoelectric plants for hydroelectric generation.

Chile Authorizes Gas Exports to Argentina

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8. (SBU) In an interesting reversal of roles, Chile's Finance
Ministry issued a decree allowing natural gas exports to Argentina
(which, in recent years, has drastically reduced gas exports to
Chile), and other countries in the region. According to the
decree, which also amends the customs regulations for the export of
liquid and gaseous fuel, Chile's construction of liquefied natural
gas (LNG) receiving and regasification terminals make it
economically feasible for the country to export natural gas.
[Note: Chile launched the Quintero LNG terminal in 2009 and
projects opening another LNG terminal in 2010. End note.]
Minister of Energy Tokman indicated Chile would be a transit
country, therefore gas would not actually be "exported" and export
taxes or value-added tax (VAT) do not apply. Chile may start
selling gas to Argentina in 2010 or 2011, according to the Director
of Chile's national oil company (ENAP).

New Service Fees Associated With Power Supply

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9. (U) Under a provision of the General Law of Electricity

Services, services beyond supplying energy provided by electric
distribution companies are subject to a regulated price structure,
which is reviewed during a tariff-setting process conducted every 4
years. The CNE pricing process for the November 2008 - November
2012 period set new prices for 24 services, e.g., meter rental,
service and replacement of equipment, paying bills late, etc.
These will take effect immediately after publication of the tariff
sheets by distribution companies.

CNE Launches Energy Efficiency Campaign - "Join the Good Energy of
Chile"

--------------------------------------------- ----------------------
-----------------------------

10. (U) Recognizing the need to incorporate energy efficiency into
the country's consciousness and production processes, the CNE and
Chile's National Energy Efficiency Program (PPEE) launched a new
campaign called "Join the Good Energy of Chile" in October 2009.
PPEE Director Andres Romero said "the idea of this campaign is to
reinforce the concept of energy efficiency as a culture to be
installed long-term in the minds and behavior of Chileans...and not
only a necessity in times of crisis." PPEE also created a new
website -- www.buenaenergia.cl -- to provide information on its
programs and energy efficiency in general.

11. (U) As part of the campaign, by the end of 2010, the CNE would
like to introduce more than 6,000 high-efficiency electric motors
-- electricity savings of around ten percent per motor/year -- with
the aim of encouraging increased energy efficiency in industry.
According to the CNE, the industrial sector accounts for 22% of
Chile's total electricity consumption, 70% of which is due to
electric motors. The project incentivizes small and medium
enterprises to purchase more efficient 1-10 horsepower motors by
providing a rebate of the price difference between the more and
less efficient engines. The launch at PPEE's office was hosted by
Energy Minister Tokman and PPEE Director Romero, along with
representatives from various companies supporting the effort:
Electricworks General Manager, Roberto Matta; Hochschild's Business
Manager, Carlos Sabugal; Weg Commercial Director, John Andrew
Elijah; and Seimens' General Manager in Chile, Edwin Chavez Lureye,
among others. Acknowledging the need for domestic industry to
maintain competitiveness while reducing energy use and greenhouse
gas emissions, Tokman stated, "We believe that the introduction of
6,000 fuel-efficient engines can achieve savings of 4.8 GWh per
year which translates into a reduction of approximately 2,600 tons
of CO2 a year."

GOC Continues to Study Nuclear Energy Option

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12. (U) Continuing a process started in 2007 to assess the
economic, social, and environmental benefits, costs, risks, and
impacts of developing nuclear electricity generation in Chile, the
CNE released findings from a fourth government-commissioned study
in December 2009. Similar to previous reports, the study concluded
nuclear plants can provide large blocks of power with minimal
environmental impacts and recommended that, if Chile chooses to
develop a nuclear program, it must have a national regulatory
authority independent of other energy sector players.
[Note/comment: On January 28, Tokman is hosting a seminar on
"Nuclear Electricity in Chile: How Far? How Close?" to present the
government's progress in evaluating the nuclear power option and
analyzing environmental, nuclear safety, and radiological security
concerns
(www.cne.cl/cnewww/opencms/12_Utiles/nucleo_e lectricidad/index.html
). It is likely the debate on nuclear energy will continue because
president-elect Sebastian Pinera said during his campaign he would
consider developing nuclear energy (ref b) and Pinera's energy
advisor, Ricardo Rainieri, publicly commented on January 28 that
the new administration would continue to study the issue and
consider technical preparations, but was not yet committing to make
a decision. End note/comment.]

Year-on-Year Electricity Output Increased in October and Decreased
in November

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-------------------------------

13. (U) According to Chile's national statistics institute (INE),
there was a 0.3% increase year-on-year to 4,947 GWh in October
2009, and a 0.1% decrease year-on-year to 4,798 GWh in November
2009.
URBAN

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