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Chile Power Report Q4 2011
Business Monitor International, Oct 2011, Pages: 49
BMI View:
Chile is faced with a dilemma in terms of its energy strategy. Repeated drought-related power shortages resulting from overdependence on hydro-electric sources mean diversification is necessary. Gas-fired generation is the preferred short-to-medium-term option, but scares over gas supplies to the country mean this a dangerous route to follow.
While nuclear isn't yet on the agenda, it may have to play a role in order to provide adequate energy security.
Hydro-power is expected to remain the dominant source of electricity generation in the coming years, although several power projects that are planned or under construction will use gas.
The government was originally keen to reduce dependence on weather-sensitive hydro projects by enlarging the gas-fired generating system, but the unreliability and cost of gas imports has now put hydro-power back in the spotlight.
Legislation passed in 2008 requires renewable energy to account for at least 10% of the energy supplied by Chile's electric utilities by 2024. Power providers are required to integrate wind, solar and small hydro-power into the supply progressively, increasing the amount to meet the 10% target or face fines.
During 2011-2015, Chile's overall power generation is expected to increase by an annual average of 5.24%, reaching 75.1TWh. Driving this growth is an annual 26% gain in gas-fired and a nearly 6% rise in coal-fired electricity supply, accompanied by annual increases in excess of 5% and 7% for hydropower and renewables-based generation respectively.
Following an expected increase in real GDP of 5.9% in 2011, BMI forecasts average annual growth of 4.0% between 2011 and 2020. The population is expected to rise from 17.3mn to 17.9mn during 2011- 2020, and net power consumption looks set to increase from 58.8TWh in 2011 to 70.5TWh by 2015, rising further to 87.8TWh by 2020.
During 2011-2015, the average annual growth rate for electricity demand is forecast at 4.76%, but it should slow later in the decade to average 4.54% in 2016-2020.
Thanks partly to the forecast rise in net generation, growth of which exceeds slightly the underlying demand trend, Chile's power supply shortfall is likely to shrink steadily as new capacity kicks in. A gradual decline in the percentage of transmission and distribution losses from about 6.4% will help balance the market. There is no theoretical net import requirement by 2015, with scope for very modest net exports by 2020.
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