Chile's New Energy Agenda Lays the Foundation for Sustainable Growth
Posted May 22, 2014
Chilean President Michelle Bachelet released a new Energy Agenda on May 15th, which her administration will use as the foundation for a national energy policy. The much-anticipated document outlines seven pillars, or key areas, where new and specific efforts are needed if the country is to grow sustainably and stably over the coming decades. Overall, the agenda is right on target regarding several broad issues –and a few specific ones as well— and if Bachelet and Energy Minister Máximo Pacheco are able to execute these plans, Chile’s renewable* energy and energy efficiency sectors should be able to compete with conventional energy –dirty fossil fuels and large hydro—on a more even playing ground than before.
A wide variety of people have been calling for more strategic and coherent government direction of the energy sector for years, and with good reason: existing and proposed plants have caused significant social and environmental damage; many new conventional projects are stalled in legal appeals; the booming growth of renewable energy has been stifled by a variety of regulatory obstacles; and energy efficiency—the energy sector’s “low-hanging fruit”—has been languishing in the background. As a result, experts warn of an impending energy crisis in the next few years, when the country will not have enough generation to power continued growth in the mining sector in particular and the economy at large. The Energy Agenda is this administration’s answer to those calls.
There are four high-level themes in the Energy Agenda which are particularly encouraging:
- The government will take a more active role in the energy sector. This is, in fact, the first pillar of the agenda (“A New Role of the State”), but is also present throughout the document. The historic lack of government engagement in planning and overseeing the energy sector has led to an industry in which most of the power and influence is highly concentrated in three powerful companies, resulting in the problems listed above. The agenda recognizes that the government’s role in areas such as zoning and strategic planning is fundamental if things are to improve.
- Stakeholder participation will be incorporated into key processes. This is major. Participatory processes are critical to making decisions that are trusted, transparent and supported by the public – and for which the decision-maker (i.e. the government) can be held accountable. The Energy Agenda describes the role of participation in several of its objectives, ranging from specific processes such as setting the new natural gas tariff in the distribution market, to more broadly creating the new “Participation and Dialogue” Section within the Ministry of Energy, to dedicating the entire seventh pillar to “Citizen Participation and Territorial Planning.”
- Energy efficiency gets the attention it deserves. Energy efficiency was largely ignored during the past four years, although it is the fastest and most economical way to help meet future energy demand. The fifth pillar of the Energy Agenda is dedicated to energy efficiency and management, and it gets a number of things right. It is also largely in line with NRDC’s report, “From Good to Great: The Next Steps in Chilean Energy Efficiency.” First and foremost, the government will prioritize passing an Energy Efficiency Law, a “legal framework to convert [energy efficiency] into a long term State policy.” This would ensure that energy efficiency efforts are no longer at the whim of any given administration, but that they would instead be a permanent institutional priority. The document reasserts the goal of reducing national energy consumption by 20% by 2025 compared to BAU projections, and specifies objectives for various sectors. I’ll go into detail on this in another blog, but in the meantime here is a review from the good folks at Opower.
- Addressing concrete obstacles to renewables. The renewable energy sector is poised to penetrate the Chilean energy market in a huge way, with over 17 GW of projects in the pipeline. Yet some key obstacles stand in the way. For example, the current system used for energy auctions heavily favors conventional projects. Financing is also more difficult for renewables –particularly geothermal – and speculation prevents real projects from going forward. The Energy Agenda addresses them specifically. It also focuses on improving conditions for geothermal power companies, which face unique regulatory and financial barriers in Chile despite the country’s vast geothermal resources. The document also reaffirms the national commitment to meet Chile’s renewable portfolio standard of producing 20% of its energy with renewables by 2025. The Chilean Renewable Energy Association (ACERA) has written an excellent summary here about how the Energy Agenda’s items will benefit renewables.
There are two more specific items in the Energy Agenda that I want to call attention to as well.
First, the document calls for the creation of a government entity devoted to the collection and analysis of energy data, similar to the U.S. Energy Information Administration. Although it was mentioned just briefly in the Energy Agenda, I cannot underscore the importance of this action enough. Presently, data about the energy sector in Chile is either difficult to find, outdated or different depending on which government agency database you are using. This makes it nearly impossible for academics, private companies, the media, civil society and the government itself to know the real, accurate status of energy generation, consumption, and other indicators – information necessary to make decisions about the future of the sector.
Second, the Energy Agenda’s first two annexes list the legislative bills and regulations that the administration will pursue, as well as when the government aims to pass or adopt each one. This provides civil society and the private sector with a clear schedule of the government’s agenda, for which it can be held accountable.
Of course, the devil is in the details; these objectives and ideas will only be successful if the government can follow through and make them a reality. But if President Bachelet and Minister Pacheco are able to do so, this Energy Agenda would put Chile on the path to be an innovative, sustainable energy leader in the region and around the globe.
*The term “non-conventional renewable energy” is used in Chile to exclude large hydro (over 20 MW) from the category. For the sake of space in this blog, I use “renewable energy” though with the same intention of excluding large hydro, which I include in the “conventional energy” category.