With the start-up last month of the Ralco dam on central Chile’s Bío-Bío River, you’d think the pressure for more electricity here might have eased.

It hasn’t.

The 570-megawatt hydropower complex, built and operated by the private, Spanish-owned company Endesa Chile, eventually will supply a hefty 9% of the power used by Chile’s capital and central
region.

But in March, Argentina, facing energy-sector problems of its own, said it would cut its natural-gas exports to Chile by up to 25%. That’s a big blow; Chile uses Argentine natural gas to generate no less than 40% of its electricity.

The silver lining, say local environmental groups, is that the resulting energy crunch finally has sparked interest here in renewable energy. Economy Minister Jorge Rodríguez Grossi announced that the National Energy Commission (CNE), a branch of his ministry, is drafting measures aimed at moving the country down the renewable-power path.

“Investors want to put money in greater electric production, but they aren’t clear on what technologies to invest in,” Rodríguez Grossi said at a July renewable-energy conference sponsored by the Chilean Congress and assorted citizen groups. “We are in the final stage of internal work on a plan to provide incentives [for renewable energy]. We hope in a short time to enter into a conversation about this with experts in the private sector.”

Some incentives on way

While details of that plan have not been made public, Rodríguez Grossi says the blueprint will promote renewable-energy projects of up to 20 megawatts in size by offering financing for feasibility studies, market studies and engineering design. He says the government also wants to fund projects that develop renewable-energy sources for off-grid “secondary networks” in remote areas. And in the very near term, the government will sponsor three geothermal-exploration projects.

Underlying this activity is concern that energy-supply problems might derail Chile’s economic growth, which has expanded demand for electricity by 7% a year.

Chile looks to dams for more than half of its power, and there has been no shortage of plans that would boost this dependence. Ralco was the second of six dams originally slated for the Bío-Bío; and many other hydro projects inhabit the drawing boards of Chilean power companies. But as important as hydroelectricity is, it can dry up when winter rains and snows are scarce, sometimes dipping to 12% or less of the country’s electric-power supply.

Aside from hydro, Chile relies largely on foreign energy sources. It imports 98% of its oil—mostly for transportation—and all of the natural gas used to make electricity here comes from Argentina. Imports also account for the vast majority of the coal and almost all of the diesel fuel burned by thermoelectric plants to offset the shortfall in natural gas. Nuclear power, meanwhile, is prohibited in Chile.

The country could meet its natural-gas needs relatively cheaply by importing gas from nearby Bolivia, which has the second biggest reserves in Latin America after Venezuela. But a 125-year-old dispute over Bolivia’s loss of Pacific coastline to Chile in a war still strains the countries’ relations. In July, Bolivians voted against sending gas to or through Chile without a favorable territorial settlement.

LNG terminal planned

Looking elsewhere, Chilean President Ricardo Lagos announced a US$500 million plan to build a liquefied natural gas terminal and plant so the country can import gas from overseas suppliers such as Indonesia, which has offered to start sending gas to Chile in 2008. But critics say the project costs too much and won’t ensure energy security.

Many suggest the money would be better spent on sustainable power available at home. Pedro Serrano, an energy expert who heads the Santiago-based Terram Foundation, a policy think tank, contends that Chile could reduce its power consumption by 30% through energy-efficiency and conservation steps alone.

“We could be self-sufficient by developing our wind, solar, ocean, geothermal, micro-hydro and biomass potential,” Serrano asserts. “Chile sits on the largest chain of active volcanoes on the planet. We have enormous geothermal resources. Costa Rica today gets half its energy from geothermal [sources].”

Says Pedro Maldonado, director of the University of Chile’s energy program: “Chile needs to move toward greater energy efficiency and diversification.”

Last year, the Santiago green group Sustainable Chile proposed a legislative package of energy-pricing and tax incentives aimed at boosting the renewable-power supply. The bill did not win much support in Congress. But Sara Larraín, the group’s director, believes many now recognize it’s time for a new approach.

“Chile can’t keep waiting for the business sector to exercise leadership in this direction,” Larraín says. “It not only has sufficient resources to meet its energy needs, but the cost of the [alternative] technologies has declined.”