Just Released: "Chile Power Report Q3 2013"

Electricity generation is taking on a political tone as Chile's presidential elections, scheduled for November 2013, draw near. The controversial HydroAysen hydroelectric power plant may have gained judicial approval, but the issue has been firmly placed back in the government's hands with a ministerial group to review it. Environmental groups are not going to let their views go unheard, and we expect that decisions will be pushed back to 2014, when the elections are safely out of the way. In the meantime, the government admits that there are concerns about electricity provision in the short term: Energy Sub- Secretary Sergio del Campo acknowledged in May 2013 that 2014 will be a more difficult year than 2013 in terms of electricity, and that problems are likely to continue until as late as 2017, when new transmission and distribution networks are completed. In terms of electricity provision it is the renewable sector that shows greatest growth potential, as the government attempts to meet its 20% by 2020 goal - when a fifth of electricity will come from renewable sources.

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Domestic demand for energy in Chile is growing, and hydroelectricity supplies the majority of this demand - a source of power that is subject to risks, as recent dry seasons and fears for energy shortages in 2014 illustrate. Chile needs to diversify its electricity-generating mix to ensure that supply meets the growing demands of the population and its energy-intensive mining industry.

During the period 2013-2022, BMI forecasts that Chile's total power generation will increase by an annual average of 3.2%, reaching 93.6 terawatt hours (TWh). The population is expected to rise from 17.6mn to 18.8mn during this period, with net power consumption set to rise from 60.5TWh in 2013 to 71.4TWh by 2017 and then to 84.1TWh by 2022. The theoretical net export capacity by 2022 is 0.9TWh.

The key developments in Chile's power sector since last quarter are:

* The future of Punto Alcalde hydroelectric power plant has come under the spotlight, as a Chilean appeals court ruled in March 2013 in favour of a group of Huasco fishermen's to halt the project on environmental grounds.
* A consortium of Japanese and South Korean lenders signed a US$1bn lending agreement for the Cochrane coal-fired power plant in Northern Chile. Work began in April 2013.
* In April 2013 Chile's Supreme Court rejected seven appeals against the HidroAysen power plant, but the project has now been taken to a ministerial group for review, given the strong opposition from environmental groups. The issue is now turning into a political one, with the government unwilling to push the project forward before to November's presidential elections.

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