VZCZCXYZ0002
OO RUEHWEB

DE RUEHSG #0243/01 0721027
ZNR UUUUU ZZH
O 131027Z MAR 09
FM AMEMBASSY SANTIAGO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4638
RHMCSUU/DEPT OF ENERGY WASHINGTON DC IMMEDIATE
INFO RUCNMER/MERCOSUR COLLECTIVE IMMEDIATE
RUEHPE/AMEMBASSY LIMA 6048
RUEHLP/AMEMBASSY LA PAZ MAR BRASILIA 0756
RUEHMN/AMEMBASSY MONTEVIDEO 4291
RUEHAC/AMEMBASSY ASUNCION 3849
RUEHCV/AMEMBASSY CARACAS 1987
RUEHQT/AMEMBASSY QUITO 2228

UNCLAS SANTIAGO 000243 
 
STATE FOR WHA/BSC, WHA/EPSC AND EEB/ESC/IEC 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ENRG KNNP SENV TRGY PGOV CI
SUBJECT:  CHILE PROPOSES JOINT CHILE-U.S. FUND FOR SOLAR ENERGY; 
OUTLINES RENEWABLE ENERGY CENTER PROJECT, FUNDING 
 
REF:  A) SANTIAGO 202; B) 08 SANTIAG0 1087; C) 08 SANTIAGO 1046; D) 
08 SANTIAGO 792; E) 08 SANTIAGO 759 
 
¶1. (U) This is an action request - see paragraph 11. 
 
¶2. (SBU) SUMMARY:  In a recent conversation with the Ambassador, 
Energy Minister Marcelo Tokman proposed a joint "U.S.-Chile Fund for 
the Development of Solar Energy," financed by US$15 million from 
each country, to be announced at the Summit of the Americas.  Post 
also received a description of Chile's renewable energy center. 
Chile's development agency, CORFO, will establish a $400 million 
fund to provide subsidies, loan guarantees, and lines of credit to 
implement renewable energy projects.  Chile has requested U.S. 
collaboration and assistance with both projects.  The complete text 
of the GOC's papers describing the Solar Fund and the Renewable 
Energy Center is included (paras 12 and 13).  End summary. 
 
Proposed Joint U.S.-Chile $30 Million Solar Fund 
--------------------------------------------- --- 
 
¶3. (SBU) Minister Tokman called the Ambassador on March 5 to restate 
Chile's interest in working with the U.S. on the Summit of the 
Americas, including the anticipated Energy Partnership of the 
Americas.  Building on prior requests for a solar energy project 
(refs a and b), he suggested a presidential initiative in the form 
of a joint "U.S.-Chile Fund for the Development of Solar Energy," 
financed by US$15 million from each country, to be announced at the 
Summit.  He forwarded the text of Chile's proposal to the Ambassador 
(see paragraph 12). 
 
Chile Plans to Establish Renewable Energy Center in 2009 
--------------------------------------------- ------- 
 
¶4. (SBU) Gabriel Mendez, an advisor to Minister Tokman, separately 
confirmed to Post that the National Energy Commission (CNE) has US$2 
million from CORFO to develop a renewable energy center in Chile 
(see paragraph 13).  CNE plans to inaugurate the Center by June of 
this year and have it fully operational by the end of 2009.  Mendez 
explained that the Center is one of several initiatives to promote 
investment in renewable energy projects in Chile, including changes 
to energy laws and creating new financial instruments. 
 
Information Clearing House and Investment Promotion 
--------------------------------------------- ------ 
 
¶5. (SBU) Mendez described the Center's two distinct missions: 
information and investment.  One function would be to act as an 
information clearing house for on-going research and developing 
technologies.  Mendez noted the possibility of connecting the Center 
and the International Renewable Energy Agency (Chile is a member) as 
well as research efforts in Europe or California.  He explained that 
a priority for the Center is establishing collaborative agreements 
with other institutions and requested U.S. assistance in making 
these arrangements. 
 
¶6. (SBU) Mendez said the Center's other function would be to act as 
a one-stop shop to promote investment in Chile by providing 
information about resources, financial instruments, and investment 
incentives.  Within the next year and a half, the Center will be 
fully staffed with 15-20 people and an operating budget of about 
$250,000/year. 
 
Legal Changes to Promote Investment in Renewables 
--------------------------------------------- ---- 
 
¶7. (SBU) According to Mendez, CNE is preparing changes to the 
country's laws to eliminate "obstacles" to investment such as 
allowing renewables to compete on a cost basis with conventional 
energy.  Chile's existing renewable energy standards require that 
five percent of electricity be generated from non-conventional 
renewable sources by 2010 and ten percent by 2024.  Mendez gave 
several other examples of proposed changes including lowering rates 
and creating tax incentives.  He said subsidies are needed to allow 
generation projects under 100MW, which would include many renewable 
energy projects, to access transmission lines.  [Note:  Currently, 
only projects under 9MW can connect to the grid at no cost.  End 
note.] 
 
¶8. (SBU) Mendez noted the need to change Chile's electricity law to 
allow Centers of Economic Load Dispatch ("CDECs") to dispatch 
 
electricity using a formula based on factors other than marginal 
cost. [Note: Under Chile's Electricity Law, companies engaged in 
electricity generation must coordinate operations through the CDECs, 
which are autonomous generating industry groups, to minimize the 
operating costs of the electric system.  Generation companies meet 
contractual obligations with dispatched electricity that is either 
produced by them or purchased at the spot market price, which is set 
hourly by the CDEC based on the marginal cost of production.  End 
note.] 
 
$400 Million Investment Fund for Renewables 
------------------------------------------- 
 
¶9. (SBU) Mendez explained that CORFO is developing new financial 
instruments, including loan guarantees, subsidies, and lines of 
credit for renewable projects.  It will establish a US$400 million 
renewable energy investment fund to implement projects, including a 
US$15 million solar pilot project.  [Note:  This appears to be part 
of the joint fund proposed by Minister Tokman, outlined in paragraph 
3 above.  End note.] 
 
Renewable Energy and Technology Avoid Politics 
--------------------------------------------- - 
 
¶10. (SBU) During a recent meeting with U.S. Ambassador to the OAS 
Hector Morales, National Energy Commission (CNE) Director of 
International Affairs Carlos Pina noted that in Latin America the 
energy issue is highly charged and often becomes politicized, making 
progress difficult.  He outlined several themes for moving forward 
on energy issues:  technical transfers, new technology, development, 
and renewable energy.  Post now has concrete outlines of proposed 
activities that fit this model (reftels). 
 
¶11. (SBU) Action requested:  Chile is requesting several forms of 
collaboration, including:  matching funds for the joint solar fund, 
technical assistance for setting up the new renewable energy center, 
and formal agreements with U.S. research institutions.  Post 
recommends establishing, to the extent possible, partnerships with 
U.S. research entities that have appropriate experience in research 
collaboration and bringing new energy technologies to market, such 
as the Department of Energy's National Renewable Energy Lab (ref e). 
 End action request. 
 
¶12. (SBU) Begin text: 
 
U.S. - Chile Fund for the Development of Solar Energy 
 
With regard to renewable energies, despite the abundance of some 
natural resources in Chile, projects that make use of [such 
resources] are ultimately not competitive in the electricity markets 
due to the current development of the technologies and, for this 
reason, the establishment of subsidiary mechanisms is required. One 
example of this is large-scale power generation using solar 
radiation. Therefore, this category of projects requires special 
subsidiary actions, so that their technical and economic performance 
within national electricity systems can be validated through private 
demonstrative projects. 
The joint development of these demonstrative projects will permit 
that technological advancements be applied promptly in Chile, and 
the participation of the USA would provide an interesting mechanism 
to facilitate the reduction of greenhouse gas emissions in the [sic] 
a developing country without compromising economic growth nor 
significantly altering energy prices. These conditions are 
fundamental requisites for the participation of developing countries 
in concrete actions to combat climate change, given the certainty 
that the efforts of developed counties will not be sufficient to 
stabilize emission levels in the long term. These collaborative 
actions are a fundamental piece of any long term agreement that 
could be adopted in Copenhagen at the end of the year 2009, and 
[defining these actions] forms a central part of the discussions 
that are being carried out in the framework of the United Nations 
Convention on Climate Change. 
 
The goal of [a] partnership [with] these characteristics is mutually 
beneficial for both parties. On one hand, the USA revitalizes its 
commitment to renewable energies in a concrete manner, leading the 
necessary process of technological transfer in order to reduce 
greenhouse gas emissions and implementing a mechanism of 
collaborative actions that is vital to the participation of 
developing countries in the fight against climate change. Chile, on 
 
the other hand, demonstrates with these actions that its commitment 
to reducing greenhouse gas emissions goes beyond the efforts that it 
has made to date and promptly incorporates new technologies that 
require an additional financial effort and will have a high impact 
on the security and sustainability of its power generation matrix. 
However, the actions to be designed must be concrete, have a high 
impact in demonstrating the willingness of both countries, as well 
as a high level of efficiency and effectiveness in their operation. 
Therefore, the following initiative is proposed: 
 
At the upcoming Summit of the Americas. The U.S.A. and Chile would 
announce the creation of a Joint Chile - U.S. Fund for the 
Development of Solar Energy in Chile with a total value of US$30 
million, which would be constituted through a financial contribution 
of US $15 million by each party. This fund would have the objective 
of beginning the development of pilot projects connected to the 
electricity systems during 2009. 
This model of cooperation led by the U.S.A. would be an example that 
could be replicated in other countries of the region that have a 
commitment to climate change similar to that of Chile.  It is a 
model based on equal efforts between the [sic] those who provide 
cooperation and those who receive it, in order to develop clean 
technologies with zero greenhouse gas emissions, and it emphasizes 
the development of new markets and technological transfer. 
 
During the year 2009, a call for proposals under this competitive 
fund should be carried out for a power generation project using 
thermal solar concentration, whose scope, conditions, technical 
specifications, and other characteristics are currently being 
developed by Chile. 
 
End text. 
 
¶13. (SBU) Begin text: 
 
Renewable Energy Centre 
 
Promotion of Renewable Energy as Central Point of Chilean Energy 
Policy 
 
The actions oriented for the development of renewables energies that 
are being promoted by the Chilean Government constitute a central 
part of its energy policy, which seeks to balance three main goals 
for the country: security of supply, efficiency and environmental 
sustainability. 
 
Chile has great potential in terms of renewable resources. Besides 
its hydro richness, the country has favourable conditions for 
geothermal, biomass, wind generation, solar, tide and wave energy. 
In this context, the government has been resolutely working to 
eliminate the barriers that these types of projects have faced, with 
important results for the country, since it will see its capacity in 
this type of energy duplicated during this presidential period. 
 
As part of the measures for the promotion of renewables, the 
government has established modifications to the legal framework, 
special programs for subsidies, preferential credit lines, 
measurements and studies, and it has announced the creation of the 
Renewable Energy Centre, designating US$ 2 millions [sic] to begin 
operations during the year 2009. 
 
Functions of the Renewable Energy Centre 
 
The Centre's purpose is to function as a "radar", identifying the 
developments in clean technology and the best practices worldwide in 
renewable energy. Furthermore, the Centre coordinates, regulates and 
spreads the information throughout the country, acting as a catalyst 
for its promotion and development. 
 
Also, this initiative seeks to gather information on similar 
experiences with instruments and proposals for the elimination of 
barriers as a reference for the definition of public policies, to 
produce systematized registries of the natural available resources 
in Chile, to facilitate capacity building within the country, 
together with providing information and orientation for investors in 
renewables projects. 
 
Focal Point of a Network of Centres Worldwide 
 
Part of the role of the Centre is to act as regional focal point for 
 
the initiatives of other countries with high levels of advancement 
in the promotion of renewable energies. Likewise, the Chilean 
Government seeks to develop a network of centres from advanced 
countries that are producing and promoting technologies in clean 
energy, in order to create alliances and agreements with 
organizations specialized in research, innovation and development. 
With that purpose, the Centre seeks to create a contact net that 
pave the road into cooperation agreements during 2009. 
 
End text. 
SIMONS