VZCZCXYZ0016
OO RUEHWEB

DE RUEHSG #0108/01 0292029
ZNR UUUUU ZZH
O R 292028Z JAN 10
FM AMEMBASSY SANTIAGO
TO RHEBAAA/DEPT OF ENERGY WASHINGTON DC IMMEDIATE
RUEHC/SECSTATE WASHDC IMMEDIATE 0636
INFO MERCOSUR COLLECTIVE
RUEHCV/AMEMBASSY CARACAS
RUEHPE/AMEMBASSY LIMA

UNCLAS SANTIAGO 000108 
 
SENSITIVE 
SIPDIS 
STATE FOR WHA/BSC, WHA/EPSC AND EEB/ESC/IEC 
 
E.O. 12958: N/A 
TAGS: ECON ENRG SENV TRGY PGOV CI
SUBJECT: Chile's Energy Highlights -- November-December 2009 
 
REF: 09 SANTIAGO 1180; 09 SANTIAGO 1200; 09 SANTIAGO 1148 
 
¶1. (SBU) Summary:  This cable provides highlights of activity in 
the Chilean energy sector during November and December 2009.  Chile 
participated in the United Nations meetings on climate change in 
Copenhagen and made a voluntary commitment to reduce emissions 20 
percent below business as usual by 2010.  In November, Chile passed 
landmark legislation to create a ministry of energy.  Implementing 
regulations for Chile's renewable energy law were published on 
December 1, but some electricity generators would like to see the 
government expand the regulations to take other energy-saving 
initiatives into account.  Chilean officials hosted a solar "road 
show" to outline requirements in bid solicitations for a 500-KW 
photovoltaic (PV) and a 10-MW concentrating solar power plant in 
Chile's northern desert.  Chile launched a new energy efficiency 
campaign called "Join the Good Energy of Chile" and the government 
authorized future natural gas exports to Argentina and other 
countries in the region.  The country's year-on-year electricity 
output increased in October and decreased in November.  End 
summary. 
 
 
 
Chile Attends Copenhagen Summit - Announces Voluntary 20 Percent 
Emissions Reduction 
 
--------------------------------------------- ---------------------- 
--------------------------------------------- 
 
¶2. (SBU) In December 2009, Minister of Environment Ana Lya Uriarte 
headed the Chilean delegation to Copenhagen, where she announced 
Chile would voluntarily reduce its greenhouse gas emissions 20 
percent below "business as usual" (BAU) by 2020 in the electricity, 
mining, transport, and other energy-intensive industrial sectors. 
Echoing what she told the Ambassador prior to Copenhagen (ref a), 
Uriarte claimed Chile's goal will be achieved using domestic 
resources.  Subsequently, Waldemar Coutts, Deputy Director of the 
Ministry of Foreign Affairs Environmental Directorate, and Alvaro 
Sapag, the Executive Director of the National Environmental 
Commission (CONAMA), admitted that there is still an internal GOC 
debate on the baseline year to calculate BAU and intimated that the 
Ministries of Energy and Finance are being cautious about 
committing the country to a target. 
 
 
 
Law Creates New Ministry of Energy 
 
--------------------------------------------- 
 
¶3.  (SBU)  For the past several decades Chile has not had a 
ministry of energy and, whenever the country has confronted an 
energy crisis, it appointed a minister of energy.  Since his 
appointment in 2007, Energy Minister Marcelo Tokman has been a 
minister without a ministry, forced to rely on the resources of 
Chile's National Energy Commission (CNE) and his powers of 
persuasion within the GOC's interagency processes to develop and 
implement energy policy.  In November 2009, the GOC enacted 
legislation to create a new ministry of energy.  President Michelle 
Bachelet, accompanied by the Ministers of Energy, Mining (Santiago 
Gonzalez) and Deputy Ministry of Economy (Jean Jacques Duhart), 
signed the decree promulgating the authorizing legislation on 
November 25.  Tokman noted "the new ministry will not be the answer 
to all problems and challenges the sector faces, but is the basis 
for finding the best solutions to the complexities confronting our 
society." 
 
¶4. (U)  The new Ministry of Energy, which will consolidate the 
Superintendency of Electricity, the CNE, and the Chilean Nuclear 
Energy Commission (CChEN), will establish long-term energy policies 
covering the electricity sector, gas, oil, geothermal, and nuclear 
energy focused on diversifying the country's electricity matrix, 
developing renewable energy, and promoting energy efficiency. 
Institutionally, this will consolidate functions previously 
scattered among different ministries and agencies.  The ministry's 
efforts will be supported by the newly-created Chilean Energy 
Efficiency Agency -- formerly the Programa Pais de Eficiencia 
Energetica (PPEE) -- and the Renewable Energy Center Chile launched 
in August 2009. 
 
Solar "Road Show" Outlines Bid Solicitations for Two Solar Pilot 
Plants 
 
--------------------------------------------- ---------------------- 
--------------------- 
 
¶5. (U)  On December 4, 2009, Energy Minister Tokman and Executive 
Vice President of Chile's development agency (CORFO) Carlos Alvarez 
hosted an event to outline bid solicitations (required 
documentation, eligibility and selection criteria, technology 
transfers, etc.) for a 500-KW photovoltaic (PV) farm in San Pedro 
de Atacama and a 10-MW pilot concentrating solar power plant also 
to be located in Chile's northern desert region.  Alvarez stressed 
the initiative is a joint effort among the CNE, which framed the 
projects, and CORFO, which will provide $15 million in subsidies, 
and the private sector, which will provide other funding and 
technological assistance.  More than 130 representatives of 
national and international companies, including Mitsubishi, 
Siemens, ENEL, Acciona, Endesa, and Abengoa attended the solar 
"road show" 
(www.cne.cl/cnewww/opencms/05_Public_Estudios /Road_Show_Solar/Road_ 
Show_solar.html) 
 
¶6.  (U) This initiative involves the Antofagasta Regional 
Government, which will finance changes to the electrical system to 
accommodate the PV plant, the municipality of San Pedro de Atacama, 
which will provide land for the project, and the local electric 
cooperative, which will purchase energy at subsidized prices. 
According to CNE sources, the requests for proposals for both 
projects will be published in February 2010. 
 
 
 
Implementing Regulations for Renewable Energy Law Take Effect 
January 1 
 
--------------------------------------------- ---------------------- 
-------------------------- 
 
¶7. (U)  On December 1, 2009, the CNE published regulations, that 
came into effect January 1, 2010, implementing Chile's 2008 
renewable energy law (Law 20.257) which requires electricity 
generators produce five percent of their energy from renewable 
sources by 2014, and ten percent by 2024.  The regulations mandate 
monthly public reporting of output from renewable sources, 
transfers of surplus between firms, and pending fines for 
non-compliance.  They also outline procedures for verifying power 
supply contracts and compliance with obligations, as well as 
permissible accounting mechanisms. In statements to the press, the 
CEO of Empresa Electrica del Norte Grande (EDELNOR), Juan Claveria, 
claimed Chile's electricity generators want the decree expanded to 
take into account other energy-saving initiatives, i.e., biomass 
use in coal-fired thermoelectric plants or the use of discharged 
water from thermoelectric plants for hydroelectric generation. 
 
 
 
Chile Authorizes Gas Exports to Argentina 
 
--------------------------------------------- ------- 
 
¶8. (SBU) In an interesting reversal of roles, Chile's Finance 
Ministry issued a decree allowing natural gas exports to Argentina 
(which, in recent years, has drastically reduced gas exports to 
Chile), and other countries in the region.  According to the 
decree, which also amends the customs regulations for the export of 
liquid and gaseous fuel, Chile's construction of liquefied natural 
gas (LNG) receiving and regasification terminals make it 
economically feasible for the country to export natural gas. 
[Note:  Chile launched the Quintero LNG terminal in 2009 and 
projects opening another LNG terminal in 2010.  End note.] 
Minister of Energy Tokman indicated Chile would be a transit 
country, therefore gas would not actually be "exported" and export 
taxes or value-added tax (VAT) do not apply.  Chile may start 
selling gas to Argentina in 2010 or 2011, according to the Director 
of Chile's national oil company (ENAP). 
 
 
 
New Service Fees Associated With Power Supply 
 
--------------------------------------------- -------------- 
 
¶9. (U) Under a provision of the General Law of Electricity 
 
Services, services beyond supplying energy provided by electric 
distribution companies are subject to a regulated price structure, 
which is reviewed during a tariff-setting process conducted every 4 
years.  The CNE pricing process for the November 2008 - November 
2012 period set new prices for 24 services, e.g., meter rental, 
service and replacement of equipment, paying bills late, etc. 
These will take effect immediately after publication of the tariff 
sheets by distribution companies. 
 
 
 
CNE Launches Energy Efficiency Campaign - "Join the Good Energy of 
Chile" 
 
--------------------------------------------- ---------------------- 
----------------------------- 
 
¶10. (U) Recognizing the need to incorporate energy efficiency into 
the country's consciousness and production processes, the CNE and 
Chile's National Energy Efficiency Program (PPEE) launched a new 
campaign called "Join the Good Energy of Chile" in October 2009. 
PPEE Director Andres Romero said "the idea of this campaign is to 
reinforce the concept of energy efficiency as a culture to be 
installed long-term in the minds and behavior of Chileans...and not 
only a necessity in times of crisis."  PPEE also created a new 
website -- www.buenaenergia.cl -- to provide information on its 
programs and energy efficiency in general. 
 
¶11.  (U) As part of the campaign, by the end of 2010, the CNE would 
like  to introduce more than 6,000 high-efficiency electric motors 
-- electricity savings of around ten percent per motor/year -- with 
the aim of encouraging increased energy efficiency in industry. 
According to the CNE, the industrial sector accounts for 22% of 
Chile's total electricity consumption, 70% of which is due to 
electric motors.  The project incentivizes small and medium 
enterprises to purchase more efficient 1-10 horsepower motors by 
providing a rebate of the price difference between the more and 
less efficient engines.  The launch at PPEE's office was hosted by 
Energy Minister Tokman and PPEE Director Romero, along with 
representatives from various companies supporting the effort: 
Electricworks General Manager, Roberto Matta; Hochschild's Business 
Manager, Carlos Sabugal; Weg Commercial Director, John Andrew 
Elijah; and Seimens' General Manager in Chile, Edwin Chavez Lureye, 
among others.  Acknowledging the need for domestic industry to 
maintain competitiveness while reducing energy use and greenhouse 
gas emissions, Tokman stated, "We believe that the introduction of 
6,000 fuel-efficient engines can achieve savings of 4.8 GWh per 
year which translates into a reduction of approximately 2,600 tons 
of CO2 a year." 
 
 
 
GOC Continues to Study Nuclear Energy Option 
 
--------------------------------------------- -------------- 
 
¶12. (U) Continuing a process started in 2007 to assess the 
economic, social, and environmental benefits, costs, risks, and 
impacts of developing nuclear electricity generation in Chile, the 
CNE released findings from a fourth government-commissioned study 
in December 2009.  Similar to previous reports, the study concluded 
nuclear plants can provide large blocks of power with minimal 
environmental impacts and recommended that, if Chile chooses to 
develop a nuclear program, it must have a national regulatory 
authority independent of other energy sector players. 
[Note/comment:  On January 28, Tokman is hosting a seminar on 
"Nuclear Electricity in Chile: How Far? How Close?" to present the 
government's progress in evaluating the nuclear power option and 
analyzing environmental, nuclear safety, and radiological security 
concerns 
(www.cne.cl/cnewww/opencms/12_Utiles/nucleo_e lectricidad/index.html 
).  It is likely the debate on nuclear energy will continue because 
president-elect Sebastian Pinera said during his campaign he would 
consider developing nuclear energy (ref b) and Pinera's energy 
advisor, Ricardo Rainieri, publicly commented on January 28 that 
the new administration would continue to study the issue and 
consider technical preparations, but was not yet committing to make 
a decision.  End note/comment.] 
 
 
 
Year-on-Year Electricity Output Increased in October and Decreased 
in November 
 
--------------------------------------------- ---------------------- 
------------------------------- 
 
¶13. (U) According to Chile's national statistics institute (INE), 
there was a 0.3% increase year-on-year to 4,947 GWh in October 
2009, and a 0.1% decrease year-on-year to 4,798 GWh in November 
¶2009. 
URBAN