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The combination of pro-renewable energy legislation, financial stability and industrial demand are fuelling a vibrant wind power sector in Chile. The Latin American nation has restricted indigenous vitality resources, except for hydropower. As a result, the country must import the majority of its vitality needs. Up until 2004 Chile met most of its demand for vitality by importing pure gas through an settlement signed in 1995 with neighbouring Argentina for them to supply 22 million cubic meters a day. However, subsidised energy costs in Argentina boosted domestic demand there, which consequently saw exports to Chile fall drastically. Currently Argentina is only sending 10% of the agreed quantity of pure gas to its Andean neighbour. Faced with an power crisis starting to influence upon economic growth, Chile was pressured to scour the globe for energy sources says Eugenio Chinchon, a Chilean business growth manager specializing in renewable power “Chile provides a lot of the copper within the world. As China has been booming and asking for lots of minerals, the price of copper has gone up. So they wish to produce more but because there’s a shortage of energy, they couldn’t produce. Also due to historical causes we don’t have natural resources to produce energy within the north, and the one way to produce has been gas. But we don’t have gas, so we should buy it from other countries. Our neighbours like Peru and Bolivia have numerous gas, but due to historical reasons, there is plenty of rivalry and they don’t need to sell us gas. So Chile has to buy liquid gasoline from the Far East and it’s very expensive. So the costs are going very high and the Chilean government wants to have wind energy.”

The discount in Argentine exports of natural gas prompted an energy policy rethink in Chile and a firm commitment by its Government to diversify its power sources. Legislation signed into regulation by Chilean President Michelle Bachelet last yr requires that electrical utilities spend money on and provide non-conventional power sources. The regulation is an try by the energy poor nation to diversify supply because it tries to feed booming industry, significantly its copper mining sector. The legislation mandates that NCES account for at the least 10% of the energy provided by Chile’s electrical utilities by 2024. Upon signing the legislation Bachelet mentioned “the main thought is to ascertain conditions to draw investment to projects for non-renewable vitality by accelerating the event of the market, eliminating entry limitations making those new sources appropriate with the country’s electricity market.” Historically, up to 75% of Chile’s domestic energy production got here from hydroelectric projects that are mainly located in it southern regions. However, recent droughts in the region have uncovered unreliability in this renewable energy source (rain at the end of 2008 did restore hydroelectric power production capacity). Energy diversification has thus spread to different potential sources. Geography has been sort to Chile with regards renewable energy sources. With many energetic volcanoes in its southern Patagonian region, geothermal vitality is pursued as is tapping into the solar energy potential of northern Chile, where year-round clear sunny skies provide some of the best conditions on the planet for this type of renewable energy. Hydroelectric capacity is about to be elevated with GDF Suez building a minimum of six new hydro crops in southern Chile, however GDF is also one in all many firms now coming into Chile’s exciting Wind power sector.

Chile’s standing as having probably the most economically liberal economy within the region is making the nation a magnet for alternative energy buyers seeking a foothold into the entire of Latin America. According to the Index of Economic Freedom, jointly produced by the Wall Street Journal and the Heritage Foundation, Chile presently ranks 11th on the earth and is primary in Latin America in terms of having established financial freedoms throughout the workings of the economy. Eugenio Chinchon a Chilean who advises European firms on establishing renewable power operations in Chile instructed Alternative Latin Investor that his nation has had an open energy market for many years “The electricity market in Chile has been utterly liberalised since 1982. It was the first country on the earth to do so. That means for renewables, that to ensure that them to compete with electricity they must do it on the identical terms.” However, Chinchon says that having a free market vitality sector could make it tough for renewables to compete except market circumstances are favourable “The only way to assist the renewables is the Chilean authorities forced the electrical energy generators to have a 5% share of their electricity coming from renewables (this will rise to 10% by 2024, as earlier mentioned). And if they don’t adjust to that they must pay a penalty. At the moment it is cheaper to pay the penalty, however, having stated that, for the time being Chile is having energy issues because the value of energy is based on market charges and now there is a shortage so now the prices are very high. Even with the competitive market its good for renewables now.” Whilst conditions in the Chilean energy sector may currently be enticing Eugenio Chinchon believes we’re witnessing alternative energy investment methods with an eye on the entire region “I know there are many companies who are desirous about Chile in particular for a lot of reasons. They want to use Chile as a platform for the remainder of South America. Because the market is not that massive in Chile, it isn’t that engaging for that, but you may set up your headquarters and you are assured that you’re not going to have problems. You are going to have less threat than in different countries corresponding to Argentina or Brazil and even riskier countries resembling Bolivia or Peru. Also by way of wind, Chile and Argentina have good wind resources, so if the tariffs are low you will get good wind revenues. I think the capability factor could possibly be over 30%.”

The present economic crisis and the knock-on effect on the value of oil have made renewable forms of energy less enticing than within the recent past however Eugenio Chinchon told Alternative Latin Investor that the perfect time to make investments is now “If the crisis, say, ends next year, and we now have recovery, things might be completely different. Many individuals who invest now will get superb returns. Probably in case you are trying to get into renewables, notably in Chile, in two years time you may be fine, but not so good as now. Now is the time to get in on the bottom floor.” It would seem that many investors are thinking consistent with Señor Chinchon as over 20 wind farm projects began in Chile last yr alone. Ironically, the success Chile is having in attracting various energy investors may ultimately prove a destructive influence in keeping with Chinchon “If they build too many wind farms I suppose prices are going to drop and if you get some level that costs are so low, you cant get well your investment as nobody will guarantee you a tariff for say 20 years. You must live with the fact that every six months there will likely be a change within the tariff, and also you expect it to be high but there is loads of risk in terms of the tariff. At the second there is numerous problems with vitality and that has been (like that) since 1995, and that is not going to change for the subsequent 12 years. So should you build a wind farm now, you will have at least have 12 years of an excellent price. If you might have a good tariff, in lower than 10 years you repay your investment.”

Surprisingly Chile, with its prolonged Pacific coastline in not a good location for offshore wind projects as Eugene Chinchon explained to Alternative Latin Investor “Offshore may be very difficult, why? Because off the coast of Chile is the junction of the tectonic plate from the Pacific and the continent. After a few metres, the dip of the ocean in that space is round 4000 metres. I think it’s difficult on the Pacific side, and may be more potential on the Atlantic side. But in Chile I don’t think it’s a solution. Nor would any Latin American countries on the Pacific coast be interesting for investors.” Those who do choose to spend money on Chilean wind energy are typically taking a look at a 20 12 months life cycle for a return on their funding and Chinchon estimates that if the present tariffs don’t change too much you’re looking at an 8% return or higher over 20 years. Though some 20 initiatives are at the moment under means in Chile there is only one wind farm that’s presently operational. The Canela 18.15 MW wind farm, which is owned and operated by Endesa Eco (a subsidiary of the Enersis group), includes of eleven wind turbines and operates in the Coquimbo region in the village whose title it bears. Eugenio Chinchon defined to Alternative Latin Investor some typical costs of setting up a comparable although larger wind farm operation “The most expensive part is the EPC contract. Depending on the size of the wind farm; Suppose a 50 million watt wind farm using 25 generators of two Megawatts, 80 meters high, more or less 65% of total cost, 80 million Euros. Turbines 65%, 10% civil works, 5% network to hook up with a grid, 20% of the revenues go to maintenance.”

The mining sector in Chile is among the main causes for the upsurge in funding in harnessing Chile’s wind in response to Chinchon “There are companies, mining companies who want electricity but don’t know in regards to the energy enterprise and are on the lookout for companies or investors to put cash into wind and doing a PPA agreement: Can you assure me energy for 20 years and make such sort of deals. As these corporations don’t know a lot about energy it is a good deal for investors who have done quite well. At the beginning there were only developers. Now there are investors who don’t have any idea, however outsource or contract out to companies. The company will get the permits and builds the wind farm, and gets shares.” Some firms making moves in the sector are GDF Suez, who’ve been contracted to build two wind farms; Canada based Methanex have announced plans to develop a wind farm in the Magallenes region in Southern Chile as a way to boost power production at its methanol crops hit by Argentina’s natural gas provide cuts; Australia’s Pacific Hydro is working with BHP Billiton to construct wind farms in northern Chile. BHP wants to make use of wind vitality to power a few of its mining operations; British energy company Seawind is investing US$230 million in a 100MW wind farm within the Tocopilla region and finally Norwegian renewable power developer SN Power are growing a project called the Totoral Wind Farm, which can have the capacity to provide 46 MW when it becomes operational on the end of this year.

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