Unifying Transmission from North to South Means Cheaper Energy in Chile

• by Marianela Jarroud (santiago)
• Thursday, May 07, 2015
• Inter Press Service

"It's not sufficient simply to increase our electricity generating capacity, if we don't strengthen our transmission capacity at the same time. If we want to be a developed country, we have to aim for diversity in our energy mix and stability in power transmission," Energy Minister Máximo Pacheco told IPS.

This project "opens up enormous opportunities for progress and stability for Chileans, with cleaner and cheaper energy," he added.

Chile's long, thin territory has an installed capacity of approximately 17,000 MW to supply its 17.6 million people and its productive sectors.

In this country power generation and distribution are in the hands of private and mainly foreign corporations, and regulated by the government's National Energy Commission, which is also coordinating the interconnection.

Of the country's total installed capacity, the central grid, SIC, accounts for 74 percent and the northern grid, SING, accounts for 25 percent, while the smaller grids in the southern regions of Aysén and Magallanes produce less than one percent.

SING stretches from the region of Arica in the extreme north, bordering Peru and Bolivia, to Antofagasta, while SIC runs from the northern city of Taltal to the Big Island of Chiloé, in the south.

Together they total more than 3,000 km in this South American country, which is 4,270 km long.

The interconnection project, already under construction with a total projected investment of one billion dollars, is being carried out by the French company GDF Suez and involves installing an additional 580 km of transmission lines.

The new power lines will carry energy from the Mejillones power plant in Antofagasta, which forms part of the SING grid, to the Cardones substation in Copiapó, in the northern region of Atacama, which is part of the SIC grid.

Chile currently imports 97 percent of the oil, gas and coal it uses, and its energy mix is made up of 63 percent thermal power, 34 percent hydroelectricity and three percent non-conventional renewable energy (NCRE) sources.

This country's shortage of energy sources has made the cost of electricity per megawatt/hour (MWh) for industry in Chile one of the highest in Latin America: over 150 dollars, according to the World Economic Forum's Global Energy Architecture Performance Index Report 2014.

That is the 13th highest cost in the world, and in the region it is only surpassed by the Dominican Republic's 210 dollars per MWh, and Brazil and El Salvador, where the cost is 160 dollars per MWh.

"Chile has the highest cost of electricity in Latin America, and the power bill went up 30 percent in the last five years," said Pacheco. "This has a strong impact on our families and hurts the competitiveness of our companies."

He said the interconnection project, postponed for decades due to technical and technocratic reasons, "is an historic milestone" because it not only makes supply more efficient, stable and steady but also guarantees lower costs and gives a boost to the economy.

According to the National Energy Commission, the interconnection will bring 1.1 billion dollars in benefits to the country because of the drop in power grid costs and prices, linked to greater competition and a reduction of risks in the market.

"This has an enormous value given that it is equivalent to building approximately 35,000 social housing units. That is the magnitude of the economic benefit of this project for the country," the minister stressed.

In concrete terms, households supplied by the SING northern grid will notice a 13 dollar drop in the price of MWh, while homes covered by the southern grid, SIC will see a three dollar drop.

In the case of industry, there will be an estimated 17 dollar reduction in the price per MWh in the north and nine dollars in the central and southern parts of the country.

In addition, "investment in the energy sector will increase, which will definitely be good news for our country," Pacheco said.

But the economic benefits are not the only attractive aspect of the project. The minister said "the aim of the connection between the country's two major grids is that the clean, abundant energy in the north can reach the centre and south."

This means environmentalists share the government's optimism.

Manuel Baquedano, director of the non-governmental Political Ecology Institute, told IPS that this is "one of the most important projects for the country" because it entails greater flexibility in energy management and, as a result, lower costs.

The expert pointed out that "the north has a surplus during the daytime" due to the enormous solar power potential in the Atacama desert, the world's driest, while in the centre and south of the country, served by the SIC, "there is a surplus at night" because of the great hydropower potential.

As a result, he said, "each system can contribute to the other, producing a more stable supply and bolstering the use of NCRE sources, which require back-up energy sources."

"It's a key project, because Chile's problem today is not generation but transmission of energy," Baquedano said.

In her second term, which began in March 2014, President Michelle Bachelet promised to increase the share of energy produced by NCRE sources to 20 percent by 2025.

"Several of the measures proposed on the government's agenda are aimed at meeting that goal, such as expanding the power grid, improving competitiveness in energy generation, and making the operation of the power grids more flexible," the minister said.

He added that the future development of the power grids "will play a central role in facilitating compliance with that target at lower costs, taking advantage of the coordinated use of the transmission corridors."

"What we are seeing is a proliferation of wind and solar power projects in the north, more than the construction of hydropower dams in the south. The public no longer tolerates megaprojects," Baquedano said.

Against that backdrop, "I'm not afraid of the interconnection. On the contrary, I believe it is a very important element for the development of NCRE sources," he concluded.

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes

© Inter Press Service (2015) — All Rights ReservedOriginal source: Inter Press Service

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