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Chile

Chile

Faith in government drops after auction

CHILE: A Chilean auction of state land for wind projects appears to have disappointed participants, who declined to bid on one of two tracts offered.

Wind-power experts have low expectations of a second auction that began shortly after the first closed, and say that business-to-business deals are more likely to have a meaningful impact.

In January, Chile's homeland assets ministry, the MBN, assigned 2,600 hectares of land in Taltal, in the northern region of Antofagasta to Enel Green Power, a subsidiary of Italian energy giant Enel. It will build a 99MW wind farm and deliver energy to the central interconnected system, which serves 93% of Chilean households.

"Prices for Chilean wind power are around $100/MWh," said Arturo Kunstmann, director of energy studies at Magallanes University. "Developers are not that interested at those prices. There are several projects that have environmental approval but are not getting under way."

In Brazil and Uruguay, developers have been willing to build projects at prices of around $70/MWh, but under different market conditions. Government-run power companies offer independent power purchase contracts of 15 years or more and the Brazilian Development Bank supports equipment manufacturers with cheap loans.

In Chile, power is delivered by private companies, which can quickly pass on price hikes to consumers. Distributors prioritise a steady stream of power over price, putting producers of variable wind at a disadvantage.

"Wind companies are waiting for better incentives," Kunstmann said. "There has been talk of improving incentives for many years, but there is an impression that the government is more interested in energy efficiency."

President Sebastian Pinera had promised legislation boosting the amount of renewable energy required from the nation's distributors from the current 5%, rising in stages to 20% by 2020. However, supporters of renewable energy have begun campaigning for their own law, believing that the ruling party is dragging its feet as the bill is stuck in Parliament.

Dino Barajas, who covers Latin America infrastructure projects at Texas law firm Akin Gump, said Chile's best hope for wind development lies with the private sector.

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