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Blowing stronger in Chile -- Energy prices fuel growth

A new wind market is taking off in South America. Chile, with only 2 MW connected to a local grid at Alto Baguales in the far south in 2001, ended 2007 with the inauguration of an 18.2 MW wind farm at Canela ahead of another 40-50 MW lined up for construction in the next few months, reports economic development agency Corfo. The Canela wind farm was built by Spanish utility Endesa through subsidiary Endesa Eco. It becomes the country's second wind plant owner after Empresa Electrica de Aysén, which pioneered the Alto Baguales project.

The CLP 15.7 billion ($31 million) Canela development, consisting of 11 Vestas 1.65 MW turbines, is located 295 kilometres north of Santiago and is the first to be connected to the country's central electricity grid, which serves the bulk of Chile's 16.3 million population. Chilean President Michelle Bachelet was on hand for the occasion. "This is the way we should be working and continue to work," she was reported as saying to the gathered press.

More Vestas turbines are on their way to Chile, which is tipped as an economic front runner in Latin America. Ten 2 MW units are heading for the Hualpen Sur project being developed by Energías Renovables del Bio SA, a company fully owned by Spanish company Eólica Navarra. British engineering company Seawind expected to start building work at the end of last year on a 48 MW wind farm. It entered Chile two years ago and has been measuring the winds at 16 sites, with aid from a government program. Seawind's first project could end up at 150 MW, says the company's Pieter D'Haen. The company is also managing a project of ten, DeWind 2 MW turbines to be delivered mid-year for mining outfit Barrick Gold Corporation. Seawind is supplying the towers.

Further from getting turbines in the ground are a trio of companies, also with international roots: Chilean developer Handels und Finanz AG, Norway's SN Power, and Australia's Pacific Hydro. Handels und Finanz, together with an international partner, has pumped CLP 8.6 billion ($17 million) into an 18 MW project called Curaumilla located near Valparaíso. The company plans to use nine or ten Vestas 2 MW turbines, with construction starting in October. The wind station will feed power to the Chilean navy from 2009, says the company's Francisco Moreno.

SN Power, with local businessman Gustavo Pavez at the helm, hopes to raise $100 million from sources such as the World Bank to construct its 50 MW Totoral plant in the north of Chile in 2009. It recently submitted an environmental assessment of the project to Corfo. Pacific Hydro, which has picked Santiago for its main South American office, erected a 60-metre measurement tower in the south of the country and hopes to build 15-30 MW of wind power within two years, says the company's Luis Arqueros.

Motivation

Chile, with no oil or natural gas, urgently needs to find new sources of energy. Electricity prices on the spot market have reached highs of CLP 127/kWh ($0.25/kWh). In the 1990s they were as low as CLP 5-25.4/kWh ($0.01-0.05/kWh), says Moreno, when natural gas was brought through pipelines from Argentina. This supply has almost dried up, he adds. With most generation projects reliant on coal or expensive diesel oil, energy sources such as wind power are being studied, says Moreno.

Wind developers hope to get a boost from a proposed non-conventional renewable energy law (ERNC), which should lead to financial penalties on generators that fail to meet renewable energy targets. The ERNC's aim is for Chile to get 8% of its energy from renewables by 2020, up from 2.4% today. The law, which should be approved early next year, is a good first step because the government is taking the matter seriously, says Moreno.

Meantime, development agency Corfo approved 29 wind measurement projects in 2007. The government agency allocates grants of up to CLP 7.6 million ($15,000) for each wind development feasibility project and 40 sites have already recorded good winds, says Corfo's Javier Garcia. "Wind energy in Chile is almost completely new. We still can't say that it is developed, but there are many opportunities," he says.

Red tape

Moreno says gaining necessary project permits takes too much time. Seawind's D'Haen disagrees, and says the "well structured" process is "not easy, but reasonable." Other wind developers fear that as electricity grid operators have no experience with wind energy, technical barriers may impede projects. For his part, Pacific Hydro's José Antonio Valdés says a shortage of wind equipment could delay development.

But enthusiasts talk of thousands of megawatts of potential capacity. The wind climate is good and predictable, with wind speeds averaging 6.5-7 m/s, with the best in the south, says D'Haen. Esteban Illanes, SN Power's concession manager, agrees. "Next year we'll see a lot of wind measurement tests and then the market will really start moving."

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