New Market Research Report: Chile Power Report Q2 2013

A lack of rainfall has put Chile's electricity generating capacity under considerable strain, with dry weather leading to power shortages. Such unreliability in the power supply chain is bad news for business - particularly the mining industry - and some private copper mining firms have decided to take the issue into their own hands. Both Codelco and BHP Billiton have plans to construct their own gas-fired power plants to ensure a regular supply of electricity for their operations. In terms of future capacity, question marks remain over the construction of a large-scale hydroelectric power plant, HidroAysen, which has proved to be a controversial project. Enersis aims to submit an environmental impact assessment for its 1,000km transmission line in 2013 and, if approved, this will mark a key step forward in the project's development. The most promising area for growth is renewable energy, however, with several new projects approved in 2012 and 2013, with competitive pricing and access to financing facilitating market development.

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Domestic demand for energy in Chile is growing, and hydroelectricity supplies the majority of this demand - a source of power that is subject to risks, as recent dry seasons illustrate. Chile needs to diversify its electricity-generating mix to ensure that supply meets the growing demands of the population and its energy-intensive mining industry.

During the period 2013-2022, BMI forecasts that Chile's total power generation will increase by an annual average of 3.7%, reaching 93.6 terawatt hours (TWh). The population is expected to rise from 17.6mn to 18.8mn during this period, with and net power consumption set to rise from 60.5TWh in 2013 to 71.4TWh by 2017 and then to 84.1TWh by 2022. The theoretical net export capacity by 2022 is 0.9TWh.

The key developments in Chile's power sector since last quarter were:

* Codelco announced plans to construct a 760MW gas-fired power plant in northern Chile, at a cost of US $758mn. It submitted an environmental impact study for the plant in February 2013.
* AES Gener announced plans to begin construction work on the 532MW Cochrane coal-fired plant at the 531MW Alto Maipo hydropower plant in late February 2013.

Energy prices for Chileans connected to the central SIC power grid were reduced by an average of 1.8% in February 2013, while those connected to the northern SING grid saw their average electricity tariffs increase by 2.3%. The new prices were implemented retroactively, from November 2012.

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