Chile and biomass fuel

Official Name: Republic of Chile.

Summary: Chile has limited crude oil, natural gas, and coal reserves, not enough to cover domestic demand, but substantial resources for hydropower and biomass fuel, especially forests.

Firewood was the main fuel used for heating in mines and households before the independence of Chile from Spain in the early nineteenth century; during colonial times, mineral coal was also occasionally used, yet the abundance of firewood made a massive exploitation before the 1840s unnecessary. Coal began to be extracted near the port of Concepción to supply steamships in the South Pacific route; soon most mines were in British hands. Throughout the nineteenth century, coal—produced in Chile or imported from the United Kingdom—was also used in copper and salt mines. At the time, water mills also made use of waterfalls and strong currents of Andes rivers to grind wheat and produce some manufactured products.

Electricity was introduced for public illumination and streetcars in Santiago in the 1880s. In the first years, power was generated mainly by hydroelectric facilities, as water from the Andes Cordillera was abundant; these were also mainly in the hands of British investors. Only in the first decades of the twentieth century did power utilities begin to supply electricity to households in Santiago, Valparaíso, and other cities in the central region of the country. In northern Chile, on the other hand, power was generated from coal to supply the copper and salt mines.

During the 1920s, the interconnection of the main consumption centers in central Chile began, and the 40.8-megawatt-capacity Queltehues hydroelectric plant entered service to supply the metropolitan areas of Santiago and Valparaíso. Still, at the end of the 1930s, the electrification rate beyond large cities and mines was very low. Thus, to accelerate the electrification of the country, the Corporación de Fomento de la Porducción (CORFO) was created in 1939 and drafted a national electrification plan (NEP). In the plan, CORFO proposed to build up the national power infrastructure through public investments in association with private capital, in the same way as was done with the railways 100 years before. Public spending was supposed to support only the generation of electricity, while the private sector carried out the distribution of generated power.

In order to carry out the NEP, CORFO created the Empresa Nacional de Electricidad, S.A. (ENDESA), which in the following years concentrated all its efforts in building a series of power-generating facilities, both thermal and hydroelectric but mainly the latter. Over the years, ENDESA became the dominant power utility in the Chilean market, also building the Sistema Interconectado Central (SIC), a network that interconnects all facilities in central Chile, and the Sistema Interconectado de Norte Grande (SING), a grid that supplies power to the northern region of the country. Additionally, there are two smaller power networks: the systems of Aisén and Magallanes, which account for only 2 percent of installed capacity. Because of long distances, the four networks cannot be interconnected, and they therefore operate independently.

In 1970, the Chilean government decreed the complete nationalization of the electricity sector. During the following decade, as the economic performance of utilities was not entirely satisfying, the government decided in 1982 to introduce a comprehensive package of structural reforms in the electricity sector, the first of its kind worldwide, which later became a model for similar reforms in several Latin American countries as well as in other regions. Activities of the vertically integrated utilities were separated in generation, transmission, and distribution of power. A power wholesale market was created, composed of, on one hand, a regulated contract market between generators and distribution companies and, on the other, a free contract market between generators and large consumers at negotiated prices. Disaggregated utilities were privatized later in the 1980s. The Chilean reform model succeeded in attracting private investment and developing a reliable and low-cost power supply, which, nevertheless, favored thermal power over hydropower.

Since the 1990s, thermal power capacity, predominantly from natural gas, has increased its share in the fuel mix. The abundance of natural gas imported from Argentina in the 1990s also induced an increase in the share of this fuel to about 20 percent. However, the fuel share in the four networks is highly differentiated: In the SIC, which supplies 90 percent of the population, 53 percent of electricity is generated from hydropower, the rest being thermal; on the other hand, in the SING, which supplies mainly mines and industrial customers, the share of thermal power is 99 percent. In the other two smaller power grids, Aisén and Magallanes, power is also mainly generated from fossil fuels; in the Aisén network, generated power is also supplied by wind farms (though only about 4 percent) and hydropower (45 percent).

Since 2004, Argentina has restricted natural gas deliveries to Chile, because of an acute domestic crisis. Because Bolivia does not deliver gas to Chile and forbids Argentina to deliver Bolivian gas to Chile, the latter has experienced a sudden deficit in gas supplies. Natural gas shortages have led to its being replaced by fuel oil and diesel for electricity generation in the short term. To diversify its natural gas imports, in 2009, Chile started to import liquefied natural gas (LNG)—which is not expected to change the country’s energy matrix any time soon. Moreover, the country is also studying resources beyond hydropower in an attempt to improve the share of renewable energy sources used for electricity generation.

In 2015 Chile generated 72 terawatts of power, or 18 percent of the national total, from renewable sources, including biomass. At the end of the year, the net installed biomass-sourced power was equivalent to 346.9 megawatts and accounted for 2.2 percent of gross energy generated in Chile’s thermoelectric power plants.

Chile kicked off a renewable energy revolution with the support of the public. Chileans overwhelmingly prioritize addressing climate change. In 2022, the government published a plan to achieve net-zero emissions by 2050 by increasing development of geothermal, solar, and wind energy. It channelled proceeds from copper and lithium mining into green hydrogen production. Chile leveraged public-private partnerships to get projects in development quickly. By 2023, the government had pledged $50 million to funding six projects in the green hydrogen sector.

Bibliography

Comisión Nacional de Energía, Government of Chile, and Deutsche Gesellschaft für Technische Zusammenarbeit. Non-Conventional Renewable Energy in the Chilean Electricity Market. www.cne.cl/cnewww/export/sites/default/05‗Public‗Estudios/descargas/ERNCMercadoElectrico‗Bilingue‗WEB.pdf.

Conley, Timothy. "How Chile Is Becoming a Leader in Renewable Energy." World Economic Forum, 4 Jan. 2023, www.weforum.org/agenda/2023/01/how-chile-is-becoming-a-leader-in-renewable-energy/. Accessed 31 July 2024.

Rodríguez-Monroy, Carlos, et al. “Electricity Generation in Chile Using Non-Conventional Renewable Energy Sources—A Focus on Biomass.” Renewable and Sustainable Energy Reviews, vol. 81, 2018, pp. 937–45.

U.S. Energy Information Administration. “Chile.” www.eia.gov/international/overview/country/CHL. Accessed 31 July 2024.

World Bank. Chile: Energy Sector Review. Report 7129-CH. Washington, DC: Energy Efficiency and Strategy Unit, Industry and Energy Department, [World Bank], 1988.