Chile suffers currently from very high prices of energy and that affects people and, above all, companies’ competitiveness. The best example may be the mining sector in which energy costs became the highest ones.

Where does this problem come from ? Chile used to import gas from Argentina by a huge pipeline crossing the Andes close to Santiago (here is an article of the NYTimes showing the enthusiasm for the project of this transnational pipeline in 1997). But Argentina broke the contract and closed the pipeline, as they needed more gas. Now there is an obvious lack of supply of energy in Chile and prices are going up.

According to Maria-Teresa, the authorities made two clear mistakes. First, the high importation proportion was a strategic mistake because they cannot stay dependant of Argentina. They liberated too much the market of energy and let the private sector take its own decision, which led to that awful situation. The State had to intervene in some key inputs to anticipate this. Chile now has to renegociate with other countries to solve the situation and the crisis turns very expensive.

The risk of the pipeline turned off should have been taken more seriously by the government. Many households and companies turned from electricity to natural gas because gas was available thanks to the pipeline, and costs to change the connection to turn to natural gas were huge. So the increasing costs of gas affect them heavily (and may make them angry !).

The second mistake is not about the “argentinan issue”. The second mistake was to specialize in hydroelectrical power energy. This choice would have been fine if the country was decentralized, but Chile is clearly not. Most of the electricity needs are concentrated in Santiago and the hydroelectrical power stations are in the south (La Region de los Lagos, the “Region of Lakes”, where many hydroelectrical power stations are located, is the last region at the south of the light orange zone on the drawing below). So even if it’s cheap to produce electricity, it’s very expensive to transmit it because much energy is lost in the transport.

Cartography realized by Veoverde in this article

The solution of this huge problem of centralization is not that simple but has to be undertaken by the country : decentralization. Early 1990’s, before the pipeline from Argentina was installed, there were two projects of construction : one close to Mendoza (Argentina) as it was built and one more in the south. For companies, there was no difference, but for the Chilean society setting the pipeline in the south would have helped to decentralize. The regulator did nothing and should have taken that as an opportunity.

Currently the biggest debate around energy in Chile is about HydroAysén, a project of hydroelectrical power station. Its location would help to decentralize the country since it would be… in Patagonia. And the main problem of this project is precisely its location : too close to one of the most incredible gifts of nature (that I had the great opportunity to visit), the natural park of Torres del Paine.

Torres del Paine, Patagonia

People know they need hydroelectrical power stations but they don’t want HydroAysén because it will destruct the environment, and one of the jewels of Chile (Torres del Paine = around 150,000 visitors a year !). Many protests were organized mainly in 2011 and some associations opposed to the projects (such as Verdeseo and its 7 arguments). So the project of HydroAysén launched a huge national debate on the issue of energy and it was an opportunity for ecologists to raise their voice. The opponents also refused the idea of one mega-project that prevents small companies to enter the market of energy.

But Maria-Teresa sees beyond these questions of environment or economics and thinks that, once more, the need of new energy sources should be used to decentralize the country. The country should be regulated in urban terms, imposing to build power stations in some areas and not in others.

As a Frenchman, I cannot finish this article without saying something about nuclear energy… Chile still refuses this type of energy although GDF Suez is willing to convince the authorities. In 2010, the President Sebastian Piñera seemed to be tempted to accept this energy and let the possibility of energy diversification. But in 2011, the society (experts and environmentalists) rose against the project of GDF to build a nuclear plant in the North, near the copper mines (actually, the opponents argued that the plant would have been used almost exclusively for the mining companies). It seems now that Piñera won’t take any decision during his mandate, which will end at the end of this year…

See you soon, Be green, Ben

Bonus : other pictures from my trip to Torres del Paine (february 2013)

Grey Glacier