Alternative energy potential in Chilean Patagonia
By Grant Devine
Commonly regarded as possessing some of the richest natural resources in the world, Chile is blessed with an abundance of renewable energy resources. Non-conventional renewable energy (NCRE) is defined by Chile’s energy ministry as energy derived from solar, wind, small-hydro (less than 20MW), biomass, biogas, geothermal and marine sources. The abundance of these resources along Chile’s varied geography has inspired confidence in Michelle Bachelet’s government to set a target of acquiring 70% of its energy from renewable source by 2050. While an ambitious goal, their confidence is not misplaced. In a recent tender by the Chilean National Energy Commission for contracts to supply 1,200 gigawatt hours of energy to unregulated customers in Chile, wind and solar outbid coal and fossil fuels with lower prices to win 100% of the contracts. With such promising economics, foreign and domestic capital has poured into the country’s renewable sector, which saw $3.4 billion in investment in 2015, up 141% from the previous year. Chile’s renewable energy market is changing the game and has placed itself at the forefront of the global effort to mitigate climate change.
With its infamous winds, dense forests, and wild rivers, Patagonia’s rich resources hold much promise for contributing to Chile’s efforts to combat climate change in the energy sector. Yet despite the disproportionate impact that climate change might have on such a pristine and environmentally sensitive part of the world, National Energy Commission (CNE) statistics indicate that Chilean Patagonia accounts for only 5.1% percent of Chile’s total installed NCRE capacity (4% in Los Lagos; 1% in Aysen;. 1% in Magallanes).  Patagonia’s relationship with non-conventional sources of energy is complicated by the fact that its population centers are dispersed among four isolated and independent grids and the existence of poorly targeted fossil fuel subsidies. While there are challenges to overcome to integrate more renewables into the energy matrix, Patagonia has an abundance and diversity of renewable energy sources that could allow the region to become energy independent and 100% carbon neutral. The following case studies demonstrate Chilean Patagonia’s renewable energy potential.
Possessing some of the fiercest and most consistent winds in the world, the Chilean coast from Puerto Montt south represents a grand opportunity for wind energy. Wind projects in the region have reported capacity factors approaching 60% while the average for the rest of the world ranges between 35-40%. (Capacity factor is the ratio of actual output to theoretical potential output should it operate continuously, essentially a measure of availability; base load power like gas and coal operate at a 85% capacity factor).
Aysen is the location of Chile’s oldest wind project, Alto Baguales, while Los Lagos has the most potential future activity according to the Ministry of Energy’s December 2015 report on development activity. With 3.4 MW of rated capacity, Alto Baguales supplies 55% of Coyhaique’s power while the remainder is generated from diesel. Due to the fact that the region is connected to the SIC grid where projects can access competitive power tenders in unregulated markets, Los Lagos has seen an explosion of wind energy project planning. The region currently has almost 840MW of wind projects in the development pipeline. Wind Park Chiloé (Parque Eolico Chiloé) recently received its environmental approval in September of 2015 and contemplates the installation of 42 turbines with a total capacity of 100.8 MW.
Lastly, wind energy has finally appeared in Magallanes, a region that formerly generated 100% of its electricity from fossil fuels. In 2015, the Canadian petrochemical company Methanex sold its 2.3 MW wind project to private owners that will connect the project to the grid, potentially paving the way for other independent renewable power producers to do the same in the future. After nearly a year long study on all the energy resources available in Magallanes, the University of Magallanes’ Center for the Study of Energy Resources (CERE) concluded that wind presents the greatest opportunity for diversifying the region’s energy matrix. CERE’s Maria Luisa Ojeda writes, “At this time, of all renewable energy resources available in the Magallanes Region, wind is the one with a best perspective. This includes Natales where we finished our measurements and observed winds of up to 9 m/s.”
Generated by harnessing the power of moving waves and shifting tides, marine energy is perhaps the most exciting source of non-conventional energy in Patagonia. According to a recent study commissioned by the British Embassy in Santiago, Chile’s 4,000 kilometers of coastline and consistent waves could provide more total wave energy than even its world renowned solar resources.
While the Los Lagos region has the most consistent and powerful waves in the country, the extreme south with its particular ocean geography and relatively extreme tidal differentials represents the greatest opportunity for tidal energy. According to the same study, the Straights of Magellan followed by the Chacao channel, which separates Chiloé from mainland Chile, are the areas of greatest tidal energy potential in Chile. Owing to the fact that the technology is still pre-commercial, activity has focused mainly on the identification of sites and measurement of potential by various research universities.
Recognizing the importance of accelerating the exploration of this vital resource, Chile’s government recently formed an agreement with the engineering company DCNS SA and the Italian company Enel Green Power S.p.A. to build a Marine Energy Research and Innovation Centre (MERIC) to help Chile identify the first potential marine energy sites and catalyze technology transfer. As costs drop and knowledge grows, energy from the waves and tides could form an important source of electricity for Patagonia’s population centers and some of the more isolated coastal communities as alternative to diesel.
The process of capturing the energy stored in plant and organic matter is perhaps the world’s oldest renewable technology. When the forest-to-wood product value chain is managed according to environmentally responsible harvesting plans and standards, it creates opportunities for forest and sawmill residues to be sustainably used as fuel for carbon-neutral power. Compared to other non-conventional energy sources such as the wind and sun that produce electricity intermittently, the great advantage of biomass power is capacity factors approaching 90%, allowing biomass to serve as a base load power. According to research performed by Chile’s forestry authority, CONAF, the regions of Los Lagos, Aysen, and Magallanes possess nearly 4.5 million hectares of productive forest capable of sustainably providing over 1,650 MW of electricity through careful forest management. Despite this potential, there are no biomass power projects in Patagonia and many people tend to view biomass as only a source of firewood, which is often collected and burned in unsustainable ways.
In an attempt to provide a model of sustainable biomass power, the forestry company Monte Alto Forestal is currently seeking to develop a 10MW biomass power project on the outskirts of Puerto Natales. Employing $480,000 in financing provided by the United States Trade and Development Agency (USTDA) due to the project’s potential environmental, social and economic benefits to the region, in February of 2016 the company completed a feasibility study that demonstrated the project’s technical and economic viability. The findings indicate that the project could decrease the region’s emission of carbon by nearly 35,000 metric tonnes per year while saving Chilean tax payers nearly $10 MM USD per year in avoided subsidies and decreased electricity prices. Perhaps more critically, it could serve as a template for the integration of other renewable energy projects in Magallanes, a region 99% dependent on fossil fuels.
Despite being Chile’s smallest region by population, Aysen is leading the way in the integration of renewables into its energy matrix. In 2015, Aysen derived 58% of its electricity from 25 MW of hydroelectric capacity in the region. In comparison to the megadams proposed by the now-defeated HydroAysen project, mini hydroelectric projects are less than 20MW in capacity and have much less of an impact on fragile river ecosystems. While the largest of Aysen’s projects is the 11MW Lago Atrevesado project 25 kilometers from Coyhaique, the 3MW Monreal project offers an example of how these small projects fit into the larger story of mitigating climate change. Harnessing power from the La Paloma river and delivering it to Aysen’s subsytem, Monreal applied for and received carbon credits through the Kyoto Protocol’s Clean Development Mechanism (CDM). With the most stringent standards for verifying the impact of the project, the CDM credits certify that Monreal is truly offsetting the emission of 4,786 metric tonnes per year of carbon dioxide.
While these case studies present an optimistic vision of Chilean Patagonia’s potential role in the fight against global warming, there is much to be done to bring that vision to reality. In Aysen and Magallanes, 78% of all electricity generated in 2015 came from diesel and natural gas , generating over 200,000 tonnes of carbon emissions. In Magallanes alone, nearly every megawatt-hour of electricity is derived from fossil fuels, contributing to the vast majority of the region’s carbon footprint. To meet the ambitious goals the administration has set out for incorporating renewables into the energy matrix, policy makers need to scrutinize the fossil fuel subsidies that distort electricity economics and to increase support for research that could lower the cost of promising new sources of energy such as marine energy. Given the region’s sheer abundance of sustainable energy resources and dispersed centers of energy demand, Chilean Patagonia could become an ideal proving ground for distributed, renewable energy systems.
The author, Grant Devine, is co-founder of Monte Alto Renovable, a biomass energy company in Chilean Patagonia. Currently based in Boston, he lived in Punta Arenas from 2010 to 2013 developing several sustainable energy projects with off-grid hotels.