Market Information Report: Chile

Transcription

1 July 2015 MaRS Market Insights Chile Market Information Report: Chile MaRS Advanced Energy Centre Authors: Simeran Bachra, Mieka Buckley-Pearson, Nina Da Nobrega Garcia and Meg McQuillan Project Manager: Kathleen Gnocato Supervisors: Ron Dizy and Jesika Briones

2 INFORMATION REPORT: CHILE Country Profile: Chile Country Snapshot Figure 1. Chile. Source: U.S. Department of State Population million Nominal GDP (USD) $277.2 billion GDP per capita, PPP (USD) $21,911 Major cities Santiago (capital), Vina Causino, Antofagasta, Vina del Mar, Valparaiso Official language(s) Spanish Currency Peso (CLP) Exchange rate 1 CLP = CAD Unemployment (%) 6% Major exports Copper, ores, fruit and nuts Export destinations China, United States (US), Japan Major imports Crude and refined oil, coal, gas and lubricants, machinery Import destinations US, European Union Market Information Report: Chile 2

3 INFORMATION REPORT: CHILE Executive Summary The Going Global series provides a 360-degree view of the energy system in international priority markets for export-ready Canadian energy companies. Each report not only examines the energy and electricity landscape of a particular market, but also the business environment, the social, political and legal frameworks, and the country s macroeconomic drivers. Developing In short, the analysis is meant to help companies answer two key questions: 1 Are our Canadian capabilities a good fit for the market? 2 What are the opportunities and barriers to doing business, and do the former outweigh the latter? In preparing this report, its authors examined a set of quantitative indicators adapted from third-party sources (the World Bank, the REN21, the U.S. Energy Information Administration, and the United Nations). These indicators measure six key considerations for understanding the challenges and opportunities for energy innovation in Chile: energy security and independence; quality and resilience of electricity supply; control over rising electricity costs; support for demand growth; environmental sustainability; and the business environment. In addition, the report identifies the scope of support for cleantech offered by national governments and utilities. At the beginning of each section, the authors provide a high-level qualitative assessment of the market. This research is also distilled into graphs that allow for a visual comparison of Chile s market in comparison to other priority markets, and Canada as a benchmark. The graphs are meant to provide the reader with a snapshot of where a market stands in comparison with other key markets. Each graph is followed by an analysis of the indicators, which provides more nuanced information. Notably, this analysis is taken from third-party sources and verified by energy experts in these markets. a comprehensive understanding of the barriers to deployment will provide a common understanding for future Canadian program There are limitations to design, and create the insights this type of new pathways for report can provide. The information presented is deployment of from secondary sources, and innovative there are often details that can only be gathered from a physical solutions. presence in the market. The report is therefore intended to serve as an initial resource in understanding whether a market is suitable for your startup. The report will prompt more specific questions and should be supplemented by a mission or visit to the market in question. It is also important to note that within the cleantech market, the report focuses mainly on the smart grid, and does not discuss technologies related to other cleantech subsectors (e.g., waste and renewable energy). Market Information Report: Chile 3

4 Key findings Opportunities In Cleantech Limited domestic energy resources Electricity demand growing with high annual growth rates Energy crises (e.g., 2008 spike in electricity generation costs) have strengthened Chile s investment in energy security, with an emphasis on renewable energies High renewable energy (RE) potential Strong regulatory support: The National Energy Strategy prioritizes promotion of RE Sole country in Latin America requiring electricity companies to fulfill RE quota Barriers To Cleantech Lack of available financing for RE projects due to lack of understanding about non-conventional sources and unattractive prices in power purchasing agreements The structure of the electricity market is highly concentrated: 90% of electricity generation and commercialization is controlled by three companies Transmission access is challenging, with resources often located in isolated areas (Increasing connection costs) or in areas with weak lines Obtaining permits is a lengthy process (an environmental licence is common to all technologies) Business Opportunities Highest credit rating in Latin America due to macroeconomic stability and integration with global capital markets Attractive destination for foreign direct investment Lowest taxes in Latin America No minimum local participation requirement for companies incorporating in Chile Barriers To Cleantech A high degree of competition between foreign firms results in the necessity for companies to have an in-country partner A physical presence as well as relationships are key to business success Lowest share of skilled labour force relative to OECD regions kuvebsm8p8yqs7miggda&ved=0cgqq6aewcq#v=onepage&q=skilled%20labour%20force%20chile&f=false 3 Market Information Report: Chile 4

5 Table of contents Country considerations Highlights of analysis Page Methodology... 6 Chile s electricity market snapshot Overview of electricity market... 8 Electricity sector structure... 9 Market regulation...10 Security of energy supply Generation and consumption...12 Energy imports and exports...13 Proven reserves...13 GDP growth...14 Network connectedness...15 Quality and resilience of electricity supply Access to electricity...17 Reliability/quality...18 Resilience...19 Value lost...19 Exposure to severe weather...19 Efficiency of energy supply (control over rising electricity costs) Wholesale market prices...21 Household prices...21 Industry prices...22 Power transmission and distribution losses...22 Support for demand growth Urban population growth...24 Change in electricity demand...25 Environmental sustainability Renewable energy capacity...27 Pollution levels...28 Climate change targets...28 National strategy for renewables...28 Smart grid overview...28 Business environment Corruption and government response...30 Ease of doing business...30 Political stability...31 Foreign direct investment...31 Financial system overview Foreign policy...32 Canada-Chile relations...32 US-Chile relations...33 Infrastructure...33 International organization membership and engagement...33 Government and regulatory environment Financial incentives for renewables...35 Legislation and programs...36 Appendix Administrative structure: Chile Institutions in the electricity sector...42 Additional resources...43 Market Information Report: Chile 5

6 Methodology This report looks at Chile from the standpoint of six national energy considerations and measures the support for the adoption of innovation energy technologies within Chile s government and major utilities. The purpose of this analysis is to help Canadian cleantech companies identify potential opportunities and understand barriers to energy innovation in Chile. The report assesses six challenges (or, country considerations ) using a total of twenty-seven metrics (see table below). To remove any subjectivity or bias in our depiction of the indicators, they are presented as raw data obtained from trusted third-party sources - including the World Bank, International Energy Agency (IEA) and U.S. Energy Information Administration (EIA) - and compared to other priority markets for reference. Each challenge is represented visually and assessed qualitatively in its respective section of the report. The analysis demonstrates areas of opportunity, as well as challenges, in deploying cleantech in Chile. Canada is referenced in each chart as a benchmark for Canadian entrepreneurs to contextualize each comparison market. Note: The source of each metric has been hyperlinked in the table below. Consideration Metric Description SECURITY OF ENERGY SUPPLY QUALITY AND RESILIENCE OF ENERGY SUPPLY Total electricity generation Electricity consumption Proven fossil fuel reserves Net electricity imports GDP growth Access to electricity Duration of interruptions Frequency of interruptions Value lost due to outages World risk index rating Residential electricity price Industrial electricity price Electricity, billion kilowatt hours Gross production + imports exports losses Billion barrels Annual percentage growth rate of GDP at market prices Annual percentage growth rate of GDP at market prices Percentage of population with access to electricity Average outage duration for each customer Average number of interruptions that customer experiences Percentage of sales lost due to power outages Measures susceptibility, coping capacities, adaptive capacities, exposure to national hazards and vulnerability Climatescope average commercial electricity prices Climatescope average industrial electricity prices EFFICIENCY OF ENERGY SUPPLY (control over rising costs) ENVIRONMENTAL SUSTAINABILITY Electricity transmission and distribution losses PM10 particulate levels Climate change targets Losses in transmission between sources of supply and points of distribution and in distribution to consumers, including pilferage (percentage of output) PM10 measures fine suspended particulates <10 microns in diameter. Estimates represent annual exposure level of the average urban resident to outdoor particulate matter Official climate change targets (such as reduction in greenhouse gas emissions) Renewable energy target Percentage of total energy mix by 2020 Targeted share of renewables Share of renewables Targeted share of renewables in electricity generation by 2020 (excluding hydropower) Share of renewables in electricity generation (excluding hydropower) Market Information Report: Chile 6

7 Consideration Metric Description SUPPORT FOR GROWING ENERGY DEMAND QUALITY OF BUSINESS ENVIRONMENT GDP growth Urban population growth Per capita usage Ease of doing business Corruption Foreign direct investment Regulatory quality Political stability Rule of law Roads paved GDP growth, annual percentage Urban population refers to people living in urban areas as defined by national statistical offices, annual percentage Measures year-on-year change in energy use (kilogram of oil equivalent per capita) The World Bank Group ranks economies on ease of doing business from 1 to 189. High scores (where 1 is the highest) mean the regulatory environment is more conducive to starting and operating a local firm Transparency International Corruption Perceptions Index ranks countries based on how corrupt a country s public sector is perceived to be. Scores: 0 (highly corrupt) to 100 (very clean) Net inflows of investment to acquire a lasting management interest in an enterprise operating in an economy other than that of investor. Net inflows (new investment less disinvestment) in reporting economy from foreign investors Governance indicator capturing perceptions of the likelihood of political instability and/or politically motivated violence, including terrorism Governance indicator capturing perceptions of the ability of the government to formulate and implement sound policies and regulations that permit and promote private sector development Governance indicator capturing perceptions of the extent to which agents have confidence in and abide by the rules of society (quality of contract enforcement, property rights, the police, and the courts) as well as the likelihood of crime and violence Infrastructure indicator, roads paved (percentage of total roads) The report also assesses the degree of support for cleantech in Chile, relative to other countries. To gauge support levels within the government of Chile, the report looks at the factors outlined in the table below. GROUP MEASURING SUPPORT Description GOVERNMENT/ REGULATORY SUPPORT National strategy for renewables Financial incentives Public financing Regulatory policy Is there a national strategy for renewables? Capital subsidies, grants or rebates; tax incentives; energy production payments Public investment through loans or public competitive bidding Feed-in-tariff programs, utility quota obligations, net metering, tradable renewable energy certificates, obligations and mandates Identifying and understanding Chile s relative energy considerations and levels of support can help Canadian cleantech companies to identify key opportunities and recognize barriers to doing business in Chile. Market Information Report: Chile 7

8 Chile s electricity snapshot OVERVIEW OF ELECTRICITY SYSTEM Chile has a privatized electricity market, in which generation, transmission and distribution are all financed by private investment. Generation and commercialization activities are competitive markets, while the transmission and distribution segments of the market are subject to a regulatory framework that establishes investment requirements, sets prices for access, and ensures third-party access. 4 The sector is divided into four distinct (non-connected) power systems, as shown in Figure 2. Sistema Interconectado del Norte Grande (SING) Installed capacity: 4607 MW Annual generation: GWh Maximum demand: 2226 MW Average load growth : 7.2% Regulated/non-regulated clients: 10%/90% 100% thermal 49% coal 42% natural gas 9% oil Demand is 85% mining industry Population: 6.3% Aysén Installed capacity: MW MW Annual generation: GWh GWh Maximum demand: MW MW Regulated clients: clients: 100% 100% Population: Population: 0.6% 0.6% Sistema de Magallanes Installed capacity: 118 MW Annual generation: 291 GWh Maximum demand: 51 MW Regulated clients: 100% Population: 0.96% Sistema Interconectado Central (SIC) Installed capacity: MW Annual generation: GWh Maximum demand: 7282 MW Average load growth : 5.1% Regulated/non-regulated clients: 55%/45% Thermal/hydro/others: 51%/42%/7% Demand: 92.2% of total population Figure 2. Chilean electricity system. Source: Ministerio de Energia, Chile and Centro de Despacho Economico de Carga, Sistema Interconectado Central (2015) 4 Market Information Report: Chile 8

9 ELECTRICITY SECTOR STRUCTURE Figure 3 illustrates the structure of the electricity market. Government agencies are indicated by light blue shading and private companies by no shading. POLICY REGULATION GENERATION TRANSMISSION DISTRIBUTION National Energy Commission (CNE) National Energy Commission (CNE) Superintendency of Electricity and Fuels (SEC) 33% ENDESA 42% TRANSELEC 44% CHILECTRA 16% AES Gene 14% CGE 24% CGE Tariffs: National Energy Commission (CNE) 16% Colbum 44% Others 42% Others 35% Others Figure 3. Structure of the electricity sector. Source: Vagliasindi and Besant-Jones Power Market Structure: Revisiting Policy Options Hydro Coal HFO/PetCoke Chile s generation mix has changed significantly since 1999, with a rapid expansion of natural gas and a steep decline (10%) in coal-based production between 2000 and Between 2007 and 2008, Argentina restricted its natural gas exports to Chile, causing Chile to boost its domestic exploration and production of oil and coal. 6 Gas/Diesel Oil Natural Gas Wood Figure 4. Breakdown of electricity generation by fuel type. Source: IEA 2012 Besant-Jones Power Market Structure: Revisiting Policy Options Market Information Report: Chile 9

10 MARKET REGULATION The National Energy Commission the regulator in charge of setting distribution and transmission tariffs was created through Law in Following this, Chile s power sector underwent liberalization beginning with the 1982 Electricity Law, which separated the provision of electricity into three distinct activities: generation, transmission and distribution. The concept of two categories of consumers was also introduced with the Electricity Law, which reflected: 1 Regulated customers: Customers of local distribution companies who pay regular distribution prices plus a node price of energy, based on the marginal cost of energy, a capacity charge and transmission charge 7 2 Non-regulated customers: Customers with maximum demand above 2 MW that are free to negotiate directly with generators for power supply The Electricity Law also introduced a spot market with marginal pricing that offers exclusive access to generators, and opened the power sector to private investment. Between 1983 and 1989, a wave of privatization of state-owned electricity utilities occurred. 8 Generation is organized around the four grid systems outlined in Figure 2. These systems are not integrated, due to the long distances between them. While electricity companies are unregulated, they are obliged to organize their operations through the CDEC (Economic Dispatching Center), which is an independent entity made up of members from each utility to ensure that the grid is efficient and supply is secure. 9 Generators operating in each regional power market declare their availability and marginal operating costs every hour to set the spot price. Regulated prices for electricity generated are determined based on expected spot prices over a four-year period and this price is calculated and remains fixed for six months in April and November. 10 Chile s regulatory framework has weaknesses that have been highlighted by drought events and unexpected supply restrictions (in 2004, Argentina reneged on its natural gas contracts with Chile). As a result of these events, Chile has transitioned to predominantly coal and diesel-based generation. Fragilities in the regulatory framework combined with delays in important electricity infrastructure projects have lead to increasing public concern about the security of Chile s energy matrix. 11 As a result, the Electricity Act has been amended three times in 1999, 2004 and 2005 after the country witnessed electricity shortages. These amendments, most importantly Law and Law , are detailed in Table 1 below. Through its National Energy Strategy, the government of Chile has committed to the long-term diversification of the country s energy matrix and to creating the conditions to make energy cleaner and safer. The strategy prioritizes the incorporation of non-conventional renewable electricity (NCRE) sources and the development of electricity. NCRE sources defined by Chilean law include biomass, geothermal, small hydro plants ( 20 MW), solar, tidal and wind. Table 1. Development of Chile s electricity sector following deregulation 12 LAW GAS IMPORT PROTOCOL 1995 PRIVATIZATION 1995 DROUGHT Creates the Superintendency of Electricity and Fuels, which is responsible for compliance Gas import protocol begins with Argentina (100% dependency) Privatization of generation, distribution and transmission continues Worst drought in history causes energy crisis and the government response is electricity rationing 1999 In response to electricity rationing, a law was enacted forcing distributors to compensate customers for energy losses during electricity rationing. This created incentives to assure supply REDUCTION OF GAS IMPORTS 2004 LAW LEY CORTA 2004 LAW LEY CORTA II 2005 Following Argentine power cuts, Argentina reduced gas exports to Chile causing the country to substitute fuel oil for gas in the midst of a drought. This led to the construction of Chile s first liquid natural gas regasification plants in 2007 Changes calculation of transmission tariffs to address expansion issues, and creates a panel of experts for dispute resolution of technical issues Improves competition conditions in generation activities, distribution agents are required to buy energy through public auctions munoz_and_wolak.pdf 9 Electricity_Sector_Restructuring_in_Chile.pdf National-Energy-Strategy English.pdf e+frequency+of+interruptions+chile&source=bl&ots=gnjhllgo7j&sig=ahwvkwmn_ FXcp05nw5e7izP3JHI&hl=en&sa=X&ei=YgoTVdfbJIifyQTEmIH4BA&ved=0CDMQ6AE waw#v=onepage&q&f=false Market Information Report: Chile 10

11 Security of energy supply Indicators Total generation (billion kilowatt-hours) GDP growth (2013) 4.1% Net electricity imports (2012, billion kilowatt-hours) 0 Total consumption (billion kilowatt-hours) Reserves (billion barrels) 0.2 Electric network connectedness (low-high) Low SUMMARY OF KEY FINDINGS Security of energy supply is the resilience of the energy system to unique and unforeseeable events that threaten the physical integrity of energy flows or that lead to discontinuous energy price rises, independent of economic fundamentals. (OECD) Relative to Canada, Chile s energy supply is insecure, falling behind China and on par with Colombia. Contributing factors include poor fossil fuel reserves, resulting in Chile s reliance on imports to generate around 60% of its energy. Due to low regional network connectedness, Chile is unable to import or export much electricity, and instead relies on fossil fuel imports and domestic generation. Alongside dependence on imports for supply, demand in Chile is projected to increase 6-7% by These factors create an opportunity for greater integration of renewables, which have the potential to reduce Chile s exposure to global market forces and contribute to a more secure energy supply. TOTAL ELECTRICITY GENERATION AND CONSUMPTION (BILLION KILOWATT-HOURS, 2014) Chile Colombia Canada Generation Consumption Figure 5. Total electricity generation and consumption, billion kilowatthours, Source: EIA and IEA. Note: Data for China not available. Market Information Report: Chile 11

12 Table 2. Electricity imports and exports, billion kilowatt-hours, Source: EIA (billion kwh, 2012) Country Electricity imports Electricity exports Electricity net imports Canada Chile China Colombia PROVEN FOSSIL FUEL RESERVES (BILLION BARRELS) Canada Colombia China Chile Figure 6. Proven fossil fuel reserves, billion barrels, Source: EIA. GENERATION AND CONSUMPTION According to the U.S. Energy Information Administration, in 2013 Chile had GW of installed electricity generation capacity (up from 16,970 MW in 2011 it has quadrupled since then). Generation from NCRE sources almost tripled in 2014 and reached 455 GWh in December Its main sources were wind (172 GWh), followed by bioenergy (104 GWh), mini hydro (89GWh), and solar PV (89 GWh). 13 The Central Interconnected System (SIC) provides 75.2% of the electricity consumed in Chile, and reaches the majority of Chile s citizens (around 46,095 GWh). In addition, 23% of Chile s energy consumption is concentrated in the Northern Interconnected System (SING) (generating 15,872 GWh). The SING is in charge of providing electricity to the country s largest consumer, which is the mining industry, largely located in the north. In 2014, Chile s electric consumption was billion kw. 14 Compared to its neighbours, it is the fifth-largest consumer of energy in South America. 15 But its energy demand is expected to increase significantly in the coming years. Estimates project that electricity consumption will increase from 6% to 7% from 2012 to 2020, 16 and that the country needs to increase its energy supply by 8,000 MW of new projects to meet this demand. Gross Generation (GWH) 70,000 60,000 50,000 40,000 30,000 20,000 10, Wind power Derivatives Biomass Coal Natural Gas Hydroelectric Figure 7. Generation by the SIC and the SING, Source: Energy Ministry, CDEC-SIC, CDEC-SING p Market Information Report: Chile 12

13 ENERGY IMPORTS AND EXPORTS Chile imports 60% of its primary energy, most of which comes from Argentina in the form of natural gas. 17 This heavy reliance on energy imports puts the country at risk of global market trends and uncontrollable climate events. This dependence resulted in a crisis in when Argentina stopped exporting oil to meet domestic demand. OIL As a relatively small producer of fossil fuels, Chile depends heavily on energy imports. In 2013, Chile imported over 300,000 bbl/d of oil, half of which was refined petroleum products and the other half crude oil. Its imports of crude oil are overall regional, from Ecuador, Brazil, Colombia and Argentina. However, most its refined petroleum originates from the United States (143,000 bbl/d in 2013). 18 NATURAL GAS In 2013, Chile imported 140 Bcf of natural gas, most of which was in the form of liquefied natural gas originating from Trinidad and Tobago, Qatar and Yemen. It also imports most of its natural gas from Argentina. Chile plans to increase natural gas supplies in order to meet its growing demand. It currently has two regasification terminals: Mejillones, located in the north, and Quintero, located near urban centres Valparaíso and Santiago. 19 It is looking into other import options, including LNG from the US and other South American countries, mainly made possible by the expansion of the Panama Canal. ELECTRICITY In 2013 Chile had GW of installed electricity generation capacity, one third of which is attributable to hydroelectric plants. Wind and solar capacity have both grown significantly and are expected to have substantial potential. Most of Chile s non-hydroelectric electricity supply is provided by fossil fuels. According to statistics from the Comisión Nacional de Energía, power generation from coal and natural gas has increased in recent years as oil-fired generation has fallen. 20 COAL Chile imports most of the coal it consumes (97% in 2012). In an attempt to curb its dependence on coal imports, Chile approved the Mina Invierno coal-mining project, which began production in 2013 and is expected to meet 30% of Chile s domestic demand eg_main_ pdf PROVEN RESERVES Chile is poor in fossil fuel resources. In 2013, it was estimated that Chile s had 15 million bbl/d of proven oil reserves. For natural gas, its current proven reserves are bcm. HISTORY CHILE CENTRAL & SOUTH AMERICA WORLD RANK CHILE Proved Reserves (Billion Barrels) , Proved Reserves (Trillion Cubic Feet) , Figure 8: Chile s proved oil reserves (in billion barrels) and proved natural gas reserves (in trillion cubic feet) Source: U.S. Energy Information Administration, Chile (2013) Chile is also home to large shale reserves but its current ability to tap in to this energy source is limited. Moreover, shale gas is located far from urban and commercial centres so it would be costly to ship. Market Information Report: Chile 13

14 GDP GROWTH Demand for electricity may be positively correlated with income and negatively correlated with price. This has been found to be true in an analysis of GDP and price coefficients conducted by the World Bank Group for Latin American countries, including Chile. Between 1986 and 2010, Chile grew at a rate of 5.4%. From 2010 to 2011, Chile s economy experienced one of the fastest growth rates in Latin America, 6.3% year-on-year. However, in 2014, the Chilean economy grew by 1.4%, its lowest rate in the previous five years. One factor that explains this slowdown is China s deceleration, which translates into lower copper and other metal prices, and which impacts Chile s main export sector. Despite sluggish growth in 2014, estimates suggest that the GDP will grow by 2.8% in 2015 and 3.7% in Future growth will be driven by increasing domestic demand and by favourable labour market conditions Chile s GDP is estimated to grow by 3.7% in 2016 GDP % GROWTH, ANNUAL e 2015f 2016f 2017f Chile Latin American & the Carribean Figure 9: Projected GDP growth, : Latin America and the Caribbean, and Chile. Source: World Bank Country Data Market Information Report: Chile 14

15 NETWORK CONNECTEDNESS Chile s electricity system features two major regional grids, the Northern Interconnected System (SING) in the north, and the Central Interconnected System (SIC) in the centre of the country. An additional eleven isolated mediumsized systems (located in the south, known as the Aysen and Magallanes systems) account for a combined 0.8% of the country s electricity production. 23 Because of Chile s geography, it is impractical and expensive to connect these four distinct networks to one another. Transelec, the main electricity transmission company in Chile, owns 50% of SIC transmission capacity. The SING power system is owned by several companies that each own around 10% to 20% of the transmission capacity. In 2000, Transelec suggested connecting the two major networks but later determined that it was not financially viable. Furthermore, reports suggest that connecting renewable energy generation projects to Chile s electrical grids remains challenging. 24 The government has recently suggested it will play a role in creating utility corridors to facilitate the integration of renewables into the grid Interconnection in construction Interconnection currently in Planned interconnection Studies Figure 10: Planned interconnection lines between Bolivia, Peru and Chile. Source: Meeting the electricity supply/demand balance in Latin America and the Caribbean, The World Bank, Market Information Report: Chile 15

16 Quality and resilience of electricity supply Indicators Average frequency of interruptions (per connection) 10 Average duration of interruptions (hours per connection per year) 16 Value lost due to electrical outages (% of sales) 1.3% Exposure to severe weather High Access to electricity (% of population) 99.6% SUMMARY OF KEY FINDINGS While the vast majority of Chilean residents have access to electricity, affordability remains a considerable issue particularly in rural and remote areas. Data on the duration and frequency of interruptions in Chile, last available in 2005, indicates that the average duration of electricity interruptions per connection is nearly three times as high as the rates in Canada. The IEA has reported that in Chile, electricity generation is fairly resilient, but transmission and distribution networks are more fragile. Despite being highly exposed to severe weather, ranking 26th on the World Risk Index Rankings, Chile has developed coping and adaptation mechanisms to protect the electricity supply. Though frequency of interruptions per connection per year are five times the Canadian rate, the value lost due to electrical outages accrues to only 1.30% of sales (on par with China). AVERAGE DURATION OF ELECTRICITY INTERRUPTIONS PER CONNECTION (HOURS) Colombia Chile China Canada Figure 11. Average duration of electricity interruptions per connection (hours per customer). Note: information for Chile is out of date (2005) as recent data is not readily available. Source: World Bank Group Benchmarking Analysis of Electricity Distribution in Latin America and the Caribbean, and the University of Waterloo (2014). Market Information Report: Chile 16

17 AVERAGE FREQUENCY OF INTERRUPTIONS PER CONNECTION (NUMBER OF OCCURRENCES PER YEAR) VALUE LOST DUE TO ELECTRICAL OUTAGES (% OF SALES) Canada 0.13% 15 China 1.30% Chile 1.30% Colombia 1.80% % 1.0% 1.5% 2.0% 0 Colombia Chile Canada Figure 13. Value lost due to electrical outages (as a percent of sales). Source: World Bank, Figure 12. Average frequency of electricity interruptions per connection (number of occurrences per year). Note: information for Chile is from 2005 as recent data is not readily available. Source: World Bank Group Benchmarking Analysis of Electricity Distribution in Latin America and the Caribbean, and the University of Waterloo (2014). percentage of rural households with electricity increased by 48% between 1982 & 2002 Table 3. World Risk Index Rankings, measuring exposure to severe weather (where 1 is greatest exposure). Source: United Nations University, Institute for Environment and Human Security. Country Rank Canada 143 Chile 26 China 78 Colombia 79 ACCESS TO ELECTRICITY Between 1982 and 2002, the percentage of households with electricity increased by 48% in rural areas and by 3% in urban areas. 25 In order to ensure access in remote regions, the government and private sector established a rural electrification program to provide investment subsidies of roughly US$1,500 per household to encourage electricity coverage in remote areas. While the electricity network has been extended across the country, affordability remains an issue Market Information Report: Chile 17

18 RELIABILITY/QUALITY 75 - South America (GRP2) Recent data measuring the reliability of Chile s grids is not readily available. Average duration of interruptions per connection in Chile rose slightly between 2000 and 2005, with interruptions per connection totalling 13 hours in This is roughly similar to the duration of interruptions per connection experienced in Brazil over the same period, but significantly longer than in Argentina or Mexico. Data on the average frequency of interruptions per connection in Chile was only available for , at which time Chile s average was 10 interruptions per connection. Figure 16 plots the most recently available Chilean data on the System Average Interruption Frequency Index (SAIFI) and the average outage duration per customer served (SAIDI) against the operating expenditure per unit of energy sold. Chile s SAIDI decreased between 2001 and 2005, although the duration rose slightly between 2003 and BOL CHL year ECU - South America (GRP2) PRY URY Figure 14. Average duration of interruptions per connection (hours/year). Source: LAC Electricity Benchmarking Database, The World Bank year BOL CHL ECU PRY URY Figure 15. Average frequency of interruptions per connection (number per year), Source: LAC Electricity Benchmarking Database, The World Bank Numbers/customer, hours/customer $ cents/kwh SAIFI SAIDI Total opex per unit sold Figure 16. Quality of electric service in Chile. Source: Vagliasindi, Besant-Jones. Power Market Structure: Revisiting Policy Options Market Information Report: Chile 18

19 RESILIENCE According to a 2012 IEA report, electricity generation in Chile is fairly resilient, while transmission and distribution networks are more fragile due to the radial nature of the two major power systems. 27 The systems have limited transfer capability in place with some network paths being served by single lines, exposing the system to weaknesses. A 2011 trunk transmission study trunk studies are conducted every four years identified and advised on new regulated investment to be undertaken in Chile s transmission infrastructure. Once identified in these trunk studies, projects are tendered and winning tenderers have five years to complete their project. After the 2011 study, 21 projects worth approximately US$880 million were tendered, an investment level that more than doubles average annual transmission system investment levels. 28 Several studies on the integration of Chile s two major power systems (the SIC and the SING) have been conducted in the past. These studies have concluded that the economic benefits are insufficient to justify a regulated investment. VALUE LOST Technical and non-technical (theft) losses have fallen sharply in Chile since Value lost to electrical outages (in terms of percentage of total sales) was 1.6% in 2006, which fell to 1.3% by Value lost to electrical outages was 1.6% of total sales in 2006 & 1.3% in 2010 EXPOSURE TO SEVERE WEATHER The World Risk Index measures country s vulnerabilities and exposures to severe weather, disaster risk and environmental degradation. According to the World Risk Report (2012), relative to other countries, Chile has a very high level of exposure to natural hazards, including earthquakes, storms, floods, droughts and sea level rise. Chile is exposed to relatively frequent droughts, which increases the likelihoods of blackouts in the country. Blackouts such as the one of September 2011 have a major impact on the country s mining and, specifically, copper operations. State copper company, Codelco, lost more than 1,400 tonnes in output in 2011 due to the drought. 30 Chile ranked 19th out of 173 countries on the World Risk Index. Although it is very exposed to natural hazards, the World Risk Report sees that it has generally effective coping and adaptive capacities. There are largely due to effective governance and a low level of susceptibility, given the country s significant experience in responding to severe weather and natural hazards. Chile s scores per the 2012 World Risk Report 31 Exposure = 30.95% (very high): Related to exposure of population to natural hazards, earthquakes, storms, floods, droughts and sea level rise Susceptibility = 20.95% (low): Measures public infrastructure, nutrition, income and economic framework Lack of coping capacity = 57.84% (low): Measures governance, medical care and material sector Lack of adaptive capacity = 40.01% (low): Related to future natural events and climate change Vulnerability = 39.6% (low): Sum of susceptibility, lack of coping capacities and lack of adaptive capacity enc=info%3aofi%2fenc%3autf-8&rfr_id=info:sid/summon.serialssolutions.com&rft_ val_fmt=info:ofi/fmt:kev:mtx:journal&rft.genre=article&rft.atitle=chile+faces+blackout+ risks+on+frail+grid&rft.jtitle=the+globe+and+mail&rft.date= &rft.issn= &rft.spage=b.6&rft.externaldbid=gbml&rft.externaldocid= Market Information Report: Chile 19

20 Efficiency of electricity supply (Control over rising electricity costs) Indicators Residential prices (US$/MWh) $ Industrial prices (US$/MWh) $ Power transmission and distribution losses (2011) 7% SUMMARY OF KEY FINDINGS Chile s residential and industrial energy prices are some of the highest in Latin America, and much higher than other member countries of the Organisation for Economic Co-operation and Development (OECD) such as Canada. Prices are impacted by lack of connection between the two main regional grids, as well as the varying prices of imports and availability of hydropower resources. Chile s transmission and distribution losses have improved significantly in the past few years. At 7%, Chile s losses are less than half of the Latin American average (16%), and are approaching Canada s average which sits at just under 6 per cent. While relatively low transmission and distribution losses help control electricity costs, high prices driven by other factors may motivate consumers to seek alternative energy sources, creating opportunities for cleantech companies and innovative energy technologies. ELECTRIC POWER TRANSMISSION AND DISTRBUTION LOSSES (% OF OUTPUT) Canada Chile Latin America & Caribbean Figure 17. Transmission and distribution losses, as percent of output ( ). Source: World Bank Group. Market Information Report: Chile 20

21 WHOLESALE MARKET PRICES Electricity prices in Chile are among the highest in Latin America. Prices in the spot market and for regulated and non-regulated clients are highly variable and are impacted by changes in gas supply from exporters and the availability of hydropower resources. 32 Prices are also impacted by the lack of connection between the two main regional grids (the SIC and northern SING). In March 2013, System, a private consultancy in Chile, reported that the average market price was US$53.35 kwh, representing a -2.10% variation over the node price in October HOUSEHOLD PRICES AVERAGE INDUSTRIAL ELECTRICITY PRICE (USD/MWH) $160 $140 $120 $100 $80 $60 $40 $20 $0 Figure 19. Average industrial electricity price, Source: Climatescope. AVERAGE RESIDENTIAL ELECTRICITY PRICE (USD/MWH) $250 $ $ $ $69.89 Colombia Chile China Canada Chile s average household electricity price in 2014 was US$188.19/MWh compared with US$192.25/MWh in Colombia, US$141.52/MWh in Peru, US$120.43/MWh in Brazil and US$44.86/MWh in Argentina. In 2010, Chilean household electricity prices decreased by 2% while OECD prices rose 1.8%. Despite this decrease, Chilean household electricity prices have been higher than OECD prices since 2007, and in 2010, were approximately 30% higher than the OECD average (see Table 5). When electricity prices are converted with purchasing power parities, the difference in household electricity prices in Chile becomes even starker compared to the OECD average (see Table 6). $200 $150 $100 $50 $0 $ $ $82.05 Figure 18. Average residential electricity price, Source: Climatescope and IEA. $94.55 Colombia Chile China Canada Table 4. Electricity prices for households in US dollars/mwh electricity prices in Chile are among the highest in Latin America 32 National-Energy-Strategy English.pdf pdf Chile Canada OECD Source: OECD/IEA 2012 Energy Prices & Taxes Table 5. Electricity prices for households in US dollars/mwh, converted with PPP Chile Canada OECD Source: OECD/IEA 2012 Energy Prices & Taxes Market Information Report: Chile 21

22 INDUSTRY PRICES Chile s average industrial electricity price in 2014 was $150.67, compared with $ in Colombia, $ in Brazil, $76.11 in Peru and $34.56 in Argentina. 34 Table 6. Electricity prices for industry in US dollars/mwh Chile Canada OECD Source: OECD/IEA 2012 Energy Prices & Taxes POWER TRANSMISSION AND DISTRIBUTION LOSSES Transmission and distribution losses as a percentage of total output have decreased between 2000 and 2010 in Chile (see Figure 20). In 2011, transmission losses in Chile were 7%, which is lower than the Latin American country (LAC) average of 16%, and lower than losses in Colombia, Brazil and Argentina Chile s average industrial electricity price in 2014 was $ % of Output Figure 20. Transmission and distribution losses as percentage of total output, Market Information Report: Chile 22

23 Support for demand growth Indicators Urban population growth 1.1% GDP growth (annual) 4.1% Per capita usage (year-on-year change) 40 ktoe (2%) SUMMARY OF KEY FINDINGS Eighty-nine per cent of Chile s population lives in urban centres, making it one of the most urbanized countries in the region and globally. Forty-one per cent of Chile s urban population lives in Santiago alone, creating significant energy demand in the nation s capital. It is predicted that Chile s urban population will continue to grow, reaching 93% of the total population by In tandem with population growth and economic expansion, energy demand is expected to grow 6-7% per year through To meet growing demand, Chile will need to add over 8 GW of new generation. The government is actively encouraging the integration of renewables to support this growth and foreign investment in this sector. 89% of Chile s population lives in Urban Centres Table 7. Support for electricity demand growth. This table considers six indicators that offer insights into projected changes in demand for electricity. Source: World Bank Group. Country Urban population growth (2013) Economic growth (GDP, 2013) Per capita energy use 2007 (kg of oil) Per capita energy use 2012 (kg of oil) Per capita energy use: difference Canada 1.4% 2.0% % Chile 1.1% 4.1% % China 2.9% 7.7% % Colombia 1.7% 4.7% % Market Information Report: Chile 23

24 URBAN POPULATION GROWTH Currently 89% of Chile s total population lives in urban areas. Of this number, 36% reside in urban agglomerations of more than 1 million people, according to 2013 data from the World Bank. The number of those living in urban centres is expected increase by 1.1% in Furthermore, out of the country s total urban population, 41% live in Chile s biggest city, Santiago. Chile has a larger urban population than other countries in the region, including Colombia (76%), Brazil (85%) and Peru (78%). Compared to other priority markets, it has a significantly larger urban population than China (only 53% of the total population lives in urban areas) and Canada (81%). While the urban population has increased more than fourfold since 1950, urban growth rates are gradually falling and are expected to stagnate by 2050 (see Figure 22). 36 Medium-sized urban areas are growing in importance. Generally, Chile s larger cities grow faster than smaller cities, with the exception of the country s three largest metropolitan areas, Santiago, Concepcion and Valparaiso. These areas tend to grow at a relatively slower rate. The OECD describes Chile s urban growth as a mix of growth in small urban areas, suburbanization in medium and large urban areas, and urban sprawl and gentrification in Santiago. 37 URBAN POPULATION TRENDS (AS A PERCENTAGE OF TOTAL POPULATION) Figure 21. Urban population trends, measured as a percentage of total population. Source: United Nations Canada Chile China Colombia Population (millions) Urban Rural Total Figure 22. Urban and rural population in Chile, Source: United Nations 2012, World Urbanization Prospects: The 2011 Revision, un.org/unup/cd-rom/urban-rural-population.htm Market Information Report: Chile 24

25 CHANGE IN ELECTRICITY DEMAND Chile s growth in electricity demand has been significant since 2000, growing at an average rate of 4.1% per year, from less than 40 TWh in 2000 to 60 TWh in Demand is expected to grow at a faster rate, between 6% and 7% per annum through As Figure 24 shows, most of this growth will occur in the Sistema Interconectado Central (SIC). 39 It is estimated that Chile needs to add over 8 GW of new electricity generation by 2020 in order meet this demand. 40 has historically opted to ration consumers and reduce voltage. 41 The head of the industry association, Rodrigo Castillo, has described the current electricity situation in Chile as a transmission crisis, characterized by tight supply and soaring costs. 42 ELECTRIC POWER CONSUMPTION 4, Chile s 2011 peak demand was 6,881 MW from the SIC and 2,162 MW from the SING. 3, , Meeting rising demand through 2030 presents a major challenge for Chile, given that it imports most of its energy resources and is heavily reliant on fossil fuels for energy generation, which pushes up electricity prices. Furthermore, with recent blackouts, drought periods and reduction of Argentina s exports of natural gas, the government is under pressure to increase its energy production. As demand is increasing faster than supply of energy, energy policies have been considered to reduce consumption and improve efficiency. In the face of blackouts, the Chilean government kwh per capita 2, , , , Figure 23. Electric power consumption (kwh per capita). Source: UN Data SIC SING Demand (GWH) Figure 24. Expected growth in electricity demand in SIC and SING, Source: CNE and the Energy Ministry, Market Information Report: Chile 25

26 Environmental sustainability Indicators Share of non-hydroelectric renewable generation 9.15% Targeted share of nonhydroelectric renewable generation 25% (by 2025) Pollution levels (PM10) 46.2 µg/m3 (Medium) Renewable energy target (total energy mix by 2020) 20% Climate change target 20% below business as usual levels by 2020 (projected from 2007) SUMMARY OF KEY FINDINGS Chile has ambitious renewable energy and climate change targets for the next ten years, exceeding those of many of its Latin American neighbours as well as Canada. By 2025, the government seeks to nearly triple the share of non-hydroelectric renewable generation in the mix, from 9.15 to 25 per cent. They are also striving for a 20% reduction in carbon emissions by 2020 (from 2007 levels). These objectives are outlined in the National Energy Commission s National Energy Strategy: There are many initiatives underway in the energy sector to achieve these goals, including the deployment of smart metres and financial incentives for renewable energy technologies. Significant investment and increased deployment of cleantech will be required to achieve these goals. Figure 25. Targeted and actual share of renewables in electricity generation, excluding hydropower. Source: REN21 and IEA. Market Information Report: Chile 26

27 Table 8. Pollution levels, as measured by PM10 particulate (µg/m3). Source: World Bank Group. Country Canada Chile China Colombia Rank 10 (Low) 46.2 (Medium) (High) (Low) Table 9. Climate change targets and commitments. Source: Climate Action Tracker and United Nations Environment Programme. Country Rank Canada 17% below 2005 levels by 2020 Chile China Colombia 20% below business as usual (projected from 2007) levels by % C0 2 per unit of GDP below 2005 levels by 2020 None RENEWABLE ENERGY CAPACITY As of 2012, 37% of Chile s energy was produced from renewable energy sources. 43 Of this figure, 34% comes from large hydro projects, and the remaining 3% from non-conventional renewable energy (NCRE). PROJECT QUANTITIES & STATUSES In February 2015, the total installed capacity of NCRE reached MW. 44 The number of projects that are either currently under construction, approved or under evaluation (as shown in Figure 26) suggest that NCRE capacity can expect to experience a significant increase in the years to come. In terms of electricity generation, production from NCRE sources reached a total of 546 GWh in January 2015, which represented 9.15% of the total generation of the system. 45 From 2013 to 2014, solar energy capacity experienced the biggest growth. It grew from 6 MW to over 400 MW in one year, demonstrating a 10.05% increase. 46 Chile has a significant clean energy potential, especially with solar, wind and geothermal projects. Even though the southern part of the country produces little electricity, it provides high-potential renewable energy sites eg_main_ pdf 44 Figure 26. Source: CIFES, NCRE Annual Report, February eg_main_ pdf Wind Power 1,91% Conventional 90,85% NCRE 9,15% Small Hydro 2,06% Biogas 0,40% Biomass 3,12% Solar PV 1,67% Figure 27. Renewable energy generation supply mix. Source: CIFES, NCRE Annual Report, February 2015 Market Information Report: Chile 27

28 POLLUTION LEVELS Chile produced million tonnes of CO 2 in 2014 (emissions from fuel combustion only). 48 The mean annual exposure of Chile to PM10 particulate levels is µg/m3 (in 2009). Widespread deforestation and mining practices are a threat to natural resources. Air pollution is mostly due to industrial and vehicle emissions. In 2011, the Chilean government introduced emission standards for its thermoelectric plants that are the same as those applied in the European Union. 49 CLIMATE CHANGE TARGETS Chile is a party to the Kyoto Protocol and the UNFCCC. However, as an Annex II country, it has no CO 2 reduction commitments. Nevertheless, it has voluntarily committed to reducing its greenhouse gas emissions by 20% by Chile also pledged to recover 100,000 hectares of degraded soil in the next 20 years, in order to make up for significant deforestation. NATIONAL STRATEGY FOR RENEWABLES The government plans to expand its renewable energy capacity in the coming decades in order to keep up with expected rising energy demand and to reduce its reliance on imported sources of energy. Chile s National Energy Commission (CNE) has created a policy document, National Energy Strategy: , which outlines its commitment to accelerate the incorporation of NCRE sources and to strengthen the development of hydroelectricity. 50 While a significant portion of Chile s current electricity is already powered by large hydroelectric sources (34%), the government aims to increase hydroelectricity generation to 45% and to increase the share of NCRE to 10% by 2024 (as outlined in Law ). The National Energy Strategy seeks a firm commitment to energy efficiency through renewable sources. Overall, the country has set itself the goal of achieving 20% of its electricity from renewable sources by 2025 (which excludes large hydropower plants). SMART GRID OVERVIEW One of the key actions of the Chilean Energy Efficiency Action Plan is to encourage the mining sector and industrial consumers to adopt energy efficiency measures, including smart energy systems. In addition, the government is also looking to implement a large net-metering regime. This would allow both residential and industrial consumers to install these systems in their own homes and businesses. Reports indicate, as the market for distributed solar and other energy sources develops in Chile, opportunities will arise for smart grid soft ware and services firms. Deployment of smart metres has already started in Chile. CGE Group is Chile s main distribution company and is responsible for providing electricity services to 40% of the population. In 2012, the company deployed smart metres in certain neighbourhoods of Santiago. 51 Furthermore, the government plans to use smart grid technologies in the medium and long term to facilitate interconnections between regional distribution networks, both within Chile and with neighbouring countries. 52 The Deep Integration Agreement it supported aims to build regional transmission lines from Central America, Colombia and Peru to connect with Chile``. Other possible interconnections could take place with Argentina, Bolivia and Ecuador. 53 Chile has developed a smart city pilot project, Smart City Santiago. As the first intelligent city prototype in Chile, it aims to bring innovative solutions to urban challenges through new technologies, including smart grids. Chile produced million tonnes of CO 2 in Strategy English.pdf 50 Strategy English.pdf Strategy English.pdf Market Information Report: Chile 28

29 Business environment Indicators Corruption index score 21/175 Political stability (scale = -2.5 to 2.5) 0.37 Rule of law (scale = -2.5 to 2.5) 1.34 Ranking: Ease of doing business index 41/189 Regulatory quality (scale = -2.5 to 2.5) 1.48 SUMMARY OF KEY FINDINGS According to World Bank and Transparency International metrics, Chile is one of the easiest countries in Latin America to do business, with the best infrastructure network and highest credit quality in the region. It is also the only Latin American country in the Organisation for Economic Co-operation and Development (OECD), with countries such as Canada, the United States, and Germany. Notably, membership in the OECD is restricted to medium and high-income countries, and results in increased economic cooperation and sharing of best practices between member states (including trade, investment, and renewable energy). Chile s membership offers a platform for collaboration and economic activity with Canada, the United States and others within the organisation. Further opportunities for cleantech companies are facilitated by the Canada-Chile free-trade agreement and partnership framework, which include provisions on collaboration on science and technology, sustainable development of mining, and cooperation in the energy sector. TABLE 10. Ease of doing business ranking compared to priority markets. Source: World Bank Group. Country Canada 16 Chile 41 China 90 Colombia 34 TABLE 11. Ease of Doing Business Ranking (out of 189 countries) Summary of business environment indicators. Source: World Bank Group and United Nations Country Political Stability (Score -2.5 to 2.5) Regulatory Quality (Score -2.5 to 2.5) Rule of Law (Score to 2.5) Roads Paved (%) Canada % Chile % China % Colombia % Market Information Report: Chile 29

30 CORRUPTION AND GOVERNMENT RESPONSE Chile has made legislative changes to reduce corruption by enacting a law of criminal liability of legal entities, a whistleblower protection act for public servants and the Transparency Law. In addition, Chile was required to pass a series of laws in order to enter the OECD. These bills are working to regulate the corporate governance of state-owned companies, improve the corporate governance of private companies, and increase bank transparency to fight tax evasion. Corruption does not pose a huge threat to businesses operating in Chile. According to the Global Corruption Barometer 54, only 21% people reported that they paid a bribe in TABLE 12. EASE OF DOING BUSINESS Chile is ranked 41 out of 189 on the World Bank s ease of doing business index (where 1 is the easiest and 189 is the most challenging country in which to do business). Within South America, Chile is ranked as the third-easiest country in which to do business, behind Colombia and Peru. Table 6 shows Chile s performance in the individual areas within the overall index for 2014 and TABLE 13. Chile s rankings within the World Bank s ease of doing business index: Topic 2015 ranking 2014 ranking Change in ranking Transparency International Corruptions Perception index ranks (from 1 to 175 where 1 is the least corrupt), and scores (from where 100 is the least corrupt). Source: Transparency International. Country Rank/175 Score/100 CHILE Canada China Colombia Starting a business Dealing with construction permits Getting electricity Registering property Getting credit Protecting minority investors Mexico Paying taxes No change Trading across border country_enforcement_of_the_oecd_anti_bribery_conventio 55 Enforcing contracts Resolving insolvency Market Information Report: Chile 30

31 POLITICAL STABILITY President Michelle Bachelet, of the Nueva Mayoria coalition (comprised mainly of centre-left political parties), won the presidential election on December 13, This is the President s second term in office. In September 2014, the government passed a comprehensive tax reform aimed at tackling inequality, structural deficit and raising public funds for an ambitious educational reform. FOREIGN DIRECT INVESTMENT Canadian direct investment in Chile is extensive and diversified, and is the primary component of the bilateral commercial relationship. The stock of Canadian direct investment in Chile stood at $16.6 billion at the end of 2013 and Chilean investment into Canada totalled US$171 million at the end of Canadian companies are mainly present in mining, utilities (water and energy), chemicals, infrastructure and financial services. FINANCIAL SYSTEM OVERVIEW Chile retains an open economy with a liberal trade regime, including a floating exchange rate, a rules-based countercyclical fiscal policy, and inflation-targeting, all geared toward reducing economic volatility. Chile continues to record solid economic growth: GDP reached approximately US$264.1 billion in 2014 at an estimated real GDP growth of 2.0%. The Chilean government s strong fiscal position has allowed for the repayment of debt and, until recently, placed the government in a net creditor position. In recent years, the strong performance of the mining sector, combined with economic growth and a favourable domestic investment climate, helped reduce unemployment to an estimated 6.0% in 2013 (from over 10% in 2004). Chile retains the highest credit quality within Latin America. All credit rating agencies maintain a stable outlook on Chile s long-term foreign-currency sovereign debt ratings, which currently stand at Aa3 (Moody s), AA- (Standard and Poor s), and A+ (Fitch). FDI IN CHILE, (By country) FDI IN CHILE, (By Sector) Others 8.2% Germany 1.2% Belgium 1.3% Not assigned 23.0% Construction 1.0% Agriculture & fishing 0.2% Not assigned 16.9% Colombia Commerce 1.7% Bahamas 1.7% Luxembourg 2.2% Brazil 2.7% Bermuda 2.9% Total: US $100,8 billion United States 16.7% 1.2% Transport & Communication 3.4% Manufacturing 4.7% Total: US $100,8 billion Japan 3.8% United Kingdom Netherlands 14.8% Electricity, gas & water 10.2% Mining 44.9% 4.3% Canada 5.1% Spain 10.4% Services 17.6% Figure 28. Foreign direct investment (FDI) in Chile by country and sector, Source: Central Bank of Chile Market Information Report: Chile 31

32 FOREIGN POLICY Chile s most important regional partners are Brazil, Argentina and the Pacific Alliance members, Peru, Mexico and Colombia. The Pacific Alliance economic integration process, covering goods, services, people and capital, offers economic opportunities beyond Chile s current bilateral FTAs with these countries. The integration of stock exchanges, for example, will form the second-largest stock exchange in Latin America. Chile does not have diplomatic relations with Bolivia following a long-term border dispute. Bolivia lost its Pacific coastline during a 19th-century war with Chile. Bolivia has sought to regain access to the sea, including bringing a claim against Chile before the International Court of Justice (ICJ) in On January 27, 2014, the ICJ issued a final judgment over a longstanding maritime border dispute between Chile and Peru. Despite requiring Chile to cede territory, both countries have agreed to abide by the ruling in what some see as a cause for optimism regarding bilateral relations between the two nations. Chile is an associate member of Mercosur (the Customs Union comprising Argentina, Brazil, Paraguay, Uruguay and Venezuela). It is also an associate member of the Andean Community (which includes Colombia, Ecuador, Peru and Bolivia). Chile s trade focus in Asia is supported by a growing list of free trade and economic agreements, including China, Japan, Korea, Vietnam, Hong Kong and Malaysia. Chile exports more goods to China than anywhere else, and China is a key source of imports, second only to the US. Chile and China upgraded relations to a strategic partnership in June Chile was the first South American country to establish diplomatic ties with China (in 1970), the first country in South America to sign off bilaterally on China s accession to the WTO and the first to conclude an FTA with China canada_chile-chili.aspx?menu_id=7&lang=eng CANADA-CHILE RELATIONS The Canada-Chile Free Trade Agreement (CCFTA) has been in force since 1997 and was the first comprehensive free trade agreement signed by Chile. The agreement covers trade in goods and services, as well as investments, and includes side agreements on environment and labour relations. Canada and Chile also have bilateral agreements on taxation and air transportation. Canada-Chile bilateral merchandise trade has more than tripled since the CCFTA came into force, growing to about $2.6 billion in Canadian exports to Chile totalled $802 million in 2013, and consisted mainly of machinery, mineral ores, mineral fuels and oil, electrical and electronic machinery, and equipment, fats and oils. 58 Canadian imports from Chile totalled $1.75 billion that same year. Major products imported included precious stones and metals (mostly gold and silver), fruit (mainly grapes), copper, fish and seafood (salmon), and beverages (wine). The Canada-Chile Partnership Framework, signed in 2007 and supported by multiple agreements, serves as a roadmap for the expansion and strengthening of collaboration between Canada and Chile in various priority sectors. These include sustainable development of minerals and metals, science and technology, investment promotion, youth mobility, education an d exchanges. President Piñera s visit to Canada in May 2013 provided an opportunity for both countries leaders to sign the renewed Canada-Chile Strategic Partnership Framework. This agreement extended cooperation for sustainable development of natural resources, strengthening ties in the areas of education, innovation, agriculture and the environment, and consolidating the bilateral and multilateral partnership in the areas of governance, defense and security. The visit also allowed for the renewal of the Memorandum of Understanding Regarding Cooperation in the Sustainable Development of Minerals and Metals. It also resulted in the signing of a geological survey collaboration, as well as a Memorandum of Understanding on the Recognition of the Canadian Beef Classification System that, together with an approved export license, provides Canadian beef and beef products access to the Chilean market. The leaders also signed a joint statement on Cooperation in the Energy Sector, and a Canada-Chile Science, Technology and Innovation Action Plan. Lastly, it was announced that for the first time 40 Chilean public high-school students would study in Canada for six months through the Chilean government s Penguins Without Borders program. The joint statement by Canada and the Republic of Chile on cooperation in the energy sector reaffirms both countries interest in facilitating trade and investment ties and strengthening energy security. The joint statement promotes cooperation between Natural Resources Canada and the Ministry of Energy of Chile, and reinforces their ability to work together in international organizations such as the Energy and Climate Partnership of the Americas and the Energy Working Group of the Asia-Pacific Economic Cooperation (APEC). Market Information Report: Chile 32

33 US-CHILE RELATIONS Chile has strong political, economic and trade relations with the United States (US). Bilateral trade has more than doubled since the US-Chile Free Trade Agreement entered into force in The US is Chile s second-largest goods trading partner overall, and was the largest foreign direct investor in Chile between 2009 and INFRASTRUCTURE According to the World Economic Forum s Global Competitiveness Index 2011, Chile had the best infrastructure network in Latin America, ranked 32 out of 139 countries on a global level. Continuous improvement of Chile s developed infrastructure network will help consolidate this position. Chile invested US$11.8 billion (equivalent to 4.7% of 2011 total GDP) in its infrastructure program from 2010 to 2014 in order to improve intercity roads, airports and hospitals. INTERNATIONAL ORGANIZATION MEMBERSHIP AND ENGAGEMENT Chile is an active participant in other major international forums, including the United Nations, Organization of American States (OAS), Asia-Pacific Economic Cooperation (APEC), Organisation for Economic Development and Cooperation (OECD), International Monetary Fund (IMF), the World Bank, the World Trade Organisation (WTO), Union of South American States (UNASUR) and the Community of Latin American and Caribbean States (CELAC). Chile served as a non-permanent member of the United Nations Security Council between , , and RANKING OUT OF 144 COUNTRIES Chile Mexico Uruguay Ecuador Brazil Colombia Peru Argentina Venezuela Figure 29. Quality of overall infrastructure in selected countries in Latin America, Source: World Economic Forum s Global Competitiveness Index Market Information Report: Chile 33

34 Government and regulatory environment Indicators Financial incentives High Public financing High Regulatory policies High SUMMARY OF KEY FINDINGS The Chilean government is increasingly supportive of cleantech and renewable energy, developing policy and structural incentives to facilitate integration of renewables to meet the country s increasing energy demand. Favourable policies include low-interest loans for renewable energy investment, capital guarantees and risk capital funds, a cleantech fund, and a carbon tax. The carbon tax, implemented in 2014, charges generators operating thermal plants with installed capacity equal or larger than 50 MW $5 per tonne of CO 2 released. This incentivizes plant operators to invest in clean technologies to reduce emissions. This and other policies outlined below foster an environment that is supportive of cleantech deployment and the entry and success of Canadian companies into the market. LEVEL OF GOVERNMENT SUPPORT FOR CLEANTECH China Chile Canada Colombia 1 point awarded for every supportive policy out of 10 Figure 30. Comparative levels of government support for cleantech in priority markets. Scores were compiled based on whether or not a government had implemented financial incentives, public financing and regulatory policies in support of cleantech deployment (see Table 14 for more detail). 4 Market Information Report: Chile 34

35 TABLE 14. Measuring government support for cleantech across markets. Includes: financial incentives (FI), public financing (PF), and regulatory policy (RP). Measuring Government Support for Cleantech Indicator Colombia Chile China Canada National strategy for renewables? Yes Yes Yes Yes FI: Capital subsidy, grant or rebate No Yes Yes Yes FI: Tax incentives Yes Yes Yes Yes FI: Energy production payment No Yes Yes No PF: Public investment, loans Yes Yes Yes Yes PF: Public competitive bidding No Yes Yes Yes RP: FIT No No Yes Yes RP: Utility quota obligation 0.0% 5% 15.0% Sub-national (varies) RP: Net metering No Yes No Yes RP: Obligation and mandate Yes Yes Yes Yes RP: Tradable renewable energy certs No No No No FINANCIAL INCENTIVES FOR RENEWABLES CHILEAN ECONOMIC DEVELOPMENT AGENCY (CORFO) CORFO offers incentives for investments in renewable energy projects. Grants to fund preliminary pre-investment feasibility studies: This includes the pre-investment or specialized consultancy required before the materialization of NCRE projects that involve investments of more than US$400,000 that are eligible according to the provisions of the Kyoto Protocol to the United Nations Framework Convention on Climate Change ( Kyoto Protocol ). The subsidy amounts to up to 50% of the total cost of the study or consultancy, with a cap of US$60,000 per project submission, provided that it does not exceed 2% of the total estimated investment. 61 Grants to fund advanced pre-investment feasibility studies: This program uses funds from Germany s KfW Development Bank and the National Energy Commission (CNE) to co-finance part of the costs of basic and detailed engineering, electricity connection studies and environmental impact evaluations and/or declarations. The grant covers up to 50% of the total cost of the study or consultancy with a maximum of 5% of the estimated investment, provided that it does not exceed US$160,000 per project submission. This grant applies to projects that have been submitted for the preliminary processes and does not apply to studies measuring the availability of resources or for prefeasibility studies pdf PROGRAM OF PRE-INVESTMENT FOR ADVANCED STUDIES IN NCRE This instrument co-finances part of the basic and detailed engineering costs, electricity connection studies and assessments and/or environmental impact declarations. The subsidy covers up to 50% of the total study or the consultancy costs up to a maximum of 5% of estimated total investment or US$160,000 per project. The instrument is intended for projects that have already undergone the preliminary processes of the pre-investment phase. LOW-INTEREST LOANS FOR RENEWABLE ENERGY INVESTMENT This CORFO program was launched at the end of 2008 and co-financed by the KfW Development Bank. The loans were designed for refinancing long-term credit and leasing operations for investments contributing to environmental improvements. The loans in this scheme operate at fixed rates, either in dollars or local currency, for periods of three to 12 years, including a grace period of up to 30 months. There is a maximum loan value of US$10,000 per project. 62 CAPITAL GUARANTEE AND RISK CAPITAL FUNDS FOR CLEAN ENERGY AND ENERGY EFFICIENCY This instrument was only introduced in In the case of capital guarantee funds, the instrument applies to both self-funded projects and CORFO-funded projects up to a total of US$7.5 million. Market Information Report: Chile 35

36 CARBON TAX In 2014, Chile enacted a carbon tax. This tax targets the power sector, particularly generators operating thermal plants with installed capacity equal or larger than 50 MW. These installations will be charged $5 per tonne of CO 2 released. Thermal plants fueled by biomass and smaller installations will be exempt. The tax is meant to force power producers to gradually move to cleaner sources to help reduce the country s greenhouse gas emissions and meet its voluntary target of cutting 2007 levels by 20% by Chile s government will start measuring CO 2 emissions from thermal power plants in 2017 and the new tax will be levied starting in Four companies are expected to pay the bulk of the new tax: Endesa, AES Gener, Colbun and E-CL. CLEAN TECHNOLOGY FUND The government of Chile has designed a plan that taps US$200 million from its clean technology fund (CTF) to address key risk, cost and liquidity barriers. It does this by providing concessional financing and technical assistance intended to stimulate the development of the country s solar power and energy efficiency markets. Chile s CTF funds are expected to leverage US$1 billion. LEGISLATION AND PROGRAMS Law/program Access Energy Fund (2014) Electric Easement Act No. 29/701 (2013) National Strategy for the Energy Sector (2012) Description This program aims to improve access to energy and the development and implementation of ad hoc technologies to meet local needs, through three grants that enable: * The installation of energy systems based on NCRE * Local capacity building through learning by doing * The generation of innovative technical solutions for various small-scale energy demands The Act modifies the process to request for an electrical easement, facilitating the process in order to resolve som e bottlenecks and other delays problems detected in the former process. Consequently, the obtaining time needed to get an easement to build a high voltage transmission power line will take less time will be lower, diminishing which will reduce the overall project length of these projectsand, allow ing a more efficient supply of electricity. Additionally,This will benefit renewables energiesy will benefit, considering these projects, which are need less time to buildt in shorter time and are more affected influenced by the lack of an adequate transmission infrastructure. In February 2012, Chile implemented the new National Strategy for the Energy Sector, aimed at expanding the sector capacity, supporting non-conventional renewable sources (ERNCRE) and promoting the sustainable financing of the system. The Strategy is built on six main goals: i. Strengthening the non-conventional renewable sector ii. Promoting energy efficiency iii. Supporting a stronger and sustainable hydropower sector iv. Attention to grid expansion and public transmission projects v. Moving towards a competitive electricity market vi. Encouraging the regional electricity interconnections with neighbouring countries. The strategy reiterates the target of 10% of national electricity from non-conventional renewablencre sources by 2024, as stated in the Non-Cconventional Rrenewable Eenergy Llaw (Law 20,257). The strategy states that this would be the minimum possible increase in the ERNCRE share, since in order to meet the annual electricity consumption growth of 6% to -7% to 2020, the share of ERNCRE in the electricity would have to double over the next decade. On 14 October 14, 2014, this law Non-conventional renewable energy law (Law ) was amended to increase theing national electricity target to 20% of national electricity to be generated from non-conventional, non-hydro renewable energy sources by Market Information Report: Chile 36

37 Law/program Support for Non-Conventional Renewable Energy Development Programme (2012) Program for Rural and Social Energy (2009) Description The 2013 Budget Law approved a budget of US$D 85.5 million for the Ministry of Energy for the Support for Non-Conventional Renewable Energy Development Programme. This programfor subsidisesing pilot projects based on non-conventional renewable energy (NCRE) such as cconcentrated ssolar ppower (CSP) plants, transmission lines for NCRE projects, geothermal exploration projects, tide energy projects and other NCRE sources. A public contest called Innovación en Energías Renovables (Innovation in Renewable Energies) was launched in December 2012, to encourage the development of pilot projects for energy self-sufficiency using renewables energies through the ESCO model (Energy Service Company). Its funds have has US$D 5 million for subsidies. The concentrated solar power plants contest was launched in February 2013 and the nominations closed in October Its aim was to encourage the implementation and operation of CSP plants to generate electricity. This programme aims to contribute, in the context of energy, to socioeconomic development and environmental sustainability, improving the overall quality of life and prioritizing the use of non conventional renewable energy (NCRE) sources in vulnerable sectors and public establishments. Activities under this programme include: * The design, financing, and development of NCRE projects in remote and vulnerable areas; * The training of users, decision makers, and stakeholders in for the development and operation of energy projects; Non-Conventional Energy Law No. 20/256 (2008, amended in 2013) * Research and development projects to enable the future development of NCRE in vulnerable and/or isolated areas. The Law N 20,257 better known as Non-Conventional Renewable Energy Law (NCRE Law), enacted on 1 April 1, 2008, aims to fulfill future energy requirements by developing non-conventional renewable energyncre sources, such as geothermal, wind, solar, tidal, biomass and small hydroelectric plants. The law requires that electricity-providing companies that, withdrawing electricity to supply their contract commitments, to demonstrate that a certain percentage of their total energy committed was injected into the system by non-conventional energyncre sources. The energy can be produced by their own plants, or by contracting from third parties. This quota came into force in at the start of 2010, and until 2014 will required 5% of electricity to come from non-conventional renewable energyncre sources. Starting fromas of early 2015, the obligation will be increasesd by 0.5% annually, with the goal to reaching 10% in The law will appliesy to all agreements executed as of 31 May 31, 2007 (new agreements, renewals, extensions, or similar arrangements). Non-compliance with the law will results in fines of 0.4 UTM (mmonthly ttax uunit), equivalent to approximately CLP 16,179 per MW not obtained from NCRE sources per year. * The obligation will last for 25 years ( ). Hydro is considered as a non-conventional source if the capacity is below 20 MW. However, for a plant producing between 20 MW and 40 MW, a portion of the energy can be considered non-conventional based on a decreasing function, with the non-conventional energy content of a 40 MW plant equal to zero. Market Information Report: Chile 37

38 Law/program Description Invest Chile Programme The Invest Chile Programme is a joint plan between then Energy Ministry of (2005) 63 Energy (represented by National Energy Commission [(CNE]) before 2010) - and the Chilean Economic Development Agency (CORFO) cooperation plan to support renewable energy projects and finance renewable energy generation nationwide. The programme includes two different sub-programmes. The firstone initiative was a programme to provide non-conventional renewable energy (NCRE) projects connected to the grid with pre-investment stage financial incentives. In the period from 2005 to 2009, the programme subsidised 50% of the total cost (, with a US$60,000 cap), of pre-feasibility studies and 50% of the total cost of pre-investment studies (with a maximum cap of US$D 160,000 cap). A total of 217 wind, biomass, biogas, geothermal and small-scale hydroelectric projects have benefited from such support. From In the period 2008 to 2010, the CNE and the Ministry of Energy transferred US$2 million to CORFO to continue run the programme. After 2010, the applications were received directly without contest. Another The second incentive initiative was provided in 2008 when the Germany s KfW Ddevelopment Bbank Kreditanstalt für Wiederaufbau (KfW) extended a 85 million loan to finance NCRE projects with credit facilities and low interest rates. This allowed helped fund 19 projects to be funded, which were mostlymainly mini-hydro energy projects. Since 2012, the Renewables Energy Center (CER) has developed two new contests to subsidize pre-investment studies of NCRE projects. The subsidy is up to 40% of the total study costs, with a cap of CLF 1,000. Access for Small and Non-Conventional Power Producers: Short Law I and II (2005) 64 Law 19,657: on Geothermal Energy Concessions (2000) As of 2014, 31 projects (five5 biogas, one1 biomass, 13 wind, four4 PV and seven7 mini-hydro), and 78 studies have been received benefited for a total amount of CLP 542 million. Short Law I allows small power producers to participate in the spot market and connect to the distribution network. It also, to promotes private investment and participation in electricity production. The legislation guarantees all small power producers (< 9 MW) the right to sell their energy to the electricity market at spot or nodal price. In addition, small producers are guaranteed non-discriminatory conditions to access the distribution system. Progressive toll trunk charge exemptions have been set up for non conventional energy (NCRE) producers, ranging from a full exemption for less than 9MW capacity plants at less than 9 MW capacity to no exemption for plants with a capacity of 20 MW and or greater. Short Law II allows power generators, including NCRE producers, to sign long-term supply contracts with distribution companies, which were awarded through a nondiscriminatory tendering process. Law 19,657 establishes regulatory frameworks for geothermal exploration and exploitation, as well as standards for concession allocation and tenders. The Ministry of Energy is responsible for the application, control and enforcement of the geothermal regulation frameworks and the management of auction and bidding processes. Public bidding for concession granting occurs every two to three years and is open to every Chilean person or corporate body organized under Chilean laws. The legislation regulates the relationships between the government, and concession holders and, landowners, as well as mining properties and water exploitation rights when exploiting geothermal energy Market Information Report: Chile 38

39 TABLE 15. Chilean renewable energy and energy efficiency policies Chile s economic development and growing energy needs in the mining sector increase the awareness of the need to consume and produce energy more responsibly. Chile and Argentina sign the Convention on Energy Integration, facilitating the import of natural gas from Argentina. The first electric interconnection between Chile and Argentina is established (Inter-Andes). The new Energy Electricity Law is developed and passed. First Chilean energy project receives funding through the Clean Development Mechanism (CDM). The CDM is a mechanism outlined in Article12 of the Kyoto Protocol that allows countries emission-reduction commitments under Kyoto to implement an emission-reduction project in developing countries. These projects must be eligible for certified emission reduction credits.66 Chile s Colbún Power Plant is certified to have completed a CO 2 reduction of 112,607 tons). The Short Act I is passed, improving the safety of the energy supply transportation system and exempting transmission charges for new renewable energy sources below 20 MW of capacity. The Short Act II is passed, improving the safety of the energy and electricity sector, simplifying legal procedures for projects below 9 MW. The Chilean government announces its support for increased use of biofuels and the Energy Safety Plan is strengthened. Chile s legislature passes Act No , which requires utility companies to produce 5% of their electricity from NCRE sources by 2014, with the target rising 0.5% per year to 10% by The Chilean government publishes 20 separate tenders for the production of geothermal energy. Chile s Renewable Energy Center is launched with the support from the US Department of Energy and the National Renewable Energy Center. The Ministry of Energy and the Ministry of Environment is created. The National Energy Efficiency Program becomes the Chilean Energy Efficiency Agency A blackout keeps 10 million (out of a population of 17 million) without electricity for several hours, underlining the need for additional energy capacity The Chilean government publishes National Energy Strategy : Energy for the Future, a policy document outlining its energy strategy for the coming two decades Market Information Report: Chile 39

40 National Energy Strategy ( ) The National Energy Strategy recommends the establishment of Independent Operation Centres (IOCs) to organize and operate the country s electricity system with increased autonomy. The strategy calls for these new institutions to provide transparency on the electricity market as well as supervision of energy practices. The strategy has six fundamental pillars to guide its implementation 67. It commits to: 1. Advancing energy efficiency 2. Increasing the use of non-conventional renewable energy 3. Increasing the use of large hydropower plants 4. Strengthening the Chilean transmission and distribution system, making it easier to distribute electricity across all parts of the country 5. Addressing the challenges faced by electric utilities as they seek to provide electricity directly to consumers 6. Promoting the development of international interconnections Tender mechanism: Open tenders will be carried out in which developers could be awarded a state subsidy to reduce the cost of energy production. According to the Chilean government, these subsidies will be defined according to the bids submitted, so developers may be unaware of these potential funds when bidding on projects. Geo reference platform: To facilitate private sector investment in renewable energy projects, the government of Chile announced it will create a geo reference platform to provide up-to-date information on the viability of renewable energy projects. Information provided by the platform will include: A description of existing renewable projects A database of potential resources Details on the state-owned land available for development Details of energy demand at industrial, commercial and residential levels Details on road and electricity infrastructure Details on environmental protection areas Details on land use and planning The goal of the project is to provide certainty regarding the feasibility of renewable energy projects and to take greater advantage of public lands for renewable energy development. Subsidy and incentive plan: The National Energy Strategy calls for the development of a new subsidy and incentive plan to further develop cutting-edge renewable energy technologies. The program is yet to be designed, but will be implemented only for pilot-scale NCRE technologies. Chile s Ministry of Energy will release more information once it is available. Key government actors 68 MINISTRY OF ENERGY The Ministry of Energy is the highest governmental institution in charge of governing and administrating the energy sector. It was created in August 2009 through a law, under which all regulatory functions were separated and placed under the control of the CNE, which later became part of the Ministry of Energy. The overall objective of the Ministry of Energy is to develop and coordinate plans, policies and standards for the proper functioning and development of the sector. It is also meant to ensure compliance and advise the Government on all matters related to energy. The Ministry has direct control over the development of a long-term strategic vision (the preparation of plans and policies for the energy sector, the creation and proposal of legal standards for the energy sector, and the study and preparation of national energy offer and demand projections). NATIONAL ENERGY COMMISSION (CNE) The National Energy Commission (CNE) is the main state organization in charge of regulating the electricity sector. Since February 2010, it has been part of the Ministry of Energy and was previously part of the Ministry of Economics, Growth and Reconstruction. It designs and coordinates plans, policies and regulations for the function and development of the Chilean electricity grid. It provides information and recommendations for different government bodies on energy matters, including to the Ministry of Energy. The CNE analyses prices, tariffs, and technical standards to which companies must adhere main_ pdf 68 Market Information Report: Chile 40

41 NATIONAL CENTER FOR THE INNOVATION AND PROMOTION OF RENEWABLE ENERGY (CENTRO NACIONAL PARA LA INNOVACION Y FORMENTO DE LAS ENERGIAS SUSTENTABLES, CIFES): Within the Ministry of Energy, the National Center for the Innovation and Promotion of Sustainable Energy (CIFES) is an institution that aims to strengthen the development of non-conventional renewable energy (NCRE) in Chile. It was created in August 2009 and supports CORFO in the design, implementation, monitoring, evaluation and promotion of strategic programs and projects on sustainable energy. As part of its strategy, CIFES publishes monthly reports on the state of NCRE in the country combined with an analysis of its current share in the main national electric systems. CIFES also monitors new technologies in order to gain knowledge and skills and diversify the energy grid. CIFES stated objectives include: Study the evolution and development of NCRE technologies and their applicability in Chile, to help remove barriers to potential projects Promote and develop agreements with centres and institutions that promote innovation To provide information and guidance to government bodies, investors, project developers and researchers To generate records of natural resources for the development of NCRE To campaign for accreditation of skills and certification of products and services related to NCRE projects (such as consultancy or engineering services, and laboratory or maintenance services) SUPERINTENDENCY OF ELECTRICITY AND FUEL (SUPERINTENDENCIA DE ELECTRICIDAD Y COMBUS- TIBLES, SEC) The SEC is a public agency in charge of supervising the energy market. It monitors the fulfilment of legal regulatory requirements and technical standards. Although the SEC previously acted through the Ministry of Economics, Growth and Reconstruction, as of February 2010, it operates through the Ministry of Energy. ECONOMIC LOAD DISPATCHING CENTRE (CENTRO DE DESPACHO DE CARGA, CDEC) The CDEC is a private entity formed of generating companies supervised by the SEC. It regulates the coordinated functioning of the power generation stations and interconnected transmission lines. One of its functions is to monitor the safety of the grid system and ensure that all operations run smoothly and cost-efficiently. NATIONAL ENERGY EFFICIENCY PROGRAM (PROGRAMA PAÍS DE EFICIENCIA ENERGÉTICA, PPEE) The PPEE was set up in 2005 under the Ministry of Economics, Growth and Reconstruction as the first public initiative to promote energy efficiency in the country. In 2008, the PPEE became part of the CNE, and since February 2010 it has acted through the Ministry of Energy energias_limpias/presentaciones/dia2/3-cardenas_presentacion.pdf Market Information Report: Chile 41

42 Appendix ADMINISTRATIVE STRUCTURE: CHILE POLITICAL SYSTEM: Chile is a democratic presidential republic that is divided into Executive, Legislative, and Judicial branches. Political Branch Members Term Executive President elected by direct vote Single four-year term Legislative (bicameral Congress) Senate of 38 members Eight-year term Chamber of Deputies of 120 members Four-year term Judiciary Supreme Court of 21 members Three-year term ADMINISTRATIVE DIVISION: Chile is divided administratively into 15 regions, which are in turn divided into 50 provinces, and 341 municipalities 70 : 15 REGIONS REGIONAL GOVERNORS 50 PROVINCES PROVINCIAL GOVERNORS 1341 MUNICIPALITIES MAYOR INSTITUTIONS IN THE ELECTRICITY SECTOR Institution Grupo CGE (CGE Distribución, Emelari, Eliqsa, Elecda, Emelat, Conafe y Transnet) Description Group CGE is a holding company that groups Chilean energy companies, specifically electricity and gas companies. It is engaged in the generation, transmission, distribution, and trading of electric power. (It also distributes natural gas and liquefied gas). Grupo CGE has a total installed generation capacity of 408 MW and around 3,500 lm of transmission lines. Its leading subsidiaries include CGE Distribucion, Gasco, Metrogas, and Gasnor. In 2014, Grupo CGE was acquired by Spain s Gas Natural Fenosa Market Information Report: Chile 42

43 Chilean Association of Electric companies (Asociacion de Empresas Electricas, Electricas A.G.) The Chilean Association of Electric Companies (Electricas A.G.) is the trade association representing electric distribution and transmission companies throughout Chile. Today, it is composed of Chilectra, Chilquinta, CGE, Saesa and Transelec groups, and other independent firms, totaling 27 companies. The Association of Electric Companies is a permanent channel of communication and collaboration among companies, authorities and other relevant actors in society. Given its solid technical input, it participates in the discussion and elaboration of public policies for a sector as crucial as energy. Transelec S.A In 2015, Electricas A.G. announced changes in the regulations on electrical transmission, the implementation of the newly dispatched electrical procurement law, and changes in energy efficiency. Transelec S. A. is the main electricity transmission company in Chile. It transports electricity to 98% of the population through its transmission lines that stretch for 3,168km from North to South. Transelec is thus the leading provider of electrical transmission between the Northern Interconnected System (SING) and the Central Interconnected System (SIC). Transelec is controlled by Canada s Brookfield through Transelec Holding Rentas. ADDITIONAL RESOURCES Resources Canadian Trade Commissioner Chile-Canada Chamber of Commerce Canada-Chile Free Trade Agreement Chile Ministry of Energy National Center for the Innovation and Promotion of Renewable Energy (CIFES) Doing Business Guide, Chile Website agr-acc/chile-chili/index.aspx?lang=eng Market Information Report: Chile 43

44 ENDNOTES labour+force+chile&source=bl&ots=7_j81qepn-&sig=0cor_jzizkja01qb3qrd8xbrwu&hl=en&sa=x&ei=j3kuvebsm8p8yqs7miggda&ved=0cgqq6aewcq#v=onepage &q=skilled%20labour%20force%20chile&f=false 3 oecd-economic-surveys-chile-2013_eco_surveys-chl-2013-en#page33 4 (IEA 2009) 5 Challenge%20octubre%202010%20LESMAP%20FINAL.pdf munoz_and_wolak.pdf 9 Electricity_Sector_Restructuring_in_Chile.pdf National-Energy-Strategy English.pdf e+frequency+of+interruptions+chile&source=bl&ots=gnjhllgo7j&sig=ahwvkwmn_ FXcp05nw5e7izP3JHI&hl=en&sa=X&ei=YgoTVdfbJIifyQTEmIH4BA&ved=0CDMQ6AE waw#v=onepage&q&f=false p National-Energy-Strategy English.pdf 17 eg_main_ pdf ??? enc=info%3aofi%2fenc%3autf-8&rfr_id=info:sid/summon.serialssolutions.com&rft_ val_fmt=info:ofi/fmt:kev:mtx:journal&rft.genre=article&rft.atitle=chile+faces+blackout+ risks+on+frail+grid&rft.jtitle=the+globe+and+mail&rft.date= &rft.issn= &rft.spage=b.6&rft.externaldbid=gbml&rft.externaldocid= National-Energy-Strategy English.pdf pdf Challenge%20octubre%202010%20LESMAP%20FINAL.pdf 36 =id&accname=ocid177151&checksum=4a2ea5dbb2d66cfb9a4badd1f4f88d &id=id&accname=ocid177151&checksum=4a2ea5dbb2d66cfb9a4badd1f4f88d National-Energy-Strategy English.pdf eg_main_ pdf eg_main_ pdf National-Energy-Strategy English.pdf 50 National-Energy-Strategy English.pdf eg_main_ pdf 53 National-Energy-Strategy English.pdf 54 enforcement_of_the_oecd_anti_bribery_conventio canada_chile-chili.aspx?menu_id=7&lang=eng canada_chile-chili.aspx?menu_id=7&lang=eng pdf 63 php?s=dhlwzt1yzszzdgf0dxm9t2s eg_main_ pdf 66 items/2718.php 67 eg_main_ pdf energias_limpias/presentaciones/dia2/3-cardenas_presentacion.pdf 70 Market Information Report: Chile 44

45 marsdd.com The Advanced Energy Centre would like to acknowledge our partners at Export Development Canada and MaRS Market Intelligence for their generous support and dedication to developing this first report in the Going Global Series. The Advanced Energy Centre s Going Global Series is developed in line with its mission to foster the adoption of innovative energy technologies in Ontario and Canada and to leverage those successes and experiences into international markets. The information provided in this report is presented in summary form, is general in nature, current only as of the date of publication and is provided for informational purposes only. MaRS Discovery District, July 2015 For more information, please contact: Jesika Briones Business Development Manager- Advanced Energy Centre [email protected] Kathleen Gnocato Associate Advanced Energy Centre [email protected] Market Information Report: Chile 45