Geothermal Energy In Chile - ESMAP

Global Geothermal Development Plan RoundtableThe Hague, NDNovember, 2013Geothermal Energy in ChileCarlos BarríaHead of Renewable Energy DivisionMinistry of EnergyGovernment of Chile

Chilean Energy SectorMacroeconomic Overview Last 30 years, the Chilean economy has had exceptionalperformances, and became a member of the OECD in2010.GDP (PPP per capita US )2000018000160001400012000100008000 Up to 2013, Chile has signed free trade and taxagreements with over 60 and 25 countries, respectively.6000400020000 Poverty was reduced from 50% in 1975 to 11% in 2012.198219871992199720022007 2012EForeign Direct Investment, (US million) Public debt was controlled and systematically reduced.3000025000 In October 2012, the Chilean government issued US 1,500 million of debt in bonds at the best conditions anemerging economy has ever achieved: 10 year bond was issued at a record 2.38% annual rate. 30 year bond was issued at 3.71% annual rate.20000150001000050000CAGR: Compound Annual Growth Rate(1) World Bank; (2) United Nations Economic Commission for Latin America; (3) Chilean Ministry Of Finance; (4) Chilean Central Bank2

Chilean Energy SectorEnergy Policy The basic principles of the present energy policy were defined in Chile in the earlyeighties. Objective: meeting energy demand at the least cost through the operation of competitive(private) energy markets, with a subsidiary role of the State. The concepts of diversification and reliability of supply were fostered in 2005 following thenatural gas supply curtailments that Argentina started to apply in 2004.Electricity MarketGeneration No regulated pricesMarket competitionEnergy tradersEconomic optimumCentralized dispatchPPAsTransmission Regulated pricesNatural monopolyOpen AccessExpansion throughbidding processesDistribution Regulated pricesNatural monopolyOpen AccessControl and standards3

Chilean ElectricSystemNorthern InterconnectedSystem (SING)Installed Capacity: 3.8 GWPeak Demand (2012): 2.2 GW100% Thermal:49% Coal42% natural gas9% OilDemand: 85% Mining IndustryCentral InterconnectedSystem (SIC)Aysén‐Installed Capacity 50 MWMagallanes‐Installed Capacity 100 MWInstalled Capacity: 13.5 GWPeak Demand (2012): 7.2 GW53% Thermal42% Hydro5% Renewable74% of the national demand92% of population76% of PIB

Electricity generation by fuel ‐ 20124%Electricty production:65.6 TWh19%31%6%40%Installed capacity1996:6 GW9%9%2012:17.5 GW4%2%35%26%24%65%65%34%13%14%22%Hydro ( 20MW)CoalOilNatural GasRenewables5

Renewable Energy OpportunitiesChile possesses a unique combination of quality and diversity in itsrenewable energy potential: The Atacama desert receives more annual solar radiation than any other placeon earth with a clearest sky. Chile has excellent areas for wind energy development. Chile is located in a region of the world that has intense seismic and volcanicactivity known as the “ring of fire”. Chile’s coast stretches 2,653 miles along thepacific, making it a prime candidate for marineenergy. Chile has the potential to develop large amount ofsmall hydropower from the central to southernregions. Rich in bioenergy waste from farming and forestry.Renewable Energy PotentialResourceSmall hydroBioenergyWindGeothermalSolarMarineTotalGross Potential(GW)23104016228164481Source: CER6

Renewable Energy TodayMain dataInstalled Capacity aggregate per year (MW)Accum. up 3Wind17034Small (MW)assessment(MW)approved (MW)(MW)Biomass4421010626Wind 4Source: CER (sep 2013)Wind power plant Talinay 90 MW, ENEL Green PowerCoquimbo areaAmanecer SolarSunEdison (100 MW)Atacama7

New Renewable targetLaw 20.698, 201323%20%LeyOld20.257TargetNew MetaTargetNueva18%15% In 2008, Chile promoted the increase ofrenewable energy share in the energymarket through a renewable portfoliostandard, to reach 10% by 2024.This law excludes hydropower plantslarger than 20 MW.13%10%8%5%3%0%2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Recently, in October 2013, the new Law N 20.698, requires that 20% of the energy of newenergy contracts comes from non‐conventional renewable energy (NCRE) sources by 2025. In addition, the law creates a new bidding mechanism for new renewable energy projects,where they can get a stable price for 10 years according to the offer made, with a price cap. The new law will require by 2025, approximately 22,700 GWh roughly equivalentto 6,500 MW of renewable projects.8

Geothermal energy in Chile Chile is one of the largest under‐developed geothermal countries in the world. The geothermal systems in Chile are associated with volcanos. Over 15 percent of the world’s active and dormant volcanoes are in Chile,forming an almost continuous line about 4,000 km long. As a result, over 300geothermal areas have been identified throughout the country. The geothermal‐resource potential of Chile may reach 16,000 MWe, accordingto preliminary estimates.9

Geothermal energy in Chile ‐ Regulation Law No. 19,657 on Geothermal Energy Concessions, published on January, 2000;governs the granting of permits or concessions, by the government to geothermaldevelopers. Rules of procedure for the implementation of Law, contained in Decree N 32 –2004 (by‐law). In March 2013, a new regulation was approved (Decree N 114 ‐ 2013), to streamlinethe concession process for geothermal projects and provide developers with long‐term certainty over development rights.10

Geothermal energy concessions1. Exploration: Gives the developer the right to carry out exploratory work todetermine geothermal potential. Duration: 2 years extendable for 2 more. Maximum area: 100,000 ha.2. Exploitation: Awards the developer the right to carry out all the activitiesrequired for a geothermal energy generation plant, including drilling,construction, commisioning and operation of an extraction system; theproduction and processing of geothermal fluids in electrical or thermalenergy.It confers the right to utilise the geothermal energy that exists within itsboundaries. Duration: indefinite. Maximum area: 20,000 ha.11

Geothermal energy concessionsStatusQuantityHectaresCommitment US Exploration Concessions793 million380 millionExploitation Concessions738.0001160 millionEXPLORATION CONCESSIONSLifetime & Exploration wells drilled14%0‐2 Yr0 wells35%2‐4 Yr7 wells51%4‐6 Yr11 wells12

Geothermal concessions by area3 million hectares in exploration stageColpitasPuchuldizaLaguna delMaulePampa LirimaChillánSan GregorioApachetaEl TatioSantiagoTinguiririca

Geothermal exploration concessions by ,000573300,0004200,0002100,0003113263413014

Geothermal main projectsCerro Pabellón (Apacheta concession), ENEL GP Environmental approval.2 production wells (1800m, 245 C) 2injected wells 1 slim hole (700m,210 C)Estimated capacity: 50 MW (2018)Source: Enel Green Power

Geothermal main projectsCuracautín (San Gregorio concession), MRP Chile Environmental approval.2 production wells drilled (2500m, 290 C) 4slim hole (1100m, 300 C).Estimated capacity: 70 MW (2018)Source: Mighty River Power

Geothermal main projectsEnergia Andina (Origin Energy AntofagastaMinerals)Source: Energía Andina17

International Financing and CooperationClean Technology Fund – Geothermal Risk Mitigation Program net/country/chile)18

Geothermal Challenges in Chile The high altitudes and arid environment of the north create logistical dificultiesfor the location of camps and the extraction of industrial sites. On the other extreme, the glacial morphology of the south complicates accessand there is also a limited window of time when work can be carried out. High exploration cost, in Chile these costs become even more expensive given theabsence –at this moment‐ of a consolidated geothermal industry.Investment cost per unit 5,100 – 6,000 US /kW2%Investment 46%ExploraciónDrilling ProfundaConstrucciónde Planta y LTxConstructionCaminosy otrosRoads19

Geothermal Challenges in Chile Companies need to find big resources that can justify longtransmission lines. Access to the electricty markets (PPAs). Geothermal risk mitigation instruments. Geothermal security regulations for drilling. Technical colaboration from countries and institutions with theexperience. Capacity building and communications on geothermal energy. To the community. To the public services involved in the environmental evaluation.20

Global Geothermal Development Plan RoundtableThe Hague, HollandNovember, 2013Ministry of Energyhttp://www.minenergia.cl/Carlos Barríacbarria@minenergia.cl

Geothermal energy in Chile Chile is one of the largest under‐developed geothermal countries in the world. The geothermal systemsin Chile are associated with volcanos. Over 15 percent of the world's active and dormant volcanoes are in Chile, forming an almost continuous line about 4,000 km long. As a result, over 300