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Chile Energy Policy Review 2009 Summary

Core Content

The Chile Energy Policy Review 2009 is a comprehensive analysis of Chile's energy sector, highlighting its achievements, challenges, and recommendations for future development. Conducted by the International Energy Agency (IEA), the report provides an in-depth assessment of the institutional framework, energy security, environmental sustainability, energy efficiency, and the development of sub-sectors such as fossil fuels, electricity, renewables, and transport.

Chile is not an IEA member but has an advanced application for OECD membership, reflecting its openness to international cooperation. The report outlines six key themes that define the current and future direction of Chile's energy policy.

Main Themes and Key Recommendations

1. Successful Liberalisation of the Power Sector

• Private initiative and competitive markets form the foundation of Chile's energy policy.
• The electricity sector was the first in the world to undergo a comprehensive reform, initiated in 1980 and completed in 1998.
• The 1982 General Law of Electric Services separated generation, transmission, and distribution, introduced a pool-type market, and established a system operator to coordinate competitive generators.
• This reform led to impressive growth in electricity access, with the share of households with electricity access rising from 62% in 1982 to 98.5% in 2008.
• Key Recommendation: Strengthen competition in gas and electricity markets, and continue to promote energy efficiency and renewable energy development.

2. Essential Role of the State in Energy Security

• Chile has faced three major supply crises in the past decade, notably in 2007/2008 due to the loss of natural gas imports from Argentina and a severe drought.
• Short-term measures included the use of emergency diesel generation, switching from gas to diesel, and reducing transmission voltage.
• Demand-side responses included consumer awareness campaigns and incentives for reduced consumption.
• Key Recommendation: The government should take a more proactive role in monitoring energy developments and systematic risk assessment, while maintaining private sector-led investment decisions.

3. Re-formulation of Long-Term Energy Policy

• The National Energy Commission (CNE) released a new energy policy in 2008, marking an important step in re-defining the sector's long-term strategy.
• The policy should be finalised as soon as possible and include clear objectives and targets for monitoring and evaluating ongoing initiatives.
• A national public debate is recommended for projects like large coal-fired plants, hydropower, and nuclear energy to ensure broad political support.
• Key Recommendation: The proposed Ministry of Energy should maintain a focus on sustainable energy use, energy efficiency, and renewable development, in collaboration with public agencies and stakeholders.

4. Reorganisation of the Institutional Framework

• The current institutional framework faces coordination challenges, especially between the energy and environment sectors.
• A legalistic approach to regulation has limited the effectiveness of long-term public policies.
• The CNE is institutionally weak compared to other energy-related entities.
• Draft legislation before the Chilean Congress aims to separate policy formulation, regulation, and enforcement, creating a Ministry of Energy and an Energy Efficiency Agency.
• Key Recommendation: Continue to improve energy statistics and develop modelling capabilities to support informed policy-making.

5. Greater Independence for System Operators

• The system operator plays a crucial role in ensuring the smooth operation of the electricity market.
• Key Recommendation: Enhance the independence and transparency of system operators to improve market efficiency and reliability.

6. Clear Regulatory Framework for Long-Term Investment

• A clear regulatory framework is necessary to integrate social and environmental costs into long-term investment decisions.
• The National Action Plan for Climate Change (published in 2008) outlines a four-year strategy to address energy and environmental challenges.
• Key Recommendation: Develop a comprehensive regulatory framework that supports sustainable development and long-term energy security.

Key Information

• Energy Mix: Fossil fuels account for 80% of Chile's total primary energy supply (TPES), with 75% imported (oil, gas, coal).
• Energy Access: Over 99% of the population has access to electricity, thanks to a successful rural electrification programme.
• Geographical Diversity: Chile's varied geography influences its energy systems, with the SING (Northern system) and SIC (Central system) operating under different conditions.
• Renewables: 16% of TPES comes from combustible renewables and waste, primarily biomass (firewood), which accounts for 57% of residential energy use.
• Transport Sector: The transport sector is a significant contributor to energy consumption and emissions, and faces similar challenges to IEA member countries in terms of sustainability and efficiency.
• Future Focus: The report recommends a greater emphasis on energy efficiency, renewable energy development, and fuel diversification.

Conclusion

The Chile Energy Policy Review 2009 underscores the importance of a well-structured and forward-looking energy policy in supporting economic and social development. While Chile has made significant strides in liberalising its electricity sector and improving energy access, the report highlights the need for continued institutional reform, enhanced energy security, and a clear regulatory framework to guide sustainable development. The IEA encourages the Chilean government to build on its current progress and to consider the recommendations in shaping its future energy strategy.