Canada Pension Plan

Hidroaysen: Pressing priority or utterly unnecessary?

Benjamin Witte
The Patagonia Times
July 2, 2009

Long a source of serious environmental concerns, Chile’s controversial HidroAysén dam project is now being questioned along technical lines as well. Despite its billing as a “national priority,” critics say that from a basic supply and demand perspective, the multi-billion-dollar hydroelectric plan is simply unnecessary. In fact, Probe International made this very point in a June 17 letter to the Canada Pension Plan Investment Board.

Proposed in 2006 at a time of widespread concern over Chile’s thinly stretched energy supply, the HidroAysén project – a joint venture between Chilean utility Colbún and Italian-owned Endesa – calls for five massive dams along Patagonia’s Baker and Pascua rivers. If approved by government environmental authorities, the dams will together boast an installed capacity of 2,750 MW – a huge amount considering Chile’s current overall capacity is just shy of 13,000 MW.

HidroAysén officials champion their US$3.2 billion plan as a “Proyecto País,” or national priority, insisting the dams are a necessary step toward satisfying the country’s growing appetite for electricity. Several high-level government officials have publicly agreed.

“From the point of view of future energy requirements, these 2,400 MW* are required. They’re not superfluous,” Energy Minister Marcelo Tokman said in July, 2007.

New research suggests otherwise. According to the authors of a recently published report entitled “Is the HidroAysén Project Necessary? An Analysis of Chile’s Energy Future,” Chile – even without the Patagonia dams – has enough electricity projects already in the pipeline to more than satisfy demand in the coming years.

Not only can it do without HidroAysén, but, with aggressive pro-efficiency policies and better use of its plentiful renewable energy sources, Chile could also do away with numerous coal-based electricity generators currently being planned, the researchers found.

“One of the prevailing misconceptions is that in order for Chile to develop economically, if they don’t approve HidroAysén, then they must build this massive amount of coal fired power plants,” study author Stephen Hall, an independent energy consultant from Canada, told the Patagonia Times. “But under a realistic forecast with aggressive efficiency and renewables, we can obviate the need for both HidroAysén and any additional coal development.”

The government’s National Energy Commission, or CNE, predicts that in the coming years, electricity demand will grow by between 5.5 percent and 6.5 percent annually. By 2025, the CNE forecasts, Chile’s 9,118-MW central grid (SIC) will need to be expanded to at least 22,375 MW.

Given the many energy projects government authorities have already or are in the process of approving, Chile should have little difficulty meeting that target, insist Hall and his collaborators, Universidad de Chile researchers Roberto Román, Felipe Cuevas and Pablo Sánchez. By 2025, those projects alone should add nearly 14,000 MW, bringing the SIC’s total to approximately 23,000 MW. Energy efficiency efforts and future renewable-based projects could, even by conservative estimates, boost capacity by an additional 7,284 MW, the researchers predict. HidroAysén’s 2,750 MW would then bring the total to more than 32,000 MW – too much electricity, the study concluded.

“(HidroAysén) will mean the SIC will be massively over-constructed, oversupplied,” said Hall. “The consequence would be that electricity rates will rise substantially…If you combine the project with the transmission line it’s over US$5 billion. I can’t see any scenario where electricity rates don’t go up substantially in order to pay down the plant.”

The researchers, furthermore, consider the CNE’s demand forecast somewhat exaggerated. Given the current global recession, electricity demand is likely to increase by just 3 percent between now and 2011, Hall and his associates predict. And, given historical trends, demand can be expected to rise by 4.5 percent thereafter. By 2025, in other words, Chile’s SIC may in fact need just 18,452 MW, making the HidroAysén dam project even less of a priority.

The study is being welcomed by members of the Patagonia sin Represas (Patagonia without Dams) campaign, a movement that began in Aysén and now involves a host of influential Chilean and foreign participants, including International Rivers.

Convinced the five dams will ruin pristine Baker and Pascua Rivers and open up the mostly untouched Patagonian wilderness to further industrial exploitation, campaign members have argued for years that the project’s obvious costs far outweigh any potential benefits. Given the conclusions of the report, critics are now questioning whether the HidroAysén scheme promises any benefits at all.

“We understand why the company would package this as a Proyecto País,” said campaign head Patricio Rodrigo. “Because whether it’s a company selling carrots, socks or apples, obviously they’re going to say they have the world’s best product, something that everyone needs. What isn’t reasonable is that members of the government would lobby on its behalf, because clearly there are other energy sources. This very study, in fact, shows we’re actually facing an oversupply.”

The campaign has played a crucial role in helping block the project, which HidroAysén submitted for approval by environmental authorities last August. Under pressure from both government and citizen observers, the company withdrew the plan three months later, promising to resume the approval process by the end of this year.

A more likely scenario, say members of the opposition campaign, is that HidroAysén will wait at least until next March to resubmit – after Chile’s upcoming presidential election.

“This year the project enters into its political phase,” said Patgonia sin Represas political coordinator Manuel Baquedano, who expects the study to play an influential role as Chile continues to debate the project.

“This is a study that was lacking,” he added. “We needed something that shows concretely that with projects already underway, and with improvement in the areas of energy efficiency and investment in renewables, projects like HidroAysén can be done away with. It also gives us an argument against people who say that without HiroAysén we’re going back to the era of candles.”

* Tokman’s statement predates HidroAysén’s 2007 redesign. The company reduced the project’s anticipated flood area from approximately 9,000 hectares to 5,900 hectares and increased the projected generating capacity from 2,400 MW to 2,750 MW.

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