Interested in Chile’s renewable sources of energy?

For those of you considering global investment opportunities in clean renewable sources of energy, allow me to share my recent conversation with Laurence Golborne, Chile’s Minister of Energy and Mining.  Mr. Golborne was in New York last month to speak about investment alternatives in those sectors.

H.E. Laurence Golborne, Chile’s Minister of Energy and Mining

Truth be told, he made a very compelling case.  Consider the following: the demand for energy in Chile has been doubling about every 10 years.  This rapid growth rate is expected to continue and accelerate during the next few years.

Equally important to this solid growth in energy demand, Chile enjoys a stable democratic government, with an open political environment supported by established institutions that have a deep commitment to the Rule of Law.  In addition, Chile promotes an open economy that welcomes — and more importantly — respects and protects foreign investment.  In fact, direct foreign investment in the mining sector is huge, representing as much as 20% of the country’s GDP.  Due to the country’s stable economic policies, both domestic inflation and public debt are very low – in fact, the lowest in Latin America!

Mr. Golborne also claims that his administration’s commitment to clean, renewable energy sources is strong, as evidenced by the fact that only 58% of its energy capacity and generation comes from dirty sources (such as carbon, oil and natural gas).  Keep in mind, however, that Chile has little oil or natural gas.

On the other hand, Chile has lots of water.  So when Mr. Golborne claims that his government is committed to clean renewable energy sources, he really means hydroelectric power generation — not solar nor wind nor biomass (each representing less than 1% of total capacity).  Although it is true that water is an energy source that is renewable and clean, the environmental impact of dam construction and management is another story altogether.  According to some local polls, 60% of Chileans now oppose the latest hydroelectric power plant proposal, since it would flood a large portion of the Aysen District of Patagonia in southern Chile.  This area is known for its breathtaking national parks and reserves.  It is a $3.2 billion project.

During my conversation with the Minister, I asked him about solar and wind.  “We are dedicated to those sources as well,” Mr. Golborne replied.  He went on to explain that his administration is setting up an $85 million Fund to develop those resources.

Hmmm… $3.2 Billion for hydroelectric; $85 Million for solar and wind… I wonder where the current administration’s commitment really lies.  For those interested in solar and wind investments in Chile, keep a close eye on where the government is putting its money.