Renewable Energy — Opportunities in Chile?

Here’s a conversation I’m having with a reader in Chile that I thought others may find interesting. Francisco Gajardo, who gave me permission to publish this, writes:

Hi Craig,

First of all, I must congratulate you for such a great job on Renewable Energy Facts and Fantasies, and the 3 Brass Tacks.

Although I’m a chemical & software engineer, I actually live on a farm in southern Chile, and I want to share with you some issues that might be interesting to you.

First, as a country we are net importers of fossil fuels and the largest copper exporter of the world, strongly linking the exchange rate with the copper (and obviously, oil, since copper is quoted at the London Metal Exchange) price: copper goes up, dollar goes down. The bad news is that we are an exports-based economy (copper, molybdenum, lithium, fruits, wine, salmon, fishmeal, lumber, cellulose, etc.) so although a high copper price is great for the government because of taxes and royalties, it’s at the cost of slashing the rest of our economy which, barring rocks, is made of renewable stuff.

Second, and although I have never been there, I think that we have far better potential for renewable energy generation as a whole than New Zealand: in the north we have the driest desert on earth, the whole country drops more than 6,000 ft in less than 200 miles on average (that’s hydro + wind) and in the south, near Magellan Strait and Drake Passage, we have far better conditions for tidal generation than the North Sea in winter.

Third, some weak efforts in renewable energies had been done during past administrations, but the current one has stated explicitly that RE are a priority, because we need to double our generation capacity in the next 10 years or so at the present growth rates. And it seems to be a serious effort, since there have been considerable increments on available government funding for such projects, and yet, the current legislation does not allow a private person or small company to sell its surplus of locally generated power to the national grid!

My point is that there might be a great investment opportunity down here, provided that somebody is able to explain it on short, technical and unambiguous words. Considering your impressive experience, do you agree, based on the previous three paragraphs, that such opportunity might indeed exist?

Looking forward for your views, I remain yours truly. Keep up the good work!

Best regards,

Francisco Gajardo

Here’s my reply, and I’ll post the follow-up that we receive from Bill Paul.

Francisco:

Thanks so much for writing. I appreciate the kind words.

I’m forwarding this to my associate Bill Paul (“renewable energy’s walking encyclopedia” as I call him) who is much better qualified to speak to this issue. Personally, I can only point out the obvious, i.e., that for a country as a whole to represent a good investment opportunity in RE, it needs to meet the following two major conditions:

1) Sufficient political stability to provide confidence to investors.

2) Some combination of mandates, incentives, carbon taxes, and feed-in tariffs that will make clean energy competitive with fossil fuels and nuclear — for at least a period of time sufficient for investors to generate their profits and get out if they want.

Bill:

Can you add to this for our esteemed guest, please?

Best,

Craig