Chile: The Star Faces Hurdles; Major Earthquake, Severe Drought, Crumbling Electricity Grid

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There is no doubt that Chile has been and is a star in the developing world. After the major earthquake the country pulled together and started a massive recovery. The country however, has been faced with a severe drought for over 3 years, as La Nina takes its toll. Reservoirs were at 40% capacity last month.


In addition, its older infrastructure may further risk energy blackouts, the "creaking power grid that threatens the economy".

Chile's power network is creaking after decades of underinvestment and it will take years to shore it up to head off a repetition of massive blackouts such as one in September that hit operations at major mines and the cost state copper company, Codelco, more than 1,400 tonnes in lost output".

The government has taken energy saving measures that include reducing voltages and saving water in reservoirs. It had said the measures would be lifted in April, but this may be reviewed in March.

The  Ottawa Citizen reports: "Rain shortages force generators to rely on expensive fuel-driven plants, compounding inflation risks in an economy that is expected to slow sharply this year to around four per cent growth after growing over six per cent in 2011.

Guinea provided nearly half of all liquefied natural gas (LNG) imports in 2010, according to Energy Ministry data, while Trinidad and Tobago, Egypt and Qatar together provided 44 per cent of the total.
The United States, South Korea and Japan each accounted for roughly a third of 2010 diesel imports, the data showed.

"It's a real barrier to our productivity," Alvarez said. "We have expensive energy compared with competitor countries in Latin America, as well as expensive energy compared with other member countries of the OECD."

President Sebastian Pinera wants to boost energy generation to head off possible rationing, but key projects such as the massive HidroAysen hydropower dam project in Patagonia face strong resistance from environmental activists.

Industry groups, such as key miners BHP Billiton Ltd. and Codelco, have urged the government to do more to meet growing energy needs and lower the cost of power, which has hurt their margins.

Pinera is due to announce a revamping of the country's shaky energy grid, which could include building a transmission line to link Chile's south-central and northern grids.

"Our government has taken the decision to not continue burying its head in the sand like an ostrich," Pinera said during an annual energy dinner last month. "We could face serious problems in the second part of the decade if we don't make decisions now."