Boston, MA -- (SBWIRE) -- 01/24/2013 -- BMI View: Question marks hang over the future of two of Chile's major power projects, the 2.75GW HidroAysen hydropower plant and the 2.1GW Castilla thermal power plant. Both are crucial to ensure Chile's long-term energy supply, particularly for its energy-intensive copper mining industry, and a court decision rejecting the Castilla project also has implications for the HidroAysen project. Even if concerns regarding HidroAysen's transmission line are resolved, it still has an environmental approval hurdle to pass relating to its transmission line, and it was on environmental grounds that Castilla failed to gain approval. Castilla's developers now have to draft a new environmental impact assessment, one that joins the two key elements of the project, the power plant and a port. Faced with the prospect of expensive energy imports, Chile's government will have to act fast to ensure that it does not send out the wrong messages to potential investors, can plug its growing electricity provision deficit, and to prepare for increasing domestic energy demands.

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Domestic demand for energy in Chile is growing, and hydroelectricity supplies the majority of this demand. But as delays slow the development of HidroAysen, particularly regarding the transmission line project, concerns regarding how Chile's government intends to fill its electricity deficit are growing. In terms of thermal power generation, the Castilla project has been put on hold following a court ruling in August 2012, which will generate further uncertainty. Positive news includes the government's commitment to improve Chile's electricity transmission and distribution network with the interconnection of regional grids. The government has revealed that it will launch a tender for this project in H113.

During 2011-2016, BMI forecasts that Chile's total power generation will increase by an annual average of 4.48%, reaching 73 terawatt hours (TWh) at the end of this forecast period. The population is expected to rise from 17.3mn to 18.7mn during 2011-2021, and net power consumption looks set to rise from 55.5TWh in 2011 to 69.9TWh by 2016, and then to 85.6TWh by 2021. The theoretical net import requirement by 2016 is 2.14TWh, falling to 1.03TWh by 2021.

Key developments for Chile's power sector this quarter include:

- In August 2012, Chile's Supreme Court rejected plans for the Castilla thermoelectric power plant, presented by Brazil's MPX Energia and Germany's E.ON. If the project is to proceed, the promoters must present a new environmental impact assessment.
- President Pinera revealed plans to launch a tender for the connection of Chile's Central (SIC) and Northern (SING) grids in H113.

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