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Boston, MA -- (SBWire) -- 11/15/2013 --Hydroelectric sources of power continue to make the headlines in Chile's power market for a number of reasons. A prolonged drought has reminded the government of unreliability of this source of power, while controversy continues over the large-scale Hidro Aysen power plant, with developers facing a stop-start process in the courts. This, combined with similar impediments to the development of coal-fired Punta Alcalde, will do little to encourage international investors. For the many opportunities that Chile's electricity market offers, if there is regulatory uncertainty, investors will think twice before entering the market. Current opportunities focus on transmission and distribution, with the ambitious connection of the central and northern electricity grids taking place; there is also a renewed commitment to renewable sources of power. In September 2013 the government approved a bill to promote renewable energy, with the renewable contribution to the energy mix targeted to reach 20% of electricity generation by 2025.

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Domestic demand for energy in Chile is growing, and hydroelectricity supplies the majority of this demand - a source of power that is subject to risks, as ongoing drought and fears for energy shortages in 2014 illustrate. Chile needs to diversify its electricity-generating mix to ensure that supply meets the growing demands of the population and its energy-intensive mining industry, but efforts to boost electricity production from other sources, such as coal at the Punta Alcande power plant, are held back by lengthy approval and appeals processes.

During the period 2013-2022, BMI forecasts that Chile's total power generation will increase by an annual average of 5.1%, reaching 108.3 terawatt hours (TWh). The population is expected to rise from 17.6mn to 18.9mn during this period, with net power consumption set to rise from 60.7TWh in 2013 to 72.7TWh by 2017 and then to 90.0TWh by 2022. The theoretical net export capacity by 2022 is 1.4TWh.

The key developments in Chile's power sector since last quarter are:

- Endesa Chile continues to face delays in its attempt to construct the coal-fired Punta Alcalde power plant in the north of the country. In August 2013, a court overturned a previously approved environmental impact study, putting the project on hold again.
- In June 2013, the Mining and Energy Commission in the Senate approved a bill that will pave the way for the connection of Chile's central and northern electricity grids. The government aims for the two grids to be connected by 2017, but third-party estimates push this date back to 2019.
- It is more than two years since the first objections to large-scale hydroelectric project Hidro Aysen was announced, and it is still unclear as to whether or not the project will go ahead.

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