• Economic Incentives for Renewable Energy Projects in Chile
  • September 17, 2010 | Author: Carlos R. Trevino
  • Law Firm: Jackson Walker L.L.P. - Austin Office
  • Chile, the South American country best known for its wines and copper production, has taken serious steps to diversify and increase its renewable energy sources. The geography of the country is as diverse as its energy opportunities. From the Atacama desert, the world's driest, located in the north of the country, to the south dominated by Patagonia, it is easy to identify natural resources to generate hydroelectric, wind, solar and geothermic power. Here are some of the regulatory and direct incentives available:

    • Open Access to Energy Sector: Chile has a legal framework for the energy sector that is based on the principles of competition in the generation segment and separation of the functions of electricity generation, transmission and distribution. Nationals and foreigners alike can participate without any regulatory barrier.

    • Open Access to Transmission Lines: Guaranteed access to transmission lines for all energy projects (no discretional exclusions). Charges and technical requirements are set by an independent institution.

    • Certain NCRE Projects are Exempt from Charges: Certain Non-Conventional Renewable Energy (NCRE) projects are exempted from transmission charges.

    • Fixed % of NCRE Required Under Law: In 2008, Chile enacted the Non-Conventional Renewable Energy (NCRE) Law, which made it mandatory for electricity companies selling directly to final customers to incorporate a certain percentage of NCRE into the electricity they sell.

    • Grants for Feasibility Studies: The Chilean Economic Development Agency (CORFO) offers various incentives for investments in NCRE projects, including grants to fund feasibility studies.

    • Ability to Sell Carbon Credits: Chile has ratified the Kyoto Protocol to the United Nations Framework Convention on Climate Change (Kyoto Protocol), and NCRE projects qualified under the Clean Development Mechanism (CDM) may obtain additional income by selling "carbon credits" to developed countries or operators in developed countries that have ratified the Kyoto Protocol (the United States has not ratified the Kyoto Protocol).

    Business-Friendly and Secure Legal Environment for Foreign Investors

    In addition to a variety of attractive investment opportunities in the energy sector, Chile offers a business-friendly environment for foreign investors. According to some of the most recent rankings, Chile is first among Latin American economies in terms of business and private investment attractiveness, market access, and transportation and communication infrastructure. For example, Chile ranks as the number one country in Latin America in the "Best Place to do Business 2009-2013" Index (The Economist Intelligence Unit). Chile's legal framework affords the same constitutional rights to foreigners as Chilean citizens, a strong protection to private property and the right to develop any economic activity that is not against moral, public order or national security. Moreover, in 2003 Chile and the United States ratified a Free Trade Agreement which, in its first five years of operation, has increased the trade between both countries by 155%.

    Recent Developments

    • The Chilean Energy ministry recently issued a Request for Proposals to award geothermic exploration concessions in 21 new areas.  The bidding conditions and specifications will be available until September 30, 2010, and the proposals must be approved by November 9, 2010.

    • CORFO will hold the 5th International Forum "Chile: Investment Opportunities in the Renewable Energy Sector" in Santiago on November 10-11, 2010.