Opportunities in the Energy Industry in Chile

Over the last few decades, Latin America has become a hotspot for U.S. exports and investment in the energy sector. The U.S. exports half of its refined energy products to Latin America, including significant volumes of LNG and crude oil. While U.S. energy policy previously centered on promoting clean energy, the change in administration is likely to open up more opportunities for investment in economically viable energy sources – including solar, wind, and fossil-fuels, regardless of green standards.

Chile will remain an important market for U.S. investment in the energy sector. Chile is currently the fifth-largest consumer of energy in Latin America, and its demand for energy is expected to grow from 65 TWh in 2012 to over 100 TWh by 2020. This dramatic increase is spurred by the mining sector (the country’s largest industry) and expanding urban areas. Chilean energy demand, increasing by over 7% annually, is opening opportunities to expand installed generation capacity including both conventional and non-conventional technologies. Opportunities for investment multiply as the country seeks to exploit its own potential and revive its systems with clean energy technology.

One of the Chilean energy sector’s alluring qualities is its high prices. While the Chilean economy grew at a rate of 5% between 2003 and 2013, the government neglected to push for simultaneous development in the energy sector. Because of the lack of critical investment, Chile faces rising energy prices. According to CIE Chile, electricity sales are predicted to increase between 3.8%-6.7% each year until 2025.

Under the new administration in the United States, Chile’s potential in conventional energy generation will become increasingly attractive to investors. Coal is still considered a key element of Chile’s energy sector. While Chile has the largest reserves of bituminous coal in South America, high extraction costs force Chile to import most of its coal. In 2011, the government green-lighted a coal mining project in Patagonia which is projected to meet 30% of the nation’s coal demand. Investments in coal are important in order to renovate older plants with more environmentally friendly technology.

Liquefied natural gas (LNG) is another important resource and a desirable alternative to diesel that can use the natural gas infrastructure already constructed in the 90’s. LNG currently accounts for about 33% of the energy supply, though investment is needed to build more terminals for LNG imports. Chile has also done exploratory drilling in the Magallanes Basin, a shale formation that has an estimated 2.4 barrels of shale oil.

The wealth of investment opportunities in Chile’s energy sector is also generated by the country’s push for sustainability. Chile’s new mission, Energy 2050, calls for 70% of the country’s electricity to come from renewable sources by 2050. The country has a variety of different renewable energy sources. Small hydroelectric plants and biomass production were the leading renewable technologies, accounting for nearly 90% of the total renewable generation in 2012. Recently, solar and wind power have come to play a larger role. In 2012, Chile’s renewable energy sector received over $2 billion in investment, 67% of which went towards new wind projects and 15% towards solar energy. In order to meet the goals of Energy 2050, Chile will still need significant investment in these areas.

Chile’s National Energy Commission has established that private investment will be the main source of capital for energy sector expansion. Investors will continue to target Chile’s energy market because of its high natural potential, high prices, emphasis on renewable energy, and strong regulatory support. As the demand for energy increases and Chile attempts to meet its goals for sustainability, the country will be