Chile: Mining-related coal-fired power plants dealt heavy blows

Published by MAC on 2012-07-11
Source: Reuters, Santiago Times

Thermoelectric plants dealt heavy blows in Chile

By Kevin Kunitake

The Santiago Times

26 June 2012

Chile hit Spanish energy giant Endesa with two punches this week, producing serious obstacles for two of the company's major projects in the country.

Protesters against Endema in Coronel buried themselves in coal ash Photo: Rodrigo Acuña, El Mercurio

In the north, the country suspended the proposed US$1.4 billion Punta Alcalde project and in the south, neighbors of the Bocamina II thermoelectric plant buried themselves in ash piles in an unorthodox form of protest.

The two blows are telling of a country that is increasing its environmental awareness but still pushing forward to fight its looming energy crisis.

"This is a threat to the electrical supply of all mining projects in the north," Generating Association of Chile (AGG) General Manager René Muga told El Mercurio. AGG is an umbrella group that includes Endesa Chile, the country's largest electric utility company.

The Punta Alcalde project proposed two 370 MW coal-powered thermoelectric plants in the northern Atacama to power the region's growing mining industry.

The Atacama Environmental Commission rejected the project's Environmental Impact Assessment (EIA) in an 8 to 2 vote Tuesday, saying the energy was not worth the pollution the plant would create.

Big energy players have met a lot of rejection lately.

In April, Chile suspended Canadian Goldcorp's US$3.9 billion Atacama project. In May, Endesa's HidroAysén project in Patagonia was put on hold.

Now with the Punta Alcalde project stopped, all eyes are on Brazilian billionaire Eike Batista's US$5 billion Central Castilla mega project currently being debated in court.

"Although Castilla is still an option for the region, I don't think it will succeed," Universidad Católica energy analyst Hugh Rudnick told La Tercera, adding that "Castilla would be able to alleviate a situation that is now becoming critical."

Ill effects or no, Chile's mining industry is demanding more power - and stalled projects, such as HidroAysén or Punta Alcalde, are missed opportunities for the country to meet its growing energy quota, especially in the relative absence of more environmentally-friendly proposals. The country's current energy matrix is at 17,000 MW, but government projections say it will need an additional 8,000 MW by 2020.

Endesa Chile said it plans to appeal the ruling.

"It was rejected by the commission based on non-technical parameters," Endesa said in a statement. "It did not take into account all the information the company has submitted during the over three-year long evaluation process."

Further south in the town of Coronel, Endesa has another problem. Neighbors of the Endesa's Bocamina II thermoelectric plant have buried themselves in the plant's ash deposits to protest the health concerns sparked by the plant's pollution.

At least 20 residents are buried up to at least their waists in large ash piles alongside makeshift crosses and protest signs. They have been there since Monday and have no intentions of leaving, although some have been transported to the hospital with signs of hypothermia.

"We will remain here until we get our answer," protest leader Betty Gómez told La Segunda. "That means until the very end. We will meet with managers and hope to find a solution."

Earlier this month, three protesters mounted the plant's chimney and staged a 36-hour hunger strike. These small but unique protests have gained a large amount of attention considering only 500 families live in the area.

Neighbors demand Bocamina II pay US$120,000 to each of the families in compensation for living near the plant's pollution.

Environmental Minister María Ignacia Benítez dismissed the demand, saying environmental standards for thermoelectric plants are on par with countries in the European Union in an interview with Radio Biobio.

The 342 MW Bocamina II is also looking to expand production by 20 MW, pending an environmental impact study.

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Chile suspends Endesa's planned $1.4 bln thermo plant

Reuters

25 June 2012

SANTIAGO - A Chilean environmental commission suspended energy firm Endesa's $1.4 billion, 740-megawatt Punta Alcalde thermoelectric project planned for the mineral-rich north of the world's top copper mining nation, the company said on Monday.

Endesa said it would appeal to the government over the decision to reject Punta Alcalde's environmental impact study, the latest blow to a mega project in power-starved Chile.

Environmental groups are increasingly opposing power projects ranging from coal-fired thermoelectric plants in Chile's northern Atacama, the world's driest desert, to hydropower dams in the wild southern Patagonia region.

The two coal-fired 370-megawatt units are planned by Endesa in Chile's Atacama region, close to Antofagasta Minerals' Los Pelambres mine, the Cerro Casale project owned by Barrick Gold and Kinross, and Lumina Copper's Caserones mine.

"With such a massive rejection, I think it will be hard to revert (the decision)," said Hugh Rudnick, professor and energy analyst at the Universidad Catolica in Santiago.

Years of under-investment, a destructive 8.8 magnitude earthquake in 2010, droughts and the country's long, thin shape have degraded Chile's power grid, drawing increasing fire from energy-intensive mining firms.

Other energy and mining projects in the Atacama region are also reeling from legal setbacks.

Chile's top court suspended a key permit for Canadian miner Goldcorp Inc's $3.9 billion El Morro copper-gold project in April and is due to rule on Batista's MPX Energia and giant German utility E.ON's $5 billion Central Castilla in coming weeks.

"If Castilla is rejected (the Atacama region) would be in a fairly complicated situation... they'd have to turn to diesel, maybe even natural gas," Rudnick said.

A spike in lawsuits against key energy projects is increasing already steep power prices and inhibiting investment, deputy energy minister Sergio del Campo told Reuters in an interview earlier this month.

Environmental groups say many of the massive energy projects would harm air quality, destroy pristine Patagonian areas or pollute often-scarce water supplies.

"Punta Alcalde's environmental impact study wasn't able to fulfill the minimal requirements requested by public health authorities," said Cristian Gutierrez, the director of the Oceana environmental group.

"Places like Huasco (where Punta Alcalde is planned) have turned into highly industrial areas that could be considered 'sacrifice areas' given the environmental pollution local residents and the environment are exposed to."

Chile aims to boost copper output from last year's 5.24 million tonnes to over 7 million tonnes by 2020, but key expansion projects and new deposits require more energy.

The country's power matrix has a capacity of 17,000 megawatts and the government aims to add another 8,000 megawatts by 2020.

Shares in Endesa were trading 0.06 percent lower in early afternoon trade, outperforming a 0.82 percent fall on Santiago's blue-chip IPSA index.

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Suits Against Chile Energy Projects Hit Investment: Official

By Alexandra Ulmer

PlanetArk

15 June 2012

A spike in lawsuits against key energy projects in world No. 1 copper producer Chile is increasing already steep power prices and inhibiting investment, deputy energy minister Sergio del Campo told Reuters in an interview on Thursday.

Years of under-investment, a destructive 8.8 magnitude earthquake in 2010, droughts and the country's long, thin shape have debilitated Chile's power grid, drawing increasing fire from energy-intensive mining firms.

"The increase in appeals against projects, aside from delaying them, is influencing the increase in energy prices and is inhibiting investors," del Campo said. "It's definitely a barrier."

He said if two key embattled hydropower projects planned in the country's pristine Patagonia region fail to materialize, Chile might have to increase its thermoelectric generation or even mull nuclear power, even after quake-hit Japan's nuclear crisis doused nuclear power ambitions in Chile, one of the world's most seismically active countries.

The 2,750 megawatt, $3.2 billion HidroAysen project, owned by Colbun and Endesa, as well as $3.6 billion hydropower Energia Austral project, developed by Xstrata Copper and Australian energy retailer Origin Energy's have faced uphill battle against public opinion.

Environmental groups are increasingly opposing mega power projects ranging for coal-fired thermoelectric plants in Chile's northern Atacama, the world's driest desert, to hydropower dams in the wild southern Patagonia region.

Chile aims to send a bill to Congress to create a public energy transmission line and decide whether to link its two main electric grids in August, he added, in a bid to improve the country's shaky energy transmission system.

Connecting the country's south-central SIC grid, which over 90 percent of the population depends on, to the northern SING grid has not been deemed profitable in the past, he said.

The Andean country's power matrix has a capacity of 17,000 MW and the government aims to add another 8,000 MW by 2020.

While Chile is often held up as Latin America's economic model, many in the country feel left out of a copper bonanza that is seen having curtailed people's water and energy supplies and harmed the environment.

Chile is banking on attracting $100 billion in mining investment and propelling annual copper output to 7 million metric tons (7.71 million tons) by 2020, but miners are growing wary of spiraling costs and lack of power for new deposits or expansion of old ones.

Short Term Relief in Power Prices

Energy prices averaged $268 per megawatt hour in April, according to Chilean energy consulting firm Systep.

But power prices should fall in the short-term as two new thermoelectric plants are scheduled to come on line in July and September and rainfall picks up, del Campo said, forecasting diesel energy consumption will fall as a consequence.

Chile is heavily dependent on fossil fuel imports and hydropower for its energy generation.

Del Campo forecast spot energy prices could fall below $100 per MWh as of October, depending on rainfall levels, and will not be above $120 per MWh as of the first quarter of 2013.

Energy costs, not blackouts - such as the one which plunged around 10 million Chileans into darkness in September of last year for a few hours - are the main risks in Chile's power sector, del Campo added.

"I totally rule out supply risks in the (northern) SING grid," on which most of the country's massive copper mines depend, he said. "What will likely have an effect in the short-term is that prices in the (south-central) SIC grid aren't falling in the way they are in the north."

State copper producer Codelco's cash costs in the first quarter of the year were $1.30 per pound of copper, rising from 2011's average $1.16 per pound, in large part due to energy prices.

(Editing by Tim Dobbyn and Marguerita Choy)