On June 10, 2014, a ministerial commission in Chile rejected the HidroAysén project, an $8 billion joint venture of the Spanish company Endesa, S.A. (51 percent), which is a subsidiary of Italy’s Enel, and the Chilean company Colbún S.A. (49 percent).
Recently-inaugurated President Michelle Bachelet had stated that she would not support the project, and her ministers of agriculture, energy, mining, economy, and health agreed. Nevertheless, the country faces a challenge of energy poverty and high costs, which President Bachelet must address going forward.
The HidroAysén plan was to build five hydroelectric dams on the Baker and Pascua Rivers in the Patagonia region in the south of the country. The rivers–located in the Aysén region–are in an area of Patagonia that is virtually empty. The project developers viewed the plan as potentially very lucrative since the region receives steady rainfall.
HidroAysén was initially approved in 2011 during the administration of former President Sebastián Piñera, but popular protests derailed the environmental impact study. According to one estimate, more than 70 percent of Chileans opposed the project, and they took to the streets to express their disapproval.
The strongest opposition came from the Aysén region, despite promises for jobs and improved welfare. Critics of the project could not overlook its environmental impact. Three dozen families would need to be relocated, nearly 15,000 acres of forests would be razed, and the small population of Southern Huemul deer would be threatened. These factors led to intense public outcry.
Chile does not have any oil or natural gas, and thus has to import most of its energy. Because the country is so reliant on foreign energy sources, almost 75 percent of Chile’s energy supply comes from fossil fuels. Therefore, hydroelectricity is a viable energy source–neighboring Brazil gets more than 75 percent of its electricity via hydroelectric sources. The HidroAysén dams would have generated 2,750 megawatts, a third of central Chile’s needs, by 2026. Because energy is so scarce, Chileans have the second-highest per capita energy costs in the region, after Uruguay.
With some modifications, approving the HidroAysén project could have been a step in the right direction. Hydroelectricity is a clean source of energy, but attention should be paid to its environmental footprint. Often, hydroelectric projects can damage the local environment, and this project was no exception.
Nevertheless, consultations with the local communities can feel out their concerns and provide assurances. For example, the Chilean government could have given special treatment to the families that would have been displaced and worked on an appropriate plan to protect the local wildlife. While challenging, the implementation of an environmental impact plan would have gone a long way in this case.
President Bachelet’s administration faces an uphill battle with regards to Chile’s energy agenda. The HidroAysén project would have provided a major boost in addressing the country’s energy supply and costs. Yet concern for environmental issues will continue to be a consideration for future development. Responsible investment is possible when concerns are addressed, while keeping energy needs in mind.