Hidromaule, Inc., a non-conventional hydropower producer in Chile, sees renewable energy technologies as a good thing for the country, with a continuing future for hydropower in the mix
With the restriction of Argentinian exports of natural gas starting in 2006, the country had to quickly adapt to find an alternative power supply, throwing Chile into a severe energy crisis. First approaches to solve this crisis came through diesel powered plants, including the conversion into diesel of existing natural gas fired plants. At that time, no solar or wind alternatives were yet operating in the grid, and the system was lacking the expertise and data needed to develop these technologies. Investment costs were higher than other alternatives, such as hydropower or coal.
Because of its natural and geographic characteristics, Chile has always been heavily dependent on hydropower technology. With the introduction of low-cost natural gas in 1997, however, developments of hydropower technology were practically stalled. Natural gas was priced at barely $US2 per MBTU, making hydropower plants non-competitive.
Once the grid matrix was forced to adapt to allow a higher share of diesel, existing hydropower and coal projects in the pipeline became slowly available again.
The 2009 escalating energy prices, a five year drought, and the increase of diesel prices worldwide combined to provide new opportunities for the development of small hydro, solar and wind power projects. Chile also passed a non-conventional energy law in 2008, subsequently modified in 2013, that obligates electric companies to deliver up to 20% of all of their energy sales from renewable sources by the year 2025. The playing field immediately opened up from three main players to include many smaller ones.
The new renewables mix includes run-of-river hydropower plants like Hidromaule, Inc. and Besalco Energía (introduced in the last issue). Hidromaule, Inc. is one of the pioneers of Non-Conventional Renewable Energy (ERNC) certificates in Chile. It has three plants operating in the Maule region, all run on irrigation canals.
Run-of-river plants are one of the best renewables options currently possible for Chile, but not the only one. Chile has considerable potential for renewable energy production with its multiple river systems, the most irradiated deserts in the north, windy regions, and many geothermal possibilities all along the los Andes Mountains.
However, the integration of new power alternatives in the system requires a revamping of Chile’s energy grid and energy legislation, which Hidromaule’s Business Manager, Jose Manuel Contrado, appreciates. In an interview this month, he described the government’s work to help new energy producers solve their PPA engagement for intermittent resources, via the regulated supply hourly bids. There is still a lot to be done with system coordination, increasing limited transmission lines, and solving the ever-present environmental concerns.
Hidromaule, itself, is located in San Clemente, halfway down the length of Chile in the lower side of the Maule region. It was formed by the Italian green energy developer, Sorgent.e Group, and Austral Andina Company, a Chilean investment group, each owning around half of the company. So far the company has built three plants in the Maule region, each using water rushing downhill through irrigation channels to produce energy: Lircay, Mariposas, and Providencia.
One of the biggest agricultural regions in the country, the Maule basin sports a vigourous irrigation canal system that feeds crops for near 2,200 farmers of the Asociación Canal Maule (ACM). With this association Hidromaule formed an agreement in 2006 to use their water and canals to produce electricity, without affecting the irrigation at all.
Hidromaule’s run-of-river hydropower plants utilise gravity to pull irrigation water through turbines from high elevations to lower ones. Built in 2008, the Lircay plant has a capacity of 19 megawatts (MW) of power production. The 2012 Mariposas plant produces 6.3 MW and the 2013 Providencia plant can generate 13.8 MW of power. Power from the second two plants is routed through electric lines to a substation at the Lircay plant, which then forwards the combined power to the Chilean Central Interconnected System grid via a 27 kilometre (17 miles) transmission line. Together the three plants produce an average of 220 gigawatt hours (GWh) of energy per year.
In 2011 the company joined with other local energy generation companies to form GPM-AG, a union association for medium and small energy generators. The GPM-AG group aims to help members with technical, operational and regulatory matters, promoting a competitive market and long-term rules for system development. The group is actively participating with government authorities to create better rules and access to local energy markets.
Not only are the three power plants built to create power without harming the environment or the local community, but they also help lower carbon emissions in the air. Hidromaule contributes a total average emissions abatement of 124,000 tons of CO2e per year. Under the United Nation’s Clean Development Mechanism (CDM) program and the Verified Carbon Standard (VCS), this enables the company to offer carbon offset credits for sale in the international markets.
Hidromaule’s production helps the local community too. The ACM agreement works two ways. Hidromaule utilises ACM’s irrigation waters and channels for power production and pays an annual fee to the association, which helps the association maintain its channels and cover operational and administrative costs. Hidromaule also provided, finance, labour and design expertise to improve the water distribution system, which has helped mitigate the impacts of recent and extended drought.
Within the community, itself, Hidromaule encourages educational and cultural development, starting with rebuilding a local school after a devastating fire in 2009. Ever since, the company has concerned itself mainly with student needs – providing infrastructure, educational tools, and support. It works especially with a local program that improves school performance and interpersonal relationships between its artistically talented students.
Hidromaule hires mainly locally for both technical and non-technical jobs, including mechanical and electrical technicians and auxiliary personnel. And it purchases regionally, including engineering, construction, and supervision services, and some electrical and mechanical equipment.
According to Business Manager Contardo, “Being all reputed local suppliers, there was no other abroad company that could better fit the required supply quality and delivery timings during project execution.”
Hidromaule contracted with ICAFAL to construct the power plants, Transnet S.A. allowed the connection of the plants to the existing power grid, the power transformers were built by RHONA S.A., water gates by INAMAR, and transmission line supports were provided by BBOSCH. The turbines and generators, the heart of the power plants, were supplied by Austrian supplier Andritz Hydro, Ingeteam’s Indar from Italy, and Alconza Berango from Spain.
On the financial end of it, the World Bank’s International Finance Corporation (IFC) granted a Project Finance Scheme for the Lircay plant, after Hidromaule proved it could meet their environmental, labour, and community health standards. And Zurich Emerging Markets provided a pioneering insurance policy that allowed Hidromaule to obtain early financing from future emission reduction production. After the Lircay experience, local banking gradually started to create project finance schemes, thanks to the CORFO and KFW agreement. The second two power plants were financed locally through BICE for Mariposas and BCI for Providencia.
Recently other renewable technologies have presented themselves as viable alternatives, thereby increasing competition for Hidromaule and other run-of-river hydropower projects. However, Contardo believes that, “All renewable energy contributions are a good news for the country, as long they can demonstrate a sustainable and low cost alternative for the system development.”
Solar and wind power projects have yet to prove their economic viability in Chile and their ability to reduce the use of carbon-producing supplementary power. Contardo notes that there are still technical and economic barriers affecting their performance, such as transmission restrictions and intermittent power production, where diesel powered backup systems are required, translating into peak system energy prices and higher average CO2 emissions. At the same time, Contardo acknowledges that there are no current legal restrictions for new players to enter the market, and he believes that Chile will find solutions that allow the development of an adequate balance of future energy supplies.
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