MR. JORGE ROSENBLUT SPEECH
CHAIRMAN OF THE BOARD – ENDESA CHILE
XXI LA JOLLA ENERGY CONFERENCE
MAY 21ST 2012
It is a privilege to participate in this most influential Institute of the America´s Energy Conference. Thanks: to my friend Ambassador Shapiro, one of the most knowledgeable officials at the State Department on Latin America, for inviting me to this conference; to Jeremy Martin and his team for setting up this great event; and to you all for being here. This is my first La Jolla Conference, and if I can be somewhat entertaining and informative, let´s hope it´s not my last!
MY COMPANY IS BASED IN CHILE. MY PARENT COMPANY DOES BUSINESS THROUGHOUT THE WORLD—WHEREVER A COUNTRY NEEDS ENERGY TO SUPPORT ECONOMIC GROWTH, IN WHATEVER SUSTAINABLE FORM, WE ARE THERE
I am the Chairman of Endesa-Chile, a member of a worldwide energy powerhouse — Enel Endesa Group — present in 40 countries and with more than 97,300 MW of installed capacity.
We have been an influential energy provider in South America. We are the largest private operator in Colombia and Peru and have a significant stake in the economic development of Argentina and Brazil as well.
Endesa Chile has also been the primary developer of the electricity matrix of Chile for more than 60 years and in 2011 supplied 38% of the electricity in Chile — the largest market share in the country.
As a major corporate citizen in Chile, Endesa Chile has a responsibility to continue supporting, driving, and sustaining the country’s growth by providing the cleanest, most renewable and most reliable energy.
We as well as our colleagues from AES are material electricity suppliers in Chile. What we do, how we do it and when we do it is critical to the economic success of Chile.
And as a number of analysts would say Chile is on course to achieve economic greatness even beyond the progress made in recent years.
CHILE HAS MADE REMARKABLE ECONOMIC PROGRESS, AND BY GROWING 6% MORE A YEAR, WE HAVE THE OPPORTUNITY TO ADVANCE TOWARD WEALTHY-NATION STATUS BY 2024
Chile has been a model of democratic and economic stability for more than two decades. Chile has a real chance to become a 1st World Nation in the near future. Current growth trends suggest that this aspiration is possible to achieve.
Take a look, Chile has a $17,380 GDP per capita, its inflation rate has declined from levels above 20% in the early 90's to 4.4% in 2011, and 93% of Chilean exports are traded under free trade agreements.
Chile plans to continue its economic progress into the future. Although Chile is currently a middle-income country, it will solidify 1st World Nation status by 2024. In another 12 years, Chile will reach the same per capita level that Germany had at the beginning of this century.
Chile can do this by growing at an annual rate of 6% per year. This goal may seem ambitious, but Chile’s strong institutions, committed private sector, and strength of the people will certainly get us there.
CHILE CAN GROW AT 6% AND BECOME A FIRST-WORLD NATION BY 2024— WITH MORE ENERGY, LOTS OF IT.
Getting there, however, will require more energy, lots of it. To grow at 6% annually and achieve 1st World Nation status, we need to increase the current installed capacity of 17,000 MW to 29,000 MW by 2024. It will be challenging to do in just 12+ years.
This means that our electric energy consumption will jump from 3,340kwh/year per capita to 6,300kwh/year. It is equivalent to the average consumption of a German citizen at the beginning of XXI century, and about half of the average consumption of a United States citizen today.
Chile needs more energy, in fact, it needs to almost double the current installed capacity in a 21st century sustainable way—that is, to fulfill, at the same time, two separate yet interrelated policy goals: requiring the Chilean electricity matrix to be more secure and more clean.
How can this be done? How can we make the Chilean electricity matrix cleaner and more secure? To achieve these goals Chile is well-equipped with two powerful instruments: NCRE (non-conventional renewable energy) and CRE (conventional renewable energy).
CHILE NEEDS A SUSTAINABLE ENERGY MATRIX WHICH IMPROVES ITS ENERGY SECURITY AND MOVE TOWARDS A CLEANER ENERGY MATRIX
So let´s review the first of the two policy goals: energy security and cleanness and then look at the two instruments at hand: NCRE & CRE.
A) ENERGY SECURITY
Today Chile’s electricity matrix is heavily dependent on imported sources for electricity generation, which indicates Chile has not achieved energy-security.
Considering the 2011 generation figures, 66% of electricity came from thermo-electrical conventional sources. All fuels were imported, amounting to $1.7b. Hence, we need to use more resources that are locally available on Chile´s own terrain.
B) ENERGY CLEANNESS
Chile’s electricity matrix has become increasingly less clean in the last 15 years. The hydroelectric component has dropped significantly from 76% in 1997 to 34% in 2011, being replaced by an expansion in NG, diesel and coal, in that order of importance.
Consequently, CO2 emissions have been going up from 3.6 tonCO2 per capita in 2005 to 4.1 tonCO2 per capita in 2011, and if we continue on this trend Chile will reach 8.5 tonCO2 per capita in 2024, more than double the world target of 3 - 4 tonCO2 per capita. It goes without saying, that’s not the way to go.
Chile needs to move towards a cleaner electricity matrix. As done in other fields, like individual retirement accounts, infrastructure outsourcing, Chile needs to seriously reach 1st World Nation status and First World sustainability status—quite frankly, these two goals go hand-in-hand.
In short, Chile’s current electricity matrix must evolve into one that provides more domestically sourced energy, with resources which are locally available on Chile´s own land, and that uses cleaner renewable sources of energy.
So how do we advance toward a cleaner, more secure energy matrix?
For that, Chile has two potent instruments: NCRE and CRE. Two instruments, which would dramatically enhance Chile’s electricity security and cleanness by tapping into its domestically abundant natural resources and by making the best use of its “Renewable, Abundant and Clean Oil”—also known as water, which flows in its many rivers.
CHILE COUNTS ON ITS RESOURCES AND CAPABILITIES TO ACHIEVE A SAFER AND CLEANER ENERGY MATRIX
So let’s take a closer look at these two instruments.
Chile has extraordinary potential for NCRE technologies, clean, renewable and domestically sourced, including small hydro, geothermal, biomass, wind and solar, achieving plant factors close to 50% as a mix.
Last year a high level, government commission, with 15 of the top energy experts in the country, suggested a goal of 15% of NCRE in the electricity matrix by 2024. This would require an additional 4,200 MW of NCRE. Aggressive–taking into account that today there exists less than 400 MW–but doable.
The additional capacity may require some incentives given that Chile´s energy regulatory framework promotes market solutions and Chile´s structural fiscal law requires a balanced budget. Some changes to the energy transmission regulation could enable, for example, faster development of NCRE.
Using Chile´s clean, renewable and abundant oil, a.k.a. water, in a conventional way also has extraordinary potential. President Piñera has given a clear signal to increase the participation of hydroelectricity in the matrix to around 45%.
So another 5,000 MW should come from conventional renewable energy—water.
C) CONVENTIONAL THERMAL
The use of conventional thermoelectric sources, however, will still be critical. At least, some 3,000 MW will be required. They have high plant factor and raise the reserve margin of the system.
While the use of NCRE and CRE is not an industrial policy, sometimes referred to as picking the winners, it should be a national goal, which the market has to fulfill.
CHILE’S RENEWABLE, DOMESTIC AND CLEAN OIL—WATER
We have briefly looked at two policy goals and two powerful instruments to achieve them, now let´s look at Chile´s natural, renewable and abundant treasure—water.
Chile has water, lots of it, which springs from the high peaks of the Andes Mountains almost 3,000 miles long, and flows all the way out to the Pacific Ocean. It is clean, renewable, environmentally sustainable, domestically available, and can fuel both NCRE and CRE.
Its use, while achieving 45% hydro, up from 34% today, and 15% NCRE by 2024, up from 2% today, and with total respect to environmental requirements, will allow Chile to double its total electricity generation, but only increase CO2 emissions from electricity by 33%.
As an example, our HidroAysén run-of-the-river project, the subject of many news stories both locally and internationally, received environmental approval by the regulatory bodies in May 2011. The approval was legally challenged. The Chilean Supreme Court just gave the go-ahead to the project.
If executed, HidroAysén will generate an equivalent to 30% of all electricity generated in Chile in 2011. It is environmentally sustainable and will be one of the most efficient hydropower projects in the world. The water for this project that we don’t use today doesn´t stay underground like fossil fuels until we need them at a later date. In fact it’s lost—equivalent to burning into the atmosphere about 1.5 billion dollars per year in liquefied natural gas. What a waste!
Chile’s aspirations to become a 1st World Nation and to utilize the vast renewable resources of the country—water, wind, sun—are one and the same…but that is not today’s reality.
THE ROAD TO ECONOMIC PROGRESS HAS SOME CHALLENGES THAT CAN BE OVERCOME IF. . .
Chile needs to make difficult political decisions. Societies demand greater participation, transparency, autonomy and decentralization. It is a global phenomenon that is also manifested in the energy sector. For several reasons, it is increasingly difficult to develop power generation projects in locations around the world. We all know that.
Countries that have succeeded in achieving 1st World Nation status have been supported by strong institutional foundation, where the rule of law exists, and where the judiciary is not only independent, but also respected. Chile has that.
Governments are often faced with the dilemma between making the necessary decisions for their countries and dealing with the political costs they create. For example, the former president of Brazil, Luis Inacio "Lula" da Silva, decided to develop the hydroelectric potential of that country, even though vast reserves of fossil fuels were available. A current example in the US is the Keystone XL project…the list goes on and on.
The challenge is how best to interact with civil society for the use of existing & abundant natural resources to sustain economic activity and progress, striving toward energy independence in an environmentally sustainable way.
WE WANT TO EMBRACE THE OPPORTUNITY AND CHALLENGE, AND LEAVE A LASTING LEGACY
In closing, our energy sector—the one that most of us here today are dedicated to— is the new steward for a renewed optimism about the future.
Our “energy destiny” is not a bleak Armageddon of depleted energy reserves, or of an inexorable carbon footprint.
It is a vista of “abundance”—of natural resources which can be harnessed into clean, reliable, renewable—sustainable—sources of energy. In another 20 to 25 years, the new technologies currently being developed, will be both refined and scaled up to make them available to people the world over.
In the book “Abundance: The Future Is Better Than You Think,” authors Peter Diamandis and Steven Kotler provide some examples of this future “energy destiny”—
If talent and decisions can shape the destiny of human beings, then our goal as stewards of the future is to ensure that humans reach our “energy” destiny in 20 to 25 years from now—by sustaining the progress being made today.
Chile has proven its economic sustainability with remarkable economic growth and competitiveness, which in turn have been due to the sustainability of the country’s democratic and financial stability, or its “governance.” It hasn´t been easy ladies and gentlemen, indeed it hasn´t.
But Chile will stay in an economic “holding pattern” if it cannot ramp up its economic growth to the next level—with the goal of becoming a 1st World Nation by 2024, with a per-capita income rivaling Germany at the beginning of this century, or Spain and Italy before the crisis.
It cannot ramp up its growth to the next level without more energy—sustainable, secure, cleaner—lots of it.
Sustaining that progress is what businessman Mr. T. Boone Pickens refers to as a “bridge”—to use what is available now—whether water in Chile or shale gas in the United States—to ensure energy security for the next 15 to 20 years.
My generation, maybe our generation, has to take the challenge to bridge the present with that bright abundant future
Our work in Chile and around the world is just one example of the many contributions being made by those of us here. Many of us are dedicated to providing for the next couple of decades a sustainable quantity of power and fuel that is vital to sustaining economic growth, from now until the technologies of the future become available.
The challenge is to build a bridge between current and future energy technologies. That bridge must be built, yet it must be built responsibly — with one eye on maintaining the momentum of economic progress, and the other on leaving behind a healthy planet.
In meeting this challenge, we will leave our legacy.
Thank you very much