Here is a short side-bar article I did for a book that Doug Tompkins is publishing soon. It will be a photo collection of Patagonia, with images of dams and electricity transmission lines superimposed on the landscape, with side-bars on environmental and energy issues:
“The Aysén projects will be the most costly projects undertaken in Chile, and will pose significant economic risks that will result in higher electricity prices and lower economic growth. The need for the dams is driven by a forecast of future demand for electricity that is extraordinarily high—6.5% per year for the next 10 to 20 years. Growth rates this high are questionable because high growth rates inevitably lead to higher electricity rates, which then reduces demand.
This is what happened in California in the 1970s and 80s. Electricity use in California was growing at about 7% per year in the early 1970s. To meet this demand, and to reduce the use of oil for generating electricity, utilities were planning on building 10 to 20 nuclear plants. Instead, California instituted aggressive efficiency standards and programs, which combined with higher electricity prices reduced demand growth to 2% year. By 1990, 75% of California’s electricity needs had been met with energy efficiency, and the remaining 25% had been met with efficient natural gas-fired cogeneration and renewables. To accomplish this, California used an “integrated resource planning” process to evaluate all the options, and chose those that were cleanest and cheapest.
Chile needs to create a similar planning process, or face a future that includes both higher electricity prices and serious environmental degradation in the Aysen. Based on my review of what little data is publicly available I found:
• The commonly quoted demand forecasts of 6.5% per year growth (or 5.5% “with efficiency”) is highly questionable. The only basis for the forecast seems to be that “the future will be like the past,” but this is not likely as electricity prices increase and efficiency options are exploited.
• The $1,000/kW capital cost estimate for the dams is certainly far below what actual costs will be. The San Roque Dam in the Philippines, comparable in size to the proposed Aysén dams and completed in 2004, cost US$1.2 billion and produced 345 MW, or US$3,500/kW. The Itaipu Dam in Brazil, completed in 1991, had a cost of US$20 billion for 12,600 MW, or US$1,600/kW. Based on the experiences of similar dams, and the review by the World Commission on Dams, it is easy to conclude that the Aysén hydro projects will cost 2 to 3 times what is currently forecast, or 12-18 cents/kWh.
An integrated resource plan for Chile would certainly reveal that there are cheaper and cleaner options to meet Chile’s need for energy.”
Here’s a graphic view of the problem. The graph of U.S. and California per capita electricity use has been seen in many talks, and in the New York Times and the Economist. I’ve added the historical and projected data for Chile–showing that while Chile is currently about one-third of California per capita electricity use, their forecast is that they will pass California in about 12 years! This fortunately is very unlikely, but if it were to occur the consequences would be very negative for the Chilean economy and environment.