Chile plans $7B dam project in Patagonia

Tuesday, May 10, 2011

SANTIAGO, Chile -- A $7 billion project to dam two of the world's last remaining wild rivers for electricity was expected to receive environmental approval from a Chilean government commission, despite a groundswell of opposition.

At stake is a mostly roadless region of remote southern Patagonia where rainfall is nearly constant and rivers plunge from Andean glaciers to the Pacific Ocean through green valleys and fjords. The decision also is key to the future of Chile, which has a booming economy, vast mineral wealth and a determination to join the elite group of first-world nations.

Ending a three-year review, the commission was expected to vote on the dams at a hearing that began amid protests Monday evening in the regional hub of Coyhaique.

With its energy-intensive mining industry clamoring for more power and living standards improving, some analysts say Chile must triple its capacity in just 15 years, despite having no domestic oil or natural gas. Chile imports 97 percent of its fossil fuels and depends largely on hydropower for electricity, creating a crisis when droughts drain reservoirs or faraway disputes affect energy imports.

Supporters say the economic benefits of the damming project justify carving roads through the heart of Chile's remaining wilderness and running a thousand miles of transmission lines to power the capital, Santiago.

The five dams on the Baker and Pascua rivers together could generate 2.75 gigawatts, nearly a third of central Chile's current capacity, within 12 years. The Aysen region will receive less expensive energy, jobs, scholarships and $350 million in infrastructure, including seaports and airports, said HidroAysen's executive vice president, Daniel Fernandez.

But people in the sparsely populated area are divided. Only three dozen families would be relocated, but the dams would drown 14,000 acres (5,700 hectares), require carving clear-cuts through forests, and eliminate whitewater rapids and waterfalls that attract ecotourism. They also would destroy habitat for the endangered Southern Huemul deer: Fewer than 1,000 of the diminutive animals, a national symbol, are believed to exist.

"They should advocate for the citizens, but it seems that what really matters here is drawing foreign investment," said Tortel Mayor Bernardo Lopez, who says 600 people in his community depend on tourism.

Robert F. Kennedy Jr., an attorney for the U.S.-based National Resources Defense Council, appealed to Pinera to call off the project.

"It's the most beautiful place, I believe, on the planet," said Kennedy, who kayaks there every year. "I don't know any place like Patagonia."

Investors have spent $220 million on the project so far, but opposition has grown to 61 percent according to the latest Ipsos Public Affairs poll, and the government is concerned about a backlash.

Interior Minister Rodrigo Hinzpeter sent in extra police ahead of the meeting. Mining and Energy Minister Laurence Golborne urged activists to turn to the courts, not the streets, if they don't agree.

"The most important thing," Hinzpeter said, "is that our country needs to grow, to progress, and for this we need energy."

Chile's decision has lessons for a world confronting a future without inexpensive fossil fuels and questioning nuclear safety. The country has abundant renewable-energy potential, from dams on its many rivers to year-round sun in its northern deserts, wind along its long Pacific coast, numerous geothermal sites and biomass from its large agricultural industry.

But Chile gets less than 5 percent of its electricity from renewable sources other than hydroelectricity, has done little to encourage efficiency, and lacks a strategy for securing future supplies, although a government commission will make such recommendations by September.

While a growing number of countries are modernizing networks to enable countless individuals with rooftop solar panels to contribute electricity, Chile's grids aren't even linked.

It's another legacy of dictator Augusto Pinochet: To encourage development and undo his socialist predecessor's attempts at land reform, he made waterways the property of the state energy company and eliminated regulations to protect competing interests. The rules remained even after the company was privatized and sold to foreigners.

As a result, Chile's rivers are the tax-free, private property of the Spanish-Italian ENDESA energy company, which now has huge influence and few incentives to modernize the system in ways that would encourage competition.

"It makes no economic sense. The big energy demand is coming from the northern part of the country and the metals industry, and in those regions you already have available resources," Kennedy said. "The Atacama Desert is ideally suited to solar thermal production. It's got the altitude, 365 days of sunlight a year and power lines that already exist, and in most cases you're only a few miles from the industries you're powering. The only reason these dams are being built is because of the political clout that ENDESA has over the Pinera government."

Fernandez said HidroAysen will help Chile to receive the cheapest, cleanest electricity possible. Several Chilean energy experts also dismissed solar as uncompetitive and years away from relevancy, and warned that the only alternative is dirty and imported coal. Chile recently approved Latin America's largest coal-fired plant, to power a mine near the northern deserts. Two other coal plants received the OK on Friday.

Kennedy's counterpoint is a huge $2.2 billion, 2.6-gigawatt solar project being built in the Mojave Desert with private money and U.S. government guarantees. It already has 20-year contracts to supply California's utilities starting in two years, much quicker than HidroAysen. "This is proven technology that is being used all over the world," he said.

Monday's dam decision may only intensify the debate. Environmentalists predict more damage from the transmission lines, which face a separate environmental review in December. Their construction could open remote Patagonia to much more development, and the area's abundant water could attract even more dams once the lines are built.

But last month's poll, which also showed 84 percent opposition to nuclear energy, suggests Chileans care more now about the environment, said Douglas Tompkins. The poll had a sampling margin of error of plus or minus 3.1 percentage points.

Tompkins, a clothing entrepreneur, and his wife, Kris, have used much of their fortunes from the Esprit, North Face and Patagonia companies to create Parque Pumalin, where 10,000 tourists a summer visit a nature reserve running all the way from the Argentine border to the sea. The couple have objected to letting the lines cut through the park; Fernandez cited technical reasons, not political ones, for a 100-mile (160-kilometer) undersea detour.

The battle shows Chileans can no longer trust the free market alone, Tompkins said: "The electric law in Chile is so skewed to the power companies, virtually guaranteeing inefficiencies and monopolies, that it is counterproductive to the interests of citizens and certainly counterproductive to the health of nature."

But HidroAysen's "benefits outweigh the drawbacks, from the development perspective," said Maria Isabel Gonzalez, who used to run Chile's National Energy Commission.

"This project is necessary for the country. It's not ideal that they're the same ones who already have an important percentage of the generation of the central grid -- this isn't acceptable, but it's what there is," the lobbyist said.

"Chile is still a poor country, with 2.5 million poor people, and to overcome poverty we need energy, and for that reason we need to develop our own resources, the most competitive ones. ... It would be very selfish on the part of the rich countries to say, 'Look how they're destroying these uninhabited pristine areas."'

Eva Vergara reported from Santiago and Michael Warren from Buenos Aires, Argentina. Warren can be reached at

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