Small Progress In Wind Sector
BMI View: Our fears over the stagna nt renewable energy project pipeline in Chile have abated marginally following the news that financial close has been reached, and the construction a new wind farm has begun . We highlight that the C hina Development Bank's role is key to the development of the project and we believe that IFIs will have to play an increasingly important role within the country's renewables industry if growth is to be sustained as the government is still yet to introduce a regulatory framework for renewables.
Irish renewable energy company, Mainstream, announced on February 1 2013 that it has reached financial close and started construction on a 33MW wind power project in Chile, with the total cost of the project expected to come in at US$70mn. The company secured a US$52mn from the China Development Bank (CDB) to help finance the project and Chinese turbine manufacturer, Goldwind, has been awarded the supply contract. Mainstream has gradually increased its wind power project portfolio in Chile since it first entered the market in 2009 (after partnering with local developer Andes Energy), and is currently developing about 2.3GW of wind and solar projects within the country, according to the company.
IFIs' Support Crucial
Although this project is relatively small-scale , its announcement does help to alleviate some of the downside risks we had previously highlighted that are facing the Chilean renewables industry. For example, our concerns over the slow implementation and pro gress of the renewables project pipeline and lack of economic feasibility in a number of cases - due to the government 's fail ure to p rovide regulatory support - have lessened slightly ( see our online service, November 12 2012, Renewables Viability Called Into Question ).
That said, we believe that private investment in conjunction with funding from international finance institutions (IFIs), or development bank such as the CD B , helps to minimise risks associated with economic feasibility, and we believe they will have to play an increasingly important role within the country's renewables industry if the government is to continue neglecting to support developers themselves.
Chile has considerable w ind energy potential , primarily along its long western coastline, and industry estimates place onshore wind potential at 40,000MW. In keeping with the Latin America regional trends, it seems that wind power is the technology of choice for the country, and we expect the wind sector to contribute the lion's share to Chile's total non-hydro renewables capacity by 2022 .
|Growing Regional Hub For Wind Power|
|Wind Capacity (MW), By Country, 2012 And 2022 And Chile Total Non-Hydropower Renewables Capacity,2012-2022|