Energy and Energy PolicyUniversity of ChicagoPPHA 39201

Jacob Kuss and Neil Karandikar

Solar Energy in Chile: Is it a sustainable solution for energy demands in the Atacama region?

Part One

1. Introduction

As energy concerns and climate change continue to headline the plans of all

global politicians, especially those of the developed nations of the West, the need for a

viable future solution that can both provide the energy necessary and refrain from

harming the environment is all the more pertinent. Alongside the political issues, popular

culture has become engrained with environmental issues as more and more individual

groups and Non-Governmental Organizations (NGOs) have taken it upon themselves to

protect the environment from the harms of fossil fuels and the antiquated means of

harvesting them. Only pushed along by such recent events such as the BP oil spill in the

Gulf of Mexico, the ordinary global citizen has also gained a heightened awareness of the

problems surrounding the use and harvesting of fossil fuels.

More specifically, in the South American nation of Chile, fossil fuels have played

an enormous role in the nations development and, perhaps more importantly, in the

continued success of the Chilean mining industry1. Since the beginning, Chile’s mines

have provided a solid foundation for the nation, which has long been touted as the most

politically and economically stable nation of all of Latin America2. Some have even

voiced the opinion that Chile will be the first Latin American nation to solidify a position

1 Renewable Energy News, 4/9/2012. 2 Bloomberg, 9/10/2012

1

in the “First World3. ” Although this is an out-of-date distinction, the message is

understood; Chile can become part of the developed ‘Western’ world as long the current

political and economic situation continue to prosper.

Now, one looming questions remains. As Chilean President Piñera has stated,

“Within three years, Piñera warned energy industry leaders, the country's burgeoning

economic growth and urbanization would generate "serious problems" as a 6-7 percent

annual surge in demand outstrips supply. ”4 With the certainty that fossil fuels will run

out and only become more expensive in the mean time, in order to ensure continued

prosperity, how will Chile provide the adequate energy necessary for the immense

mining industry of the Atacama region?

2. History and Overview of Atacama

The Atacama Desert is located in western

South America, along the Pacific Ocean, from the

southern reaches of Peru delving into the northern

regions of Chile. 5 As can be seen in Figure 1, the

Atacama Desert stretches from the thin coastal

shelf along the ocean all the way to the Andean

foothills, all the while stretching more than six

hundred miles

down the continent, spanning over a total area of over four thousand square miles.6 The

3 See 1. 4 UPI.com, 1/17/125 National Geogrpahic, 2003. 6 Prospecting Journal, 5/25/2012

Figure 1. The Atacama Desert in South America. Maps101. com

2

yellow portions of the graphic show the boundaries of the Atacama Desert while the

orange portions show the surrounding deserts in the region.

As various surveys and studies have found, areas of the Atacama region have not

seen a significant amount of rain since records have been kept on levels of precipitation

and some studies found that the area has not seen rain in over three hundred years.7

Following the logic of studies such as these, the Atacama region has been deemed the

driest place on earth.8 Being one of the main hindrances to solar energy, cloud cover and

precipitation will prove to be of no concern for solar installations in the area, as can be

seen below on Figure 2.

Another overwhelmingly obvious sign that points to the potential of solar energy

in this region of Chile is the simple fact that the Atacama region has the highest levels of

solar radiation on the planet.9 As the Universidad de Chile found, areas of the Atacama

reached solar radiation levels up to 7 to 7.5-kilowatt hour per square meter. 10 These

numbers are mind-blowing when compared to the relatively low levels of solar radiation

seen in countries where solar energy is most utilized, such as Germany. In Germany, the

country with the largest solar usage to date, the highest solar radiation levels attained are

merely fractional to Chile’s potential. ‘The maximum radiation obtainable in the whole

of Germany is equal to that available in the southern Chilean cities of Coyhaique or Punta

Arenas. The farther north in Chile, the higher the radiation. ”11 As the article details, the

German solar radiation potential is relatively low, it does not compare to lesser regions of

Chile when compared to the Atacama. Figure 2, shows the levels of solar radiation seen

7 See 5. 8 See 5.9 The Santiago Times, 10/1/2012 10 See 9.11 This is Chile, 1/20/2011

3

throughout the world. Of note, Germany’s highest solar radiation levels could reach 5.5-

kilowatt hour per square meter. As an additional point of reference, that state of Illinois

receives about 4. 46-kilowatt hour per square meter, as another group shared.

Figure 2. Courtesy of NASA 2008.

One of the remaining drawbacks for solar energy is the cost that surrounds each

kilowatt-hour. However, in an area like Atacama, which such high solar radiation and

such little hindrance from precipitation and overall cloud cover, the solar output of a

large scale solar installation could rival that of a conventional power plant utilizing

diesel, coal, natural gas, or even hydroelectric dams. 12 As will be seen later in the paper,

these other forms of electrical production may not provide the same advantageous results

that solar can provide.

3. Demands for Energy and the Chilean Mining Industry

While quoting Chilean President Piñera earlier, the bleak outlook of the energy

12 Solarserver, 10/30/2012

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situation seemed to detail economic hardship in the years to come. However, with a

wider scope, the bleakness dissipates to reassured faith in the government’s management

of the energy sector. The President went on to say that, “Over the next two decades,

however, this imbalance in energy demand and supply is projected to even out as new

planned capacity goes into full swing. ”13 Chile’s economy has shown a promising trend

in growth over the past couple of years, as copper prices have soared. 14 In 2011, the

Chilean economy saw a 6.0% growth in their economy, while this year has seen a steady

rise once again, reaching 4. 7%. 15 Despite the positive statistics backing Chile’s recent

economic surge, the country’s all-important mining industry is struggling with energy

demands.

The facts and figures surrounding Chile’s mining industry are astounding when

one realizes the true importance and breadth of resources put towards the economic

sector. First, the Chilean mining industry utilizes up to 80% of all the energy within the

entire nation. 16 Aside from the amazingly one-sided demand for energy that the northern

part of Chile demands, the vast majority of Chilean produced energy comes from the

southern provinces by way of hydroelectric dams, which account for roughly 30-40% of

the country’s total energy. 17 Unfortunately, the geography of Chile’s resources creates an

interesting issue. The energy produced in the southern portions of the country cannot

reach the northern reaches, including the Atacama, which obviously demand the most

energy, due to an incompetent grid system, heavily damaged by previous earthquakes,

and immense distances along the 2,600 mile long country.

13 See 4.14 See 2.15 See 2.16 CSP Today, 6/22/2012.17 See 16.

5

Due to this unfortunate distancing of resources and the demand, Chile’s mining

sector largely relies on foreign fossil fuels to produce energy in the Atacama. Due to

varying percentages, the exact percent of Chilean energy produced from fossil fuels is not

certain, but the percentage lies somewhere between 60-75%, with essentially all of the

energy being utilized by the mining industry coming from these fossil fuels. 18

Aside from the immense percentage of energy used by the mining industry in

Chile, the sheer importance of the industry, more specifically the copper industry, to the

nation’s overall economic health is remarkable. As the world’s leading producer of

copper, Chile has enjoyed great economic gain in the past few years as copper prices

have continued to rise. From 2000 to 2009, copper prices were averaging about $1.79 per

pound. 19 However, this year, copper prices have risen to $3.60 per pound. 20 This has

come as great news for the Chilean economy; over 60% of their exports are from copper

alone, which in turn accounts for over 15% of their gross domestic product (GDP). 21

4. The Role of the Chilean Government

With the undoubted knowledge that Chile must boost its current energy

production, by any means necessary, thus enabling the continued growth of the mining

industry and the overall economy, the government’s role will play a large part in the

future. Under the current administration with President Piñera, a Harvard trained

economist, the Chilean 2020 plan aims to firmly place the nation among those in the first

world. 22 Packed with initiatives to encourage business in Chile from international

18 See 16.19 See 2.20 See 2.21 See 2.22 CNN, 10/15/2012

6

entities, the 2020 plan also has wider reaching goals, more specifically, in the energy

sector.

Nowadays, renewable energy only accounts for 3-6%, depending on the figure

chosen. 23 Under the 2020 plan, Chile aims to raise this number up to 20%, therein

leaving a large gap that must be filled in a meager eight years.24 The government has

made minor steps towards making the goal a reality by way of putting $85 million

towards renewable energy subsidies, although these will not be used for solar energy.25

This money will largely go towards other modes of production aside from solar, most

likely wind energy because international investment may provide all the push solar

energy needs in the region.

The Piñera government has expressed great interest in bulking up the

hydroelectric energy production systems within the country. However, as discussed

earlier, these hydroelectric dams are located in the southern provinces of the country and

offer little to no support, due to the Chilean grid system, to the northern provinces,

including the Atacama and the invaluable mining industry that consumes up to 80% of

the nation’s energy. Despite these truths, the government continues backing large-scale

hydroelectric projects by way of multi-billion dollar investment.26

This fact seems to go against the Chilean 2020 plan that aims to boost renewable

energy from 3-6% all the way to 20%. While hydroelectric already accounts for 34-40%

of Chile’s energy production, the sheer difference in a multi-billion dollar project as

compared to a measly 85 million dollars towards renewable energy throughout the

23 See 16. 24 See footnote 1. 25 4-Traders, 7/19/201226 BBC, 4/4/2012

7

country puts little weight behind the words of Chile’s 2020 plan. Aside from the political

rhetoric, the Chilean government has seen large-scale opposition to the immense

hydroelectric projects they have planned.

5. Energy Difficulties for the Chilean Government

In recent memory, the Chilean government has faced enormous difficulty in

stabilizing a somewhat suspect energy grid throughout the country. In late September

2011, after a large earthquake, the entire country was paralyzed by a massive blackout

that affected over 10 million people in the country of only 16 million.27 Along with

blacking out well over half of the Chilean population, this episode in energy blunders led

to a crippling halt in the all-too-important copper mines of the northern provinces and

many critics called to President Piñera for his lack of funding to Chilean infrastructure.28

On top of the immense numbers of Chilean citizens without power, along with the copper

mines, all of the capital city of Santiago, the economic, political, and cultural center of

Chile, was without power. Look to the chaos that ensued after super storm Sandy hit

New York City and add the uncertainty that would stem with the halting of the

government in Washington. Needless to say, a massive blackout of this stature in a

country trying to solidify itself among the developed elite of the West cannot happen.

More recently, President Piñera has detailed the huge difficulties the country will face

with heightened stress on the already struggling energy supply with the blooming

economy in the near future.

Perhaps the largest obstacle facing the government at this moment is the

27 Reuters, 9/24/201128 See 26.

8

HidroAysen project. Obviously, the government needs to come up with viable solutions

for the current energy demand issues. However, the government’s mammoth monetary

backing of multiple billions of dollars of this immense hydroelectric project in the Aysen

region of the south, has received huge push back from the environmentalist community.

Speaking from a logical standpoint, the plain fact that the majority of energy is used in

the far northern regions of Chile for mining purposes lends little credence to a massive

hydroelectric project in the far south that cannot supply the energy needs of the north.

Not to mention, this project is taking place in the picturesque Patagonia region, that

straddles both Argentina and Chile in the far southern cone of the South American

continent.

Figure 3. Courtesy of BBC. Detailed map and plan of the HidroAysen Project.

9

Aside from the huge environmental implications including: over fifteen thousand

acres flooded, damming two beautiful rivers, harming a unique environment home to

endangered animals, and a 2,000 mile cable stretching through the country to reach

Santiago29, the project is ignoring 80% of the energy consumption in Chile. If Chile

hopes to continue its promising track of GDP growth and economic stability, it must

solve the energy problem, but mainly the energy problem in the mining regions of the

north.

6. Part One Conclusion

With such large push back for the HidroAysen project, one poll put 74% of the

public against it30; the Chilean government is fighting an uphill battle to solve the energy

needs for one fifth of the nation. Although subsidies may not be necessary for solar

installations in the Atacama region, as international investment has already been greatly

shown from Chinese companies, among other international solar leaders, the multi-billion

dollar deal penned for the HidroAysen could be put to better use in facilitating a solar

boom in Chile. With the most solar radiation of any spot on the planet and the capability

to compete with typical energy sources, Chile must put more effort forward to sustain the

economy and provide the much-needed energy for the Atacama as the mining industry

continues to exploit the mineral treasure trove.

Part Two

The Atacama Desert is likely the most suitable place on the planet to make use of

solar energy. This region receives the highest levels of solar radiation on the Earth’s

29 See 26.30 See 1.

10

surface with an average of 4,800 Kcal/m2 per day.31 The Atacama is also one of the driest

regions on the Earth. It receives a miniscule average rainfall of just 1 millimeter per

year.32 It is so dry that, in fact, there is evidence that the desert may not have received

any significant rainfall from 1570 to 1971.33 In addition, the mountains are entirely free

of glaciers something that is very unusual for mountains of such elevations. These are

ideal climatic conditions for solar energy to be very efficient and productive. What is

then the problem in this scenario? Some of the main drawbacks that have kept solar

energy in this region from taking off are the high associated costs and the economic

feasibility in general.

Renewable energy has traditionally been much more costly to incorporate than

more traditional energy sources. Solar energy in particular has a very high upfront cost, a

feature that is not present in most other energy forms. Until recently, it was widely

believed that although solar energy has its advantages in terms of being a clean energy

source, it simply could not compete in terms of price or efficiency. Estimates are that

solar power costs nearly twice as much as coal or natural gas. The Wall Street Journal

cites that “it can cost 20 cents or more to produce a kilowatt-hour of electricity from a

solar-power system, depending on where the system is located and the level of incentives

offered. By contrast, generating electricity from coal or natural gas costs between 2 and

10 cents a kilowatt-hour, depending on the fuel and age of the power plant…”34 This is

the primary reason why there are few instances where solar power has been incorporated

on a large scale.

31 See 3.32 See 7.33 See 11.34 See 14.

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The good news is that although this trend has not been reversed, the gap has been

closing between the costs of solar power versus traditional forms of energy. There are a

couple of reasons for this emerging phenomenon. One of the reasons that the cost of the

solar cells have gone down in the past few years is an increasing manufacturing industry

in China. Also, solar cells have been becoming more efficient so that fewer of the cells

are required to produce a given amount of energy. These two effects have resulted in the

consequence that solar energy costs only a third to a quarter of what it did only a few

years ago. This is allowing solar energy a great chance to compete with coal and natural

gas in a variety of environments and especially in the arid Atacama Desert.

Currently, Chile’s energy policies are an unsustainable means for providing for

the country in the future. Chile imports nearly 75% of its energy in the form of fossil

fuels with the remaining 25% coming from hydroelectric power.35 Even this plan is not

carried out with optimal efficiency. Ideally, Chile should import gas from countries that

are rich in the resource such as Bolivia and Peru and therefore purchase the petroleum at

a low price. However, because of border disputes it is infeasible for Chile to import gas

from either of the mentioned countries. Chile has done a better job of managing its

electricity sector. The country is better equipped to make use of hydroelectric power and

there is a strong network of hydroelectric plants currently in place. There are some

concerns, however, such as the environmental impact of building these plants. Also,

interestingly many of these plants are run by individual producers.

One of the reasons why Chile has increasingly found the need to import gas from

other countries is because production domestically has declined. Petroleum production

35 See 12.

12

declined from 2.48 million cubic meters to only 1.38 million cubic meters in 1990.36 This

trend has continued at a gradual rate. Naturally, as petroleum production declined during

this time period domestic production of gasoline accounted for a much smaller share of

total energy consumption. This behavior is depleting the country’s oil reserves and there

is some concern over how this situation can be remedied for the future.

In light of these facts, Chile has tried to discover more petroleum largely to no

avail. Chile has even conducted off shore operations in Argentina, Brazil, Columbia, and

Ecuador. Unfortunately, these initiatives were costly and did not prove to be very

successful. There was also some exploration that took place in the Atacama Desert.

Earlier in 1992, Chile and Argentina agreed to build a 459 kilometer pipeline help meet

Chile’s growing energy needs.37 These are the origins of Chile’s current dependence on

foreign fossil fuels as its main energy source.

Politicians have turned to hydroelectricity as the best viable option for energy

production in Chile. The largest current project in this regard is HidroAysen, a plant to

construct five hydroelectric plants on two rivers in the Patagonia region.38 The proposal

was approved by President Pinera in May 2011. This project would have an installed

capacity of 2,750 MW and would be capable of generating over 18 TWh per year.39 If

everything is successful, this would account for around a third of the country’s current

energy consumption. But, there has been an overwhelming public outcry over this

project. The biggest concern is that the construction of these plants could have

irreversible environmental damage.

36 See 15.37 See 15.38 See 12.39 See 12.

13

In order for the project to get underway, about 5,900 hectares of wilderness would

need to be flooded.40 This is an astronomical number indeed. Some also believe that the

construction could threaten an endangered Andean species of deer. A poll that was

conducted found that 74% of the public was against the approval of the project for these

very environmental reasons.41 Another reason why those that live in the region are

complaining is because the costs are being unfairly weighted upon them. They claim that

they will derive little benefit from the energy produced as it will be transmitted to other

areas while they bear the heavy burden of coping with the new constructions. This has

proved to be a very sticky situation, but the project has been approved and looks like it

will be followed through.

It is clear that Chile’s current energy policy has some drawbacks, but then again

so does incorporating solar energy. So is using more solar energy really a viable and

economically sensible option for Chile? This is a very difficult question on many levels.

There are many factors that must be considered both domestically in Chile and abroad

that have an impact on energy in Chile. For example, markets and the level of demand

both affect the prices of energy in Chile. There are also the environmental concerns that

we have touched upon regarding Chile’s current means of obtaining energy. Another

issue is that some mines in the Atacama are concerned that their current habits may

inhibit opportunities for future business opportunities. Operations of these mines leave

large carbon footprints which raises a red flag for exporters of the product. Therefore,

the potential shift toward greater use of solar energy is being taken seriously by many in

this region and also in other parts of the world by foreign investors.

40 See 4.41 See 3.

14

One recent development is that electricity prices in Chile have gone up to $0.25

per kilowatt-hour on the market.42 On the other hand, solar energy costs have declined

dramatically. In fact, First Solar claims that the price of solar energy in Chile has

declined by 50 percent.43 This has led to interest in solar energy in the Atacama Desert

more than ever before. Several companies both in Chile and in other countries have

submitted proposals for potential projects although only a small portion of these projects

have been approved. This year alone 3 GW of solar energy project were submitted for

review. Thus far, only 639 MW of these projects have been approved. Moreover, only 1

MW of the projects has been completed as yet in spite of the high demand.44 Many view

solar expansion in the Atacama region as a clear alternative to current energy use, but yet

the government has not gotten behind this idea. Even though solar energy is becoming

better able to compete with other energy forms in terms of price, there are still more

complications that need to be addressed.

Those that are uninformed about the issues tend to think that installing solar

power plants is a much simpler process than it really is. One might think that it is just a

matter of the mines signing agreements with the developers, but it is rarely that easy.

Contracting and financing issues often come up and make the job much more difficult.

One of the traditional disadvantages of solar energy is that it is not completely

reliable and the mining industry cannot afford to be out of power when it needs it most.

This effect is mitigated by the fact that the Atacama Desert is one of the most solar

radiated spots on the Earth, but nonetheless it is something to consider. Also, the way

that the grid is set up in Northern Chile makes it infeasible to import some of the cheap

42 See 2.43 See 9.44 See 1.

15

hydroelectric power generated in Southern Chile. The only other option then is to find

some other backup energy source. Unfortunately, a clear backup option does not yet

exist and would only drive up costs once implemented. Energy storage could prove

useful in this situation, but the technology has not been developed enough and is very

costly. Financing of the actual project is also not always an easy task due to intricate

rules and regulations.

It is valuable to understand the grid system that is currently in place in Chile to

better assess the situation and how solar energy could potentially play a part. The grid is

divided into four systems with a total installed capacity of 16,143 MW.45 The four

systems in the grid are SING – Northern Interconnected System, SIC – Central

Interconnected System, Aysen Electric System, and Magallanes Electrical. The first two

of these systems currently comprise 99.1% of total energy requirements and hence

deservedly receive much more attention than the other two.46 As the name suggests, the

SING serves the northern portion of Chile with 90% of demand coming from copper

mining.47 This system supplies 23.4% of total energy with an installed capacity of 3,772

MW.48 The SIC system similarly supplies energy to the central part of Chile. It is the

largest system supplying 75.7% of total energy and has an installed capacity of 12,221

MW.49 Finding efficient ways to incorporate solar energy into the grid system is an issue

that must be addressed for solar energy to become prominent in the Atacama Desert.

45 See 15.46 See 15.47 See 15.48 See 15.49 See 15.

16

The SING grid powers 63% of Chile’s copper supply which is also 21% of global

supply.50 The grid is currently comprised of 50% coal, 30% natural gas, and 20%

diesel.51 This is a dangerous practice for the mining industry because of the

environmental impacts of this energy usage and because most of these energy forms are

imported. Thus, the SING grid is left vulnerable to changes in energy prices from

abroad. The SIC grid also supplies energy to the mining industry, but is not as ideal as

the SING in terms of making use of solar energy.

There is clearly a high demand for energy and favorable conditions for solar

power in the Atacama Desert, but what are signs that suggest that it will work? One

encouraging fact is that there are already solar plants in use in other parts of the world

that have worked and that do not have the same type of advantages offered by the arid

Atacama. Several solar plants have been successfully installed and used in the energy

matrix in southern Europe, a region with 30% less solar radiation than in the Atacama

Desert. Not only does the Atacama Desert have higher solar radiation, but the Atacama

boasts many other advantages over southern Europe for solar energy production

including higher aridity, average rainfall of only 1mm per year, clearer skies, more hours

of sunlight, and less seasonal variation in sunlight. This shows that the Atacama could

certainly be a great location for solar energy, at least on climate based reasons.

One of the primary drawbacks of solar energy is that it is an unpredictable source

of energy. There is no energy generated when the sun has set, but the demand for energy

still exists at these time periods. Energy storage technologies can help remedy the

situation, although they do add to the total cost of the project. The basic mechanism

50 See 2.51 See 2.

17

behind energy storage is to store the energy that was produced at a period of low demand

for use in a period with high demand. Of course, a period with low demand will have a

lower cost and a period with higher demand will have a higher cost of energy. There are

many different types of energy storage systems such as mechanical, chemical, thermal,

and others.52 Systems are also further distinguished as being small-scale or large-scale.

One of the most studied and viable energy storage systems currently is batteries,

although there are numerous issues left to address. Batteries are currently not as efficient

as needed, do not have a high enough capacity per unit volume and weight, and do not

have the capability to deliver large currents on demand.53 Nonetheless, batteries have a

lot of potential for energy storage in the future. One of the latest developments in this

area has been lithium batteries. These batteries have lithium compounds as cathodes and

have high-conductive coating making them a more attractive option. There are efforts

currently to develop these batteries even further with enhancements such as grapheme

coating. The U.S. has set several targets for batteries in terms of their efficiency and

capacity, but these targets are still not very close to being met. As yet, batteries are not a

feasible option to smooth energy output from solar energy but hopefully future

developments will be able to achieve this aim.

Another one of the reasons that a breakdown of the costs of solar energy is

challenging is because there are many technologies that implement solar energy and the

costs differ among these technologies.54 A commonly used solar energy technology is

referred to as the parabolic trough. This technology makes use of linear panels to harness

the sun’s energy. Some of this energy is in turn used to heat a fluid that propagates the

52 See 13.53 See 13.54 See 10.

18

system. The system also makes use of a collection of mirrors to monitor the sun and to

ensure that the maximum amount of energy is being collected. This is the most

developed solar energy technology currently. In practice, however, even these systems

require a fossil fuel backup. An additional feature is that the parabolic trough needs

water for the system to run and this is a very scarce resource in the Atacama Desert.

Another solar energy technology is the linear Fresnel reflector.55 This system uses

a series of mirrors to track the sun and to reflect the light onto a receiver. The linear

Fresnel reflector is similar to the parabolic trough with the main difference being that it is

much cheaper. It is also, however, less efficient since the tracking mechanism of the sun

is less effective. A solar power tower is another option for solar energy. These towers

are fixed with receivers that collect the energy at the top and use a large amount of

mirrors to do the work of tracking the sun. A solar dish is another way that solar energy

is being harvested. As the name implies, a parabolic mirror dish collects the solar

radiation that is received. This system can also be used in conjunction with an engine

where the engine is powered by the solar radiation harvested by the dish.

Some of the most prominent solar energy systems make use of what are known as

photovoltaic cells.56 These cells have a semiconductor material that collects the energy

emitted by the sun which causes the emission of photoelectrons. There are many more

intricacies to the system, but these are the basics. Some of the different classifications of

photovoltaic cells include first generation cells, second generation cells, and third

generation cells. There is also what is known as concentrating photovoltaic cells. These

55 See 8.56 See 8.

19

systems only capture the sunrays that are hit directly, and therefore are most suitable for

regions with high radiations such as the Atacama Desert.

There are various costs associated with installing a solar plant in the Atacama

Region. These costs can broadly be defined as investment costs and operational and

maintenance costs. Some of the key factors that collectively determine the investment

cost of a solar plant are the capacity, area, and storage capacity of the plant. Operational

and investment costs are refer to the costs incurred in overseeing the plant and making

sure that it runs properly. These costs also depend on which type of technology is

incorporated. Another point to keep in mind is investment depreciation, which reduced

the taxes of the company.

Some of the benefits of installing a solar plant in the Atacama include carbon

credits, income from energy generation, and income from installed power. Using

renewable energy resources such as solar power reduces a company’s carbon footprint

and therefore results in carbon credits. The benefits incurred from these credits are one

of the main advantages of solar energy. The direct sources of income of a solar plant of

course should also be taken into account when determining the total benefits of the plant.

All things considered it is still somewhat unclear whether using more solar energy

in the Atacama Desert would make economic sense, however the tide is turning toward

the installation of more solar plants. Some models by several researchers have been used

to estimate the net present value of installation of solar plants of various technologies in

the Atacama. The results have been fairly mixed. Unfortunately, some models still find

negative or zero net present values. But, these models do not take into account the

numerous positive externalities generated by solar plants. Some of the most important of

20

these externalities are helping to reduce Chile’s carbon footprint and also helping to

reduce the country’s dependence on foreign fossil fuel. With more efficient solar

technology being developed at lower costs and the possibility of an increase in the price

of fossil fuels we believe that the net present value is actually positive or at worst will be

in the very near future. Therefore, we strongly advocate that solar energy comprise a

much larger proportion of the Chilean energy matrix in the Atacama.

21

Part One Bibliography

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2. (14, 15, 19, 20, 21) "Pinera Bullish on Chilean Growth Amid 'Gloomy' World Picture." Bloomberg. N.p., n.d. Web. 06 Dec. 2012. <http://www.bloomberg.com/news/2012-09-09/pinera-bullish-on-chilean-gdp-growth-amid-gloomy-world-picture.html>.

4. (13) "Chile's Pinera Sees Trouble Ahead in Energy Output." UPI. N.p., n.d. Web. 06 Dec. 2012. <http://www.upi.com/Business_News/Energy-Resources/2012/01/17/Chiles-Pinera-sees-trouble-ahead-in-energy-output/UPI-46681326834204/>.

5. (7, 8) "Atacama Desert @ National Geographic Magazine." Atacama Desert @ National Geographic Magazine. N.p., n.d. Web. 06 Dec. 2012. <http://ngm.nationalgeographic.com/ngm/0308/feature3/>.

6. "The Race for Renewable Energy: Chile Takes Center Stage." Prospecting Journal RSS. N.p., n.d. Web. 06 Dec. 2012. <http://www.prospectingjournal.com/the-race-for- renewable-energy-chile-takes-center-stage032512/>.

9. (10) "Chile Has World's Highest Capacity for Solar Energy, Study Says." The Santiago Times. N.p., n.d. Web. 06 Dec. 2012. <http://www.santiagotimes.cl/chile/science- technology/25220-chile-has-worlds-highest-capacity-for-solar-energy-study-says>.

11. "Chile Could Become World Leader in Solar Energy." -. N.p., n.d. Web. 06 Dec. 2012. <http://www.thisischile.cl/Article.aspx?id=5993>.

12. "Chilean PV, CSP to Become Competitive with Conventional Generation by 2020." Solarserver. N.p., n.d. Web. 7 Dec. 2012. <http://www.solarserver.com/solar-magazine/solar-news/current/2012/kw44/chilean-pv-csp-to-become-competitive-with-conventional-generation-by-2020.html>.

16. (17, 18, 23)"Atacama Extractives Hold Potential for CSP." CSP Today. N.p., n.d. Web. 07 Dec. 2012. <http://social.csptoday.com/technology/atacama-extractives-hold-potential-csp>.

22. Brennan, Claire, and For CNN. "President Sebastian Pinera: I Want a First World Chile by 2020." CNN. Cable News Network, 15 Oct. 2012. Web. 07 Dec. 2012. <http://edition.cnn.com/2012/10/15/business/chile-pinera-economy-business/index.html>.

25. "COLBUN S.A." Colbun S.A. : Chile to Start Subsidizing Renewable Projects -Deputy Energy Minister. N.p., n.d. Web. 07 Dec. 2012. <http://www.4-traders.com/COLBUN-S-A-6494571/news/Colbun-S-A-Chile-to-Start-Subsidizing-Renewable-Projects-Deputy-Energy-Minister-14422124/>.

26. (28, 29) "Chile Court Rules in Favour of Patagonia HidroAysen Dam." BBC News. BBC, 04 Apr. 2012. Web. 07 Dec. 2012. <http://www.bbc.co.uk/news/world-latin-america-17620307>.

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27. Avila, Moises, and Simon Gardner. "Power Blackout Hits Chile, Halts Copper Mines." Reuters. Thomson Reuters, 24 Sept. 2011. Web. 07 Dec. 2012.

<http://www.reuters.com/article/2011/09/25/us-chile-blackout-idUSTRE78O00120110925>.

Part Two Bibliography1. Bevins, Vincent. "Renewables Hit a Wall in South America." The New York

Times 25 Oct. 2011: n. pag. Print.2. Candia, Fabian. "Feasibility of Incorporating Solar Energy as a Power Source

for the Chilean Mining Industry." Copper Studies (2011): 2-12. Print.3. "Chile: A Partner for the Carbon Market / Renewable Energy | ProChile -

Carbon." Chile: A Partner for the Carbon Market / Renewable Energy | ProChile - Carbon. N.p., n.d. Web. 13 Nov. 2012. <http://carbon.prochile.cl/node/36>.

4. "Chile OKs 162 MW Solar Park in Copper-rich Atacama Region." Reuters. N.p., 17 Oct. 2012. Web. 13 Nov. 2012. <http://www.reuters.com/article/2012/10/17/chile-atacama-solarenergy-idUSL1E8LHK4R20121017>.

5. Moser, Bob. "Atacama Extractives Hold Potential for CSP." CSP Today 22 June 2012: n. pag. Web. 13 Nov. 2012. <http://social.csptoday.com/technology/atacama-extractives-hold-potential-csp>.

6. Pekic, Vladimir. "Chile: Sky Solar Breaks Ground on 18 MW PV Project." Pv Magazine. N.p., 30 Oct. 2012. Web. 13 Nov. 2012. <http://www.pv-magazine.com/news/details/beitrag/chile--sky-solar-breaks-ground-on-18-mw-pv-project_100009014/>.

7. "Rare Snow in Atacama Desert, Chile : Image of the Day." Rare Snow in Atacama Desert, Chile : Image of the Day. N.p., n.d. Web. 13 Nov. 2012. <http://earthobservatory.nasa.gov/IOTD/view.php?id=51312>.

8. "Solar Chile | Our Focus | Sustainable Energy Development." Solar Chile | Our Focus | Sustainable Energy Development. N.p., n.d. Web. 13 Nov. 2012. <http://www.solar-chile.com/our_focus.htm>.

9. Staeck, Jason. "The Race for Renewable Energy: Chile Takes Center Stage." Prospecting Journal (2012): n. pag. Web. 13 Nov. 2012. <http://www.prospectingjournal.com/the-race-for-renewable-energy-chile-takes-center-stage032512/>.

10. Ulmer, Alexandra. "Chile GasAtacama Sees over $4 Bln in LNG Power Deal with Miners." Reuters. N.p., 18 Oct. 2012. Web. 13 Nov. 2012. <http://www.reuters.com/article/2012/10/18/chile-gasatacama-lng-idUSL1E8LIAGS20121018>.

11. Vesilind, Priit J. "The Driest Place on Earth." National Geographic Magazine. N.p., n.d. Web. 13 Nov. 2012. <http://ngm.nationalgeographic.com/ngm/0308/feature3/>.

12. Yapp, Robin. "Chile's Uncertain Renewable Energy Future." RE News RSS. N.p., 9 Apr. 2012. Web. 13 Nov. 2012. <http://www.renewableenergyworld.com/rea/news/article/2012/04/chile-looks-to-renewables-as-its-grid-falters>.

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13. Fernandez, Felipe. "Economic Impacts of Installing Solar Power Plants in the North of Chile." School of Engineering (n.d.): n. pag. Web. 8 Dec. 2012.

14. Sweet, Cassandra. "Silicon Substitute." Wall Street Journal [New York] n.d.: n. pag. Print.

15. "Chile: Country Overview." Encyclopedia of Nations. N.p.: n.p., n.d. Print.

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