Cogeneration project development is a good medium- to
long-term market opportunity for US industry. The National Energy
Commission conservatively estimates that Chile has an
economically-feasible cogeneration potential of 340 MW. Chilean
industry will require technical and financial assistance to
implement cogeneration projects.
The National Energy Commission (CNE) estimates that Chile has
a cogeneration technical potential of 1,000 MW, of which 340 MW
is considered to be cost-effective.54
The sectors with the highest technical and economic
potential for cogeneration are copper mining, iron and steel,
ceramics, brick-making, cement, pulp and paper, food processing,
tire manufacture, hospitals, hotels and large residential
buildings. These industries share a need for simultaneous
consumption of thermal and electrical energy, have a high
consumption of heat and electricity, operate more than 5,000
hours per year, and produce residual fuels or gases with high
energy content. Installation of cogeneration in Chile will
require technical support from foreign companies and financing
assistance.
Table 11 summarizes the current capacity of cogeneration in Chile.
TABLE 11: CHILEAN COGENERATION CAPACITY, 1994
| Pulp and paper | 150 MW |
| Nitrates | 50 MW |
| Sugar refining | 21 MW |
| Mining | 20 MW |
| Petrochemical | 15 MW |
| Fish processing | 5 MW |
| Total | 261 MW |
SOURCE: NATIONAL ENERGY COMMISSION, NOVEMBER 1994.
Almost all of this cogeneration capacity is for
self-generation. Very few cogenerating plants sell their excess
electricity. These facilities primarily use steam generators to
produce electrical energy and use excess steam in productive
processes.
Biomass and natural gas from Chile's proposed pipeline
projects are the two fuels with the highest potential for use in
cogeneration systems. Pipeline project developers expect Chilean
industry to be a significant market for natural gas. Coal is also
a potential cogeneration fuel but Chilean coal has a low energy
content.
Part of the demand for natural gas is expected to result from industries complying with air emissions regulations under the country's new environmental legislation. Demand for natural gas by industry is expected to grow by 50 percent per year during the first three years of the fuel's availability. From 1997 to 2000, many industries will convert their processes from petroleum to natural gas and these retrofits will create a significant opportunity to promote the use of cogeneration.
FIGURE 13: TWO ESTIMATES OF THE DEMAND FOR NATURAL GAS
Assuming that one of Chile's two proposed natural gas
pipelines is built, there will be plentiful supplies of natural
gas from reserves in Argentina and Bolivia. The expected price of
natural gas from the pipelines varies by end-use. The price of
gas for thermoelectric generation is expected to be less than
US$2.70/MMBtu. The price for industrial applications, depending
on the user's characteristics, is expected to be between US$2.10
and $4.50/MMBtu. Other than coal, which costs about
US$1.80/MMBtu, these prices are lower than other fuels such as
LPG (US$8.45/MMBtu), diesel ($6.33) and coal used in industry
($3.29).
According to the CNE, there are still four significant
barriers to the expansion of cogeneration in Chile. First,
connection to the grid carries a fixed cost, regardless of the
size of the facility. This can be an excessive burden for small
cogeneration projects. Second, industry must be able to secure
long term contracts to guarantee amortization of the cogeneration
system. Third, financing is difficult to access for cogeneration
projects. Finally, foreign technology and technical assistance is
required.
The CNE recently made possible the sale of excess electricity
back to the grid.
The European Community is providing Chile with assistance to develop the country's cogeneration industry. This assistance, however, should not preclude involvement by US industry.
54. Much of the information on
cogeneration market potential is drawn from "Mercado para la
Cogeneración en Chile" del Primer Encuentro Empresarial
sobre Sistemas de Cogeneración en Chile, Daniel Blazquez Pino,
National Energy Commission, November, 1994.
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