Market Assessment of Chile

6. Motors

Market Opportunity

Chile has a growing market for US-manufactured energy-efficient motors. Chilean industry will invest US$25 billion in new infrastructure over the next 6 years, creating a vibrant market for efficient motor technology. A US$2.8 million Global Environment Facility project will retrofit electric motors in the mining industry. This project will also increase the size of the Chilean market for efficient motors.

Market Conditions

In 1994, approximately US$18 million worth of motors were sold in Chile. Sales have been growing at about 15 percent per year. All motors are imported. The Chilean market is highly competitive and price sensitive. Of the 45 motor manufacturers in the world, 30 sell in Chile. Sales of US motors in Chile in 1990 and 1993 are presented in Table 6.

The market is divided between two groups of suppliers. South American, Eastern European and Asian manufacturers sell standard motors while US and European manufacturers sell high-quality motors (see Tables 7 and 8). The Japanese motor industry does not sell in Chile.

The most energy-efficient motors on the market cost between 25 and 40 percent more than standard motors. The prices of standard motors varies between 10 and 15 percent among competitors while that of high-quality motors varies between 3 and 5 percent.

TABLE 8: MANUFACTURERS OF HIGH PERFORMANCE MOTORS
REPRESENTED IN CHILE SOURCE: PERSONAL COMMUNICATION

TABLE 7: MANUFACTURERS OF "STANDARD" ELECTRIC MOTORS REPRESENTED IN CHILE SOURCE: PERSONAL COMMUNICATION

Standard motors make up three quarters of the market with high-quality motors making up the rest. Annual sales of high-performance, energy-efficient motors represent less than 1 percent (US$180,000) of the market. European and American manufacturers control 90 percent of these sales.

Foreign motor manufacturers market their products in Chile by stressing the value added by high-quality, energy-efficient motors and adjustable speed drives. This strategy is receiving increasing attention from Chile's industrial companies that are under pressure to reduce operating costs and comply with new environmental regulations.

In a highly competitive market, energy-efficient motors can lower production costs for industry. Chilean industry prefers US technology and generally develops strong loyalty to product suppliers.

Energy Efficiency and the Chilean Motor Market

Large Chilean industries are beginning to realize the value of energy-efficient motors in reducing production costs. The following is a summary of one study that investigated the potential for energy-efficient motors in the copper mining industry.

Case Study: Codelco's Chuquicamata Mine

Codelco, Chile's publicly-owned copper company and the nation's industrial giant, undertook a study of the energy efficiency potential in the world's largest open pit copper mine, Chuquicamata. The mine uses more than 7,000 motors in its operations. Seventy-three percent of energy consumption at the facility is used for operation of electric motors, 23 percent for electro-winning and electro-refining operations and 4 percent for power transmission and transformers (see Table 9).

The concentrator, which eliminates non-copper materials during copper production, accounts for half of the mine's electricity demand. Eighty-four percent of the motors in the mine operate continuously.

TABLE 9: DISTRIBUTION OF ELECTRICITY CONSUMED
IN MOTORS AT THE CHUQUICAMATA MINE

Source: Leibbrandt And Lowick-Russell

After evaluating the baseline and potential efficiencies of this motor population, the study found that replacing continuously-operating motors with high-efficiency motors would reduce electricity consumption by 47 GWh. If all motors were replaced, Chuqui's electricity consumption would be reduced by 55 GWh, saving the mine US$3 million per year in electricity costs.⁴³ After including efficiency improvements to the busbars, the facility could save more than 77 GWh and at least US$5 million per year.

FIGURE 10: ENERGY EFFICIENCY POTENTIAL IN THE CHUQUI MINE'S MOTORS

The results of this study are consistent with others conducted at other mining facilities around the country. For example, the concentrator at Codelco's Andina division is responsible for 82 percent of the annual energy consumption of the division.⁴⁴

Barriers to the Sale of Energy-Efficient Motors

Chilean copper mines have their own electrical departments that purchase and perform maintenance on electrical equipment. Staff are knowledgeable but departments have limited annual operating budgets and are accustomed to rewinding failed motors. This reduces the efficiency of motors.

Other obstacles to the sale of energy-efficient motors are similar to those found in other parts of the world. They include:

• Segmented market structure: manufacturers, distributors, and end-users are not in contact;
• Lack of an institutional incentive in industry;
• Aversion to downtime;
• Lack of awareness of the life-cycle benefits of energy-efficient technology;
• Competing demands on investment decisions;
• Lack of product information and training;
• Lack of systems thinking (e.g. industry introduces new industrial process controls to improve its process and product quality but does not also consider new infrastructure, motors or adjustable speed drives that can achieve the same result); and
• Small values (e.g. electricity may represent as little as 3 percent of total production costs, so energy efficiency savings may not be highly valued even though such an investment would reduce overhead).
  

A concerted marketing effort on the part of motor manufacturers could overcome many of these barriers.

Case Study: GEF Energy-Efficient Motors Project

The Global Environment Facility (GEF) has recently provided US$2.8 million for a project to reduce greenhouse gas emissions in Chile. Scheduled to begin in May 1995, the project will improve the energy efficiency of motors in the Chilean mining industry and increase biomass methanol production for the transport sector. More than half of the project's funding will go towards motors in the form of technical assistance, institutional incentives and energy service companies (ESCOs). The project should raise awareness and increase the market for high-performance motors.

The project objectives include:

• implementation of large-scale energy efficiency projects in at least two Chilean mining companies;
• training Chile's engineering and consulting firms in the ESCO concept; and
• establishment of a capital fund to finance energy efficiency projects that have an expected payback period of less than 6 years.

Distribution Channels for the Motor Industry

Most of Chile's largest industries buy directly from motor manufacturers through local representatives or distributors. Standard-quality motor manufacturers control 85 percent of sales to small end-users, distributors and equipment manufacturers (like appliance manufacturers).

Notes:

⁴³ Personal communication, Peter Lowick-Russell, Procobre and Jürgen Leibbrandt, Codelco, Santiago, Chile, September 1994.
⁴⁴ Edgardo Villagra Valenzuela, "Ahorra de energía, mano de obra y repuestos en la industria minera del cobre, Codelco Andina" Seminario Nacional Uso Eficiente de la Energía, 19 de Noviembre de 1991.

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