Drought-stricken Chile to shore up diesel supply

Chile is rolling out a plan to shore up diesel supply for power generation to mitigate the risk of blackouts heading into what could be another parched winter in the southern hemisphere.

In a planned extension of a 2021 preventive rationing decree from March 2022 to September 2022, national grid coordinator CEN would organize the procurement of supplemental diesel supply for thermal generators in anticipation of another seasonal shortfall in hydroelectricity, the historic backbone of Chile's energy matrix. The volume of "security diesel" would be determined by comparing 2021 monthly diesel consumption by generators in March-September to anticipated demand in 2022, according to a draft of the new decree seen by Argus .

The cost of the extra supply and logistics would be borne by all generators in the grid.

Although thermal generators are responsible for ensuring feedstock to enable their dispatch, diesel generators have not always complied because of logistical bottlenecks and reluctance to sign pricey term contracts with distributors.

Chile's aggressive campaign to phase out coal generation has aggravated the risk of short-term energy shortages. Even though the country has ample thermal generation based on imported coal as well as LNG, coal units are shutting down as part of a decarbonization program that started in 2019 and has since accelerated.

Greener ambitions The potential drought-driven energy crisis will be inherited by Chile's leftist president-elect Gabriel Boric , who takes over from center-right president Sebastian Piñera on 11 March.

In a speech before the country's top business executives and political leaders at the Icare conference today, Boric pledged to accelerate decarbonization and implement a "just" energy transition under an "ecological government" in concert with workers, companies, government authorities and communities.

"This is not about activism, or generating an irreconcilable economy between development and sustainability ... we have to find a balance, here and in the whole world," the former congressman and student activist said. "And here we hope to play an international leadership role to convince developed countries they have to make a bigger effort and the transition has to be just."

Respect for the environment is one of three economic objectives he laid out for 2022, along with encouraging investment and recovering formal employment, particularly for women.

Boric hopes to expand Chile's already formidable solar and wind energy base, which the outgoing government has sought to leverage into an incipient green hydrogen industry.

"Environmental sustainability goes hand in hand with economic sustainability," Boric told business and political leaders today, reaffirming a commitment to a structural deficit of close to 4pc of GDP established in the government's 2021 budget. He reiterated a gradual approach to reforms and a vowed to "temper expectations", a reference to popular demands for radical reforms advocated by some of his close advisers.

By Patricia Garip

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