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Renewable Sources of Energy - International Law Office

International Law Office

Energy & Natural Resources - Chile

Renewable Sources of Energy

October 15 2001

Renewable Energies
Regulation
Geothermal Energy
Rights of Concession Holders
Obligations of Concession Holders
Penalties


Chile's geography and climate are key contributing factors to the availability of renewable energy sources.

Water power is the major source of electricity generation. The generation of electricity, its transmission via high-tension lines and its subsequent distribution to consumers is governed by the Electricity Law 1/1982 (and subsequent amendments), and supplementary regulations.

Renewable Energies

Renewable energy sources are located in well-defined geographical areas of Chile. Solar energy is preferred in the northern area (regions one to four), where solar radiation reaches over 4,200 kilocalories per square metre. Wind energy is utilized particularly in the southern area (regions 10 to 12), while geothermal activity occurs in several areas along the Andes mountain range.

The framework that governs the exploitation and exploration of renewable energy is identical to that which applies to other types of energy. Thus, its use depends on competitiveness in terms of price and quality when compared to traditional energy sources. There are no limits on the use of renewable energy, although no state subsidies encourage their use.

Renewable energies produce approximately 10,500 megawatts (MW) per year, a figure which attests to their low usage, particularly when compared with the demand for electric energy, which is more than 36,000 gigawatts per year.

Regulation

The use of renewable energies is regulated by law only to the extent that they are used to generate electricity (with the exception of geothermal energy).

The General Environment Law expressly states that projects for the laying of high-tension lines (ie, which convey electricity at voltage levels ranging from between 66 kilowatts (kW) to 500 kW), and for the construction of electricity generation plants for which the capacity exceeds 3 MW, may not be implemented or modified without a prior evaluation of their environmental impact.

The most relevant aspect of this law in relation to electricity generation and transmission is its creation of a public agency, the National Environmental Corporation (CONAMA), which manages the Environmental Impact System, among other things.

The Environmental Impact System is a procedure that must be followed for given industrial activities or projects. An evaluation of the environmental effects that result from these activities or projects, and details of the measures that will be adopted to minimize their negative consequences, must be filed with CONAMA or its local branch, Corporación Regional del Medio Ambiente (COREMA).

The analysis may be reported in an environmental impact study (EIS), or an environmental impact statement or declaration (EID), depending on the nature of the environmental changes that occur. The EIS involves more in-depth analysis, and will take longer to approve than the EID.

In law, an EIS must be conducted on a project if (i) it is likely that it will have significant adverse effects on the quantity and quality of the renewable resources, or (ii) the landscape or touristic appeal of an area will be altered.

In the event that the EIS or EID is rejected, an appeal may be filed with the same agency or, at second instance, with the ordinary courts of law. Alternatively, a new study or declaration may be filed with the same authorities.

The Constitution grants private parties the possibility of bringing a writ of protection in cases where their constitutional rights are affected by an arbitrary or unlawful act of the authorities or of a given individual. Accordingly, any individual who deems that his or her right to live in an environment that is free from contamination is being adversely affected may bring a civil legal proceeding requesting the suspension of the disputed act.

Geothermal Energy

The legal framework distinguishes between thermal waters that are used for medicinal, touristic or entertainment purposes and those used as sources for geothermal energy. The former are regulated primarily by Decree Law 237/1931, the latter by Law 19,657 on Concessions of Geothermal Energy and Decree 142/2001 of the Ministry of Mining.

Sources
The law defines 'geothermal energy' as energy "which is obtained from the natural heat of the earth. It may be drawn from steam, water or gases (excluding hydrocarbons), whether naturally available or artificially created".

Such energy is considered the domain of the state, and can be exploited by private agents only upon obtaining a concession for exploration or operation.

Concessions
A geothermal energy concession represents a real, immovable right that is independent of the state and any individual.

When a concession is awarded it can only be revoked for reasons of public utility, expiration or extinction.

Accordingly, the holder of a geothermal concession may defend its right by all means which the law permits, with respect to both private agents and the state.

The Ministry of Mining is responsible for awarding concessions and overseeing the enforcement of their provisions.

In order to obtain a concession the applicant must be a Chilean individual. Companies must be chartered in accordance with applicable Chilean law. An application must include:

  • all relevant information on the applicant;
  • the location and surface of the area to which the concession will apply;
  • technical and economic information on the project; and
  • a statement of the intended investments.

The process begins by filing the application for a concession with the Ministry of Mining. A notice with a summary of the application must be published in the Official Gazette on the first and fifteenth days of the following month. The same notice must be published in regional and national newspapers.

Third parties then have 45 days to file their own applications for concessions or lodge complaints or observations. Once this timescale has elapsed and the ministry has received a report from the National Commission of Energy, it decides whether to accept the concession.

If the concession is challenged by third parties, the applicant has 30 days to address the disputed issue. Then the ministry decides within 90 days whether to award the concession.

If several applicants apply for concessions with respect to the same area, the ministry will call a public bid to award one or more concessions.

Third parties may neither lodge complaints or observations nor apply for other concessions with respect to the same area if the application is submitted after an exploration concession has been granted.

Likely sources
The law identifies as 'likely sources' areas of water that are heated from within the earth and the surface of land that surrounds such areas. The likely sources are expressly listed in the Ministry of Mining's Regulations 142/2000 and 78/2001. If a concession for exploitation of the geothermal energy of a likely source is requested, the ministry calls a public bid within 90 days of the application being filed.

The invitation to bid has two stages: the submission of information about the bidders and the evaluation of economic offers.

In the event of any opposition filed by third parties, the ministry will decide whether to call off the bid within 60 days. Once the oppositions have been decided, and providing that the ministry decides to continue with the bidding process, it has 90 days to decide whether to award the concession.

Rights of Concession Holders

The maximum surface area to which an exploration concession applies may not exceed 100,000 hectares (200,000 hectares in the case of an exploitation concession).

The exploration concession entitles the holder to take measurements and conduct studies aimed at establishing the existence of the renewable energy source and its physical and chemical characteristics.

The exploitation concession entitles the holder to conduct drilling, building, production and transformation operations with respect to geothermal fluids that may be transformed into thermal or electric energy.

Exploration concessions are awarded for a maximum term of two years and may be extended for an additional two years.

The exploration concession grants the holder the exclusive right to apply for an exploitation concession for up to two years after its extinction, except where the application would affect a likely source. Then the concession is awarded through a public bidding process.

Concessions are transferable to third parties and may be transferred at death.

The concession holders have certain rights over the relevant surface land, namely:

  • the right to occupy all or part of its extension with installations, constructions and pipelines;
  • any right established for the benefit of electric services companies; and
  • rights of transit and occupancy of roads, railroads, pipelines and tunnels.

The establishment and exercise of these rights is determined by agreement of the parties or by judicial decision.

The concession holders also acquire a right to the consumptive use and continuous exploitation of underground waters detected in the course of the concession.

The other rights of concession holders include:

  • the right to exclusive concessionary use of the relevant area;
  • the right to seek remedies with the Ministry of Mining for acts or events that affect their rights and that take place while the application is filed or the bid is underway; and
  • the right to withdraw from the concession either partially or completely. In the case of a partial resignation, payment for the licence decreases proportionally.

Obligations of Concession Holders

Concession holders are obliged to pay the state for a yearly patent.

The holder of an exploration concession must file a yearly report with the Ministry of Mining on the progress of prospecting activities.

The holder of an exploitation concession must file a yearly report with the Ministry of Mining with respect to its commercial or industrial operations.

Concession holders must indemnify affected parties if a geothermal concession is awarded after mining concessions, rights of use of water, permits for exploring underground waters, administrative concessions or special contracts for operations on substances that are not mined have already been granted, if and when any damage is caused.

In the event that a geothermal concession overlaps with a mining concession, the owner of the former must inform the holder of the latter of any concessionable mining substances that it draws or recovers. Furthermore, the owner of the geothermal concession must turn such substances over to the holder of the mining concession, prior to being refunded for all expenses and investments incurred in drawing or recovering them. The concession holder has the same obligation towards the state with respect to non-concessionable substances.

In the case of two or more concessions that use the same reservoir of geothermal fluids, the concession holders must agree on technical procedures for common exploitation. Any conflicts will be solved by an arbiter.

Concessions expire automatically in the case of failure to pay for consecutive licences. They also expire at the request of the ministry if the concession holder fails to conduct any exploitation activities.

Penalties

Any infringement of the law is penalized with fines ranging from between $200 and $4,000. They may be appealed at an ordinary court of law.


For further information on this topic please contact Patricio Prieto or Claudio Undurraga at Prieto & Cía by telephone (+56 2 280 5000) or by fax (+56 2 280 5001) or by email (pprieto@prieto.cl or cundurraga@prieto.cl).



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