energy sector needs to break out of the vicious circle in which
it is stuck before the country is left facing a critical
shortage, Antofagasta Plc chief executive officer Diego
Hernández told AMM.
"The country still has power
available for the next four years, but any more than that and
we will start having problems. We need to have projects
approved now as it takes three to four years to get plants
generating, from starting pre-feasibility through permitting to
production," he said.
The crux of the problem is that
Chile has very little new power-generation capacity coming to
the grid, and a period of dry weather in the central circuit
has limited hydropower capacity and forced coal-fired plants to
work at full capacity, Hernández said.
The power balance is being made
up partly by liquefied natural gas, but mostly by diesel, which
is more expensive.
At the same time, once long-term
contracts with power generators expire, mining companies are
being forced to either renew at very high prices or find
themselves unable to renew altogether, with the latter leaving
them exposed to the marginal cost of the grid.
This is the situation faced by
Antofagastas Los Pelambres Mine in Coquimbo.
"The big power generators are in
a monopoly. For them, the status quo is quite convenient, as
they can sell part of their power at a high price, at the
marginal cost, and its very difficult to bring newcomers
to the table," he said. "We havent been able to break
this vicious circle," Hernández said in an interview in
Santiago ahead of the Center for Copper and Mining
Studies annual Cesco Week.
The Chilean copper industry is
unlikely to go down the same route as the power-intensive
aluminum industry, namely self-generation of energy, but
Hernández said it could be forced to take some
short-term measures to secure power.
"As mining companies, our scope
is not to produce power and we want to avoid that because it
would also add a link to the copper value chain that is capital
intensive. We prefer to invest that money in mining and not in
power generation," he said.
"If finally there is no power
available at reasonable cost, we need to start thinking of
solving the problem ourselves. But once you establish
additional power, and the power-generating companies that
currently dominate the market start to lose share as newcomers
enter, then probably I dont see it as something wed
have to get involved in for the long term," Hernández