Chile's government Tuesday submitted a bill to spur renewable energy use, Chilean Energy Ministry Marcelo Tokman said.
"Our diagnosis is that these sources of energy are already available at competitive costs," he said in a joint press conference with Economy Minister Alejandro Ferreiro.
But despite ample resources – wind, water, solar and geothermal energy – Chile's use of renewable energy accounts for only 294 megawatts of installed capacity, 2.4% of the country's 12,326 megawatts capacity, well below the global average of some 4%, Tokman said.
"The problem doesn't lie with a public subsidy, it lies with a regulatory framework regarding long-term contracts" that will ease the introduction of the technology, he added.
The government wants to regulate a jump-start to the industry by charging power generators a punitive fee per megawatt not generated with non-conventional renewable energy.
"It's a clear, precise, limited stimulus," for companies to invest more in these types of power generation, said Ferreiro.
Chile's energy matrix consists largely of large-scale hydropower plants and combined-cycle and thermal power plants.
If passed by Congress, the government would charge companies that fail to provide at least 5% of energy within the two main grids – the SIC in its central heartland and the SING in its desert mining hub – from 2010 through 2020.
"This will affect contracts signed from 2007, but only for energy supplied from 2010," Tokman said. Companies have reacted positively to the plan, he added.
At the same time, the law will be flexible enough to allow companies to fulfill their minimum levels buy buying them from other companies on the same or a different grid, boosting trading on the spot energy market, Ferreiro said.
Chile needs to secure adequate fuel and electricity to feed its energy-hungry economy amid declining natural gas imports from Argentina and the exposure of hydropower plants to the threat of period droughts.
In the face of growing concern over energy supply, President Michelle Bachelet recently named Tokman the county's Energy Minister in a cabinet shuffle. Previously, energy and mining were handled by one cabinet minister, Karen Poniachik, who is now Mining Minister alone.
As a result of the initiative, the government expects installed capacity in non-conventional renewable energy to reach 200 megawatts in 2010, 360 megawatts in 2011, and 900 megawatts in 2020.