Trials and Tribulations

Large hydropower schemes are often controversial, and Chile’s Ralco scheme is no exception. Legal disputes, environmental opposition and falling power prices all mean that Ralco may never see commissioning.

Figure 1. Hydropower development on the Bio-Bio river
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New power projects have had to jump through as many legal, technical and environmental hoops as the Ralco hydropower project in Chile, even given the growing opposition of environmentalists across the world to large-scale dam constructions. If the project is ever constructed, and the future of the hydropower scheme still hangs in the balance, then Chilean electricity generator Empresa Nacional de Electricidad SA (Endesa), which is 60 per cent owned by Enersis, which, in turn, is 64 per cent controlled by Spain’s Endesa, will have reason to celebrate.

First proposed in 1995, the 570 MW Ralco scheme – the second of a planned five-plant cascade on the Bio-Bio river in southern Chile – has been at the centre of an environmental dispute for the last five years. After finally receiving environmental approval for construction from Chile’s National Environmental Corporation (Conama) in June 1997, work was able to begin on the South American state’s largest hydro project. However, despite the approval of the government’s environment body, it has been in limbo since then with both indigenous and environmental groups such as the National Corporation of Indigenous Development (Conadi) and the National Ecological Network (Renace) fighting tooth-and-nail to stop the scheme, which they say would mean flooding lands belonging to some 500 Pehuenche Indians, a branch of the Mapuche indigenous group.

Figure 2. The 450 MW Pangue scheme also on the Bio-Bio river
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Preparatory work was halted in September 1999 when a Santiago court judge ruled in favour of some 20 indigenous families who refused to sell their lands, despite Endesa offering to relocate them and pay compensation. By early October work resumed after a Court of Appeals overturned the civil court order, even though Endesa has still to purchase the land, which will be flooded during 2002 when the plant is anticipated to come on line.

In January of this year, the government of President Frei, which has strongly supported the project’s construction from its inception, granted it an electrical concession, authorized through the Electricity and Fuel Superintendent, which allows work to continue on the plant, despite lawsuits pending before the courts against both Endesa and Conama.

Political moves

Figure 3. One of the Ralco project turbines on test
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Opponents of the project criticized the decision by President Frei’s administration, whose term ended on 11 March, saying it was politically motivated. “The authorization was clearly a political move. It was adopted less than two months before President Frei’s term ends in order to leave the Ralco issue settled before president-elect Ricardo Lagos begins his term,” said a Renace spokesman. Renace, an umbrella movement comprising nearly 150 environmental groups, called on the country’s Controller General’s Office to annul the decree that approves the permit, claiming that the authorization of the concession was invalid, since Endesa neither holds the appropriate water rights, nor does it have complete ownership of the lands necessary to build the Ralco dam. The Controller General’s office reviews government decrees to make sure they comply with the law.

However on 10 March, on the eve of the accession to power of President Lagos, Chile’s Controller General gave the go-ahead to Endesa to complete construction on the project. Endesa said the company would make a decision on resuming construction on the facility after the company’s board of directors had had a chance to study the ruling. Endesa said the question of water rights for the project has yet to be finalized. The government agency overseeing water rights is expected to issue its final ruling in April. “What remains is basically a matter of clarification,” officials at Endesa said. “But it won’t influence construction on the project.”

The owner/operator of the project, Chile’s Endesa, which is controlled by its Spanish namesake, had hoped to have the scheme in operation in early 2002, but a delay of at least a year now seems likely and could, according to industry analysts, run to several years. Endesa, which estimates that it has already invested $120 million in preliminary work on the $500 million dam, has said that it will not proceed further without definitive authorization and has postponed the award of a $100 million contract for the construction of the dam itself, the last contract to be signed.

Brazil’s construction company Andrade & Gutierrez, in partnership with two local construction companies, is reported to have put in the most competitive bid for the construction of the Ralco dam – a 151 m-high RCC dam with a crest length of 350 m. The reservoir, in the Ralco tributary of the Bio-Bio, will have a volume of 1.22 billion m3 and will flood up to 5120 km2.

The dam will supply an underground power plant comprising two 285 MW generating units, through a 7 km-long, 9.2 m-diameter headrace tunnel. The two Francis units will operate under a net head of 175 m, with a design flow of 368 m3/s, and produce an estimated mean annual output of 3300 GWh.

The power plant, which will house the two generating units, will be 110 m long, 26 m wide and 46.9 m high. The plant will be connected with the main network, Sistema Interconectado Central, at the Charrua substation, by two 220 kV lines.

Work on the underground powerhouse, the abduction tunnel and river diversion tunnel and dam excavations have already started, under contracts awarded back in 1998. Work on the powerhouse and abduction tunnel is being undertaken by a consortium led by Spanish construction company NECSO in partnership with Grana y Montero of Peru, while Chile’s Besalco is responsible for the river diversion tunnel and dam preparatory works.

France’s Alstom was awarded a turnkey contract worth $57m for the supply and installation of electromechanical equipment in March 1999. As well as the design and build services, Alstom will supply the two Francis turbine generator sets, the main transformers and auxiliary equipment, a SF6 GIS substation and a control command system, with equipment manufactured at its factories in France, Canada and Brazil.

As part of the agreement, Alstom has arranged a 100 per cent supplier credit. Alstom had previously been involved with the commissioning of another hydro project in Chile, the 500 MW Pehuenche, which was commissioned in 1991.

The 450 MW Pangue scheme, also on the Bio-Bio river, which was designed to operate in conjunction with the Ralco project, was constructed and commissioned by an ABB/Kvaerner consortium in March 1997.

Cheap power

Opponents of the project say that Ralco is unwarranted in both technical and financial terms and that Chile could meet projected demand through other types of generation, either combined cycle gas turbine plant using gas imported from Argentina, or non-reservoir hydro, which would have limited environmental impact. The investment needed to build the plant would also be recuperated through higher electricity rates for end-users, critics add. Chile’s National Energy Commission (NEC) has, however, repeatedly defended its policy on Ralco, and hydro development in general. NEC’s executive secretary Maria Isabel Gonzalez, pointed to the economic advantages of hydroelectricity, which she said cost on average cost $0.019/kWh compared to $0.036/kWh for steam-fired thermal plant and $0.021/kWh for gas-fired thermal plant.

NEC has, however, done power producers in Chile no favours, after cutting central grid node prices – the prices at which generators sell to distributors – in November last year. Node prices are set every six months by the government’s energy agency and generators had hoped for an increase in the last price review. They were instead in for an unpleasant surprise, with the average price cut by four per cent to $29/MWh. This followed a five per cent reduction in April 1999.

Node prices have been dropping steadily since 1995 due mostly to lower generating costs following the arrival of cheap natural gas from Argentina. This has placed increased pressure on generators, particularly those operating hydro plants, which have seen their position as the main source of cheap power threatened by planned combined cycle gas turbine (CCGT) plants. Several generators have frozen new investment projects as a result of falling prices. Colbun, for example, announced the postponement of its 64 MW Quilleco hydro plant last year.

Timing has been important for Endesa, which has relied on Ralco being built on schedule to block the entry of new gas-fired CCGT plants and allow it to maintain its dominant position in the Chilean generating market. Any further delays may make Endesa decide to put a final stop to its long-suffering project.

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