Chile project lawyer talks territorial management, permitting

Obtaining permits for projects in Chile can present significant challenges for developers, particularly those in the energy, desalination and mining sectors.

A chief factor at play, or at least one of those most debated at present, is the complexity of the permitting process, something which the current administration is trying to address via a pair of bills.

Another important and interrelated factor is territorial planning and, specifically, acceptance of large projects by communities, particularly if some have already been built in their vicinity. 

A further challenge for energy projects in particular is that they, unlike residential developments for example, must be built where energy resources are found. 

Against this backdrop, Chilean renewables and storage association Acera has published a report on territorial management, focused on its role as an enabler of the energy transition. 

To discuss the topic of territorial management, BNamericas speaks with lawyer José Miguel Hernández, a partner at local legal firm Evans Group, where he works in a department dedicated to in-depth understanding of territorially complex projects and identifying potential headwinds.

BNamericas: In general, for a country looking for investment in critical sectors like electric power, how important is it to have the right territorial management?  

Hernández: Energy is complex because of multiple factors. For example, if I wanted to build a hydroelectric plant, I’d have to go where the resource is, you can’t change that.

If I wanted to build a wind farm, I’d need to build it where the wind is. For example, the best wind resource is, by far, in Chiloé [an archipelago in Los Lagos region]. But can you do it in Chiloé? No, you can’t. There are social, environmental and land-use issues that make development impossible. 

The same goes for solar resources. It is where it is. People say ‘ah, but there's lots of sun.’ Yes, it’s everywhere but there are specific conditions, in terms of [irradiation] variance. It’s not the same building a solar plant in Antofagasta [region] at 200m above sea level as building one at 1,400m above sea level in the same region. 

A solar plant in Antofagasta region built at 200m above sea level is influenced by maritime conditions [morning mist] that impact irradiation levels, the plant factor.

So, the territorial problem in terms of electric power is very complex. It’s not like a building, where it doesn’t matter where it’s constructed. You need to build [the power plant] where the resource is.

And then if we want to talk about batteries, a hot topic today, they can't be built just anywhere either. They need to be installed near to a project experiencing curtailment and near a substation. You can’t install a battery system 150km away from the substation because of the transmission costs. 

So, in the world of energy, territory is very important, but what is more important is the resources. Plants are built where the resource is. 

BNamericas: How is Chile faring in terms of territorial management? For example, we understand there are regional master plans stating where you can or can't build plants.

Hernández: As a general rule, energy infrastructure is always permitted in regulatory plans; however, this rule applies to certain types of projects, for example, thermoelectric plants [unlike renewables plants] can be built where you want. If there's a gas pipeline, demand, etc. You need to comply with environmental, sectoral and territorial rules to build.

But in terms of renewable energy, no. With renewables, despite this, they’re always permitted in territorial plans [and] their location is going to depend on the resource. For example, I can't build a wind park at Nehuenco [a thermoelectric complex in Quillota, Valparaíso region]. This isn't because it's prohibited but because in Nehuenco there’s no wind.

So, for some kinds of energy, territorial management is applicable, for others it’s not. 

BNamericas: For renewables, there’s nothing in the pipeline in terms of legislation or regulation?

Hernández: No, and in the absence of planning, it’s very disorganized. Today [for example], a part of a region can be covered with wind or solar parks for grid consumption or green hydrogen. There’s no regulation saying how many will be permitted to be built.

The regulatory framework permits this, and it's possible for an entire province to become filled with wind or solar projects.

BNamericas: So, there’s nothing really controlling this? 

Hernández: There are areas being promoted [for renewables investment]. For example, in Taltal [Antofagasta region] there's an area that, for some time now, has been promoted by the energy ministry and the ministry of national assets for the development of wind parks.

Why? Because in Taltal there's very good wind and the land is property of the Chilean finance ministry. So, the State, about 10 years ago, said this zone would be assigned for the development of wind energy.

The territory is divided into blocks and multiple remunerated concessions [known locally as concesiones de uso oneroso] for the development of wind parks have been assigned. 

But this is because the State owns the land. Now, let’s look at the zones of Los Ángeles in Biobío region, Angol in Araucanía region, and Llanquihue in Los Lagos region, where the land is private. We’re seeing them filling up with wind parks. Land use is permitted, the regulatory plan permits it, and the landowners permit it. Therefore, there’s a boom in projects. From an energy standpoint, it’s very favorable, the resource is being tapped – but in some regards it's quite disorganized. 

BNamericas: Within the legal and energy spheres, is there a loose consensus that some kind of regulation is needed?

Hernández: Regulation is always good in the sense that it organizes, protects and permits. However, we can't keep fighting with a permitting system as discretionary as that in Chile.

In the end, the process of obtaining permits is grueling, madness, because each territory has its own unique problems, especially in a country like Chile, which has an enormous variety of different territories. For example, if I wanted to install a wind farm in Magallanes region, Llanquihue or Taltal, there are multiple and diverse conditions. In Taltal, it's about archaeology; in Magallanes, it's about birds; in Llanquihue, it's about indigenous communities.

If there were some state-level guidelines, for example, in an area that has resources, certain types of projects would be allowed, there would be early strategic environmental assessments, or there would be a better understanding of local issues, or even a state mechanism to accelerate some projects, depending on where they are to be built, things would be much easier.

But in Chile, everyone jumped in, in an unorganized manner. They focused on where the resource is, where the land is. The current situation could end up for [green energy projects] in what's called "sacrifice zones" in Chile. Because the regulations allow it, everyone piles into the same area, without planning.

I believe this issue needs to be addressed for the assurance of the energy industry, the communities and the environment.