Description: 

A project to assist in the development of geothermal projects through concessional risk mitigation support.

Background:

Over the past decades, Chile has experienced steady growth, and with that growth has come an increased demand for energy across all sectors. However, energy infrastructure production has not grown at an equal pace. The result is that Chile remains a net importer of energy resources, most of which are fossil fuels. Current estimates place Chile’s energy imports at about 75 percent of its total use, and of that, fossil fuel use is estimated to comprise approximately 75 percent of total energy consumption.

To address this issue, the Chilean government passed legislation in 2014 known as the 20/25 law. This law states that 20 percent of energy from new contracts must come from renewable sources by 2025. Supporting legislation gives priority to certain renewable energy sources. One example of this is geothermal, which was given a streamlined concession process for the purpose of allowing developers long-term certainty over development rights.

Objectives and Outputs:

Begun in 2014, the Geothermal Risk Mitigation Program (MiRiG) is a partnership between the government of Chile, Inter-American Development Bank, and CIF. CIF is investing $20 million in this project, which is being undertaken for the purpose of assisting projects that are unable to advance without concessional risk mitigation support.

Geothermal energy is new to South America, and this project is part of a plan to show that the technology is viable at a large scale. Project resources will be utilized for the purpose of mitigating resource and other project risks and incentivizing developers to make the additional investments required for drilling campaigns and plant construction. MiRiG will focus on three projects, which together have a potential to produce up to 200MW. The project investments will support up to 100MW of capacity, and are expected to result in greenhouse gas emissions savings of between 8.7 and 18.0 MtCO2e.

In addition to project finance, MiRiG will provide technical assistance and knowledge management activities. These will take the form of (i) development of social and environmental best practices, (ii) contracting of independent geothermal advisory services, and (iii) knowledge management mechanisms for disseminating best practices and lessons learned to government agencies, developers, financial institutions, and other countries in the region that are considering similar development projects.

MiRiG has the potential to benefit large portions of the Chilean population through providing pathways for energy supply transformation. The project will also result in decreased greenhouse gas emissions, as well as a decreased carbon footprint by any users of developed energy infrastructure projects. Additionally, the project will create new employment opportunities, as well as build national capacity for future renewable energy developments.

IDB Project Portal

This project summary is drawn from draft project proposals [such as the PAD, PID, SAR, and country investment plan] and may not contain the most up-to-date information.

Project Details:

Cover NoteProject Document | Independent Review | Proposed Decision 
Approved on April 15, 2014 (Approved Decision)
Approved amount(s):
USD 27.7 million (concessional loans/guarantee)
USD 1.05 million (grant funding)
USD 20.0 million (concessional loan/guarantee under DPSP)
USD 52,000 (MPIS technical assistance on grant funding)
USD 1.2 million (MPIS on concessional loan/guarantee)