In 2004, Chile had total installed electricity generating capacity of 10.7 gigawatts. The country produced 50.9 billion kilowatthours (Bkwh) of electricity in 2004, while consuming 49.1 Bkwh. Hydroelectricity supplies the largest share of Chile’s electricity supply, contributing 43 percent in 2004. However, the contribution of conventional thermal sources has grown rapidly since the start of natural gas imports from Argentina in the late 1990s.

Chile privatized its electricity sector in the 1980s, and all generation, transmission, and distribution activities are now in private hands. CNE is mostly responsible for government regulation of Chile’s electricity sector, along with the Ministry of Economy and Energy (MEE).

Chile has four separate electric systems: the Sistema Interconectado Central (SIC), which serves the central part of the county; the Sistema Interconectado del Norte Grande (SING), which serves the desert mining regions in the north; and the Aysen and Magallanes systems, which serve small areas of the extreme southern part of the country. The systems are mostly autonomous, as long distances between the four make integration difficult. Transelec controls almost the entire national transmission grid that serves the four systems. In August 2006, Hydro-Quebec sold its majority stake in Transelec to a consortium of private investors.

Of the four electricity systems, the largest is the SIC, which covers the major population centers surrounding Santiago and serves over 90 percent of all electricity customers. In the SIC, the most important player is Enersis, majority owned by Spain’s Endesa. Enersis holds controlling stakes of both the largest generating company, Endesa, and the largest distribution company, Chilectra, which serves about half of Chile’s population.

Unlike the large number of household consumers in the SIC, the SING serves mostly large industrial customers, principally mining interests, in Chile’s northern regions. Also unlike the SIC, the large majority of the electricity supply of the SING comes from thermal sources, chiefly imported natural gas from Argentina. The largest generating company in the SING is Electroandina, owned by Tractebel and Codelco.

Hydropower has historically been Chile's single largest power source. Droughts, however, have periodically curtailed hydropower production, causing supply shortfalls and blackouts. In response, the Chilean government began in the 1990s to diversify its energy mix to become less reliant on hydropower, mainly by building natural gas-fired power plants.

After being delayed for several years by opposition from local residents and environmental activists, Endesa’s Ralco hydropower plant on the Biobio River began operations in September 2004. Ralco is the largest power plant in Chile, with generating capacity of 570 megawatts (MW). In December 2004, Chile’s environmental agency approved plans by Endesa to expand Ralco’s capacity to 690-MW.

The Argentine gas crisis has revitalized other Chilean hydropower projects. Chilean power generator Colbun announced in November 2004 that it would proceed with construction of the 70-MW Quilleco hydroelectric plant on the Rio Laja; Colbun originally received regulatory approval for the $80 million project in 1999, and construction is now slated to be completed by 2007. Colbun is also developing the Chiburgo (19 MW) and Hornitos (55 MW) hydroelectric projects. Endesa plans to complete the 32-MW Palmucho plant, which will work in conjunction with the company’s Ralco facility, in the second half of 2007. Australia’s Pacific Hydro and Norway’s SN Power Invest are developing the 155-MW La Higuera hydroelectric plant on the Tinguiririca River, scheduled for completion in 2008.

Conventional thermal sources, especially natural gas-fired, have become increasingly important to Chile’s electricity supply as a way to reduce susceptibility to hydroelectricity’s seasonal fluctuations. In the SIC, conventional thermal sources constitute about half of the total electricity supply, while in the SING they constitute almost all of the supply.

There are numerous large-scale power projects in the development pipeline for Chile. Colbun is currently building the 250-MW Candelaria combined-cycle, gas-fired turbine (CCGFT). Endesa plans to complete a 370-MW CCGFT at its existing San Isidro plant, near Santiago, by the end of 2007. Southern Cross, a private equity fund, began construction in April 2006 on the 120-MW Campanario project, a gas-fired power plant in central Chile that will also have the ability to run on diesel. Southern Cross purchased the project from Innergy Holdings, a local gas distributor that had decided not to pursue the project. Some planned projects, though, have been delayed. AES Gener, a subsidiary of US-based AES Corp, sought regulatory approval in early 2005 for its 740-MW Totihue CCGFT south of Santiago; however, a combination of local opposition to the plant and uncertainty about future natural gas supplies have caused the company to delay the project for the foreseeable future. Many of the proposed gas-fired power projects will also have the ability to run on fuel oil or diesel.

Due to the Argentine natural gas crisis, coal-fired power plants have begun to receive renewed attention. Chile has two existing coal-fired facilities, the 340-MW Ventanas and the Guacolda plant. In early 2006, Guacolda (majority-owned by AES) received environmental approval for a 200-MW addition at the facility. AES also received environmental approval in August 2006 for a 250-MW expansion at the Ventanas facility. Other companies that have stated interest in building new coal-fired capacity include BHP Billiton (300 MW), Endesa (350 MW), and Suez (400 MW).

In the longer term, LNG could provide another potential fuel source for electricity generation. ENAP plans to develop a gas-fired power plant alongside its Aconcague refinery. Endesa has also stated that it would supply its San Isidro project from a potential LNG import terminal.

Other renewables contribute a small portion of Chile’s total electricity supply. There has been heightened interest recently in Chile’s geothermal potential. Geotermica del Norte, a consortium of ENAP and Enel, began surveying the country in 2001; in 2006, the company requested a concession to develop geothermal resources in the El Tatio region of northern Chile. Chile Wireless Energy Chile announced plans to develop three, 5-MW wind power stations in the country, while Endesa plans to develop a 10 MW wind plant.