A $7bn (£4.2bn) project to dam two of the world's wildest rivers for electricity won environmental approval on Monday from a Chilean government commission, despite a groundswell of opposition.

The commissioners – all political appointees in President Sebastián Piñera's government – concluded a three-year environmental review by approving five dams on the Baker and Pascua rivers in Aysen, a mostly roadless region of remote southern Patagonia where rainfall is nearly constant and rivers plunge from Andean glaciers to the Pacific Ocean through green valleys and fjords.

Monday's vote – 11 in favour and one abstention – could prove to be pivotal for the future of Chile, which has a booming economy, vast mineral wealth and a determination to join the elite group of first-world nations.

With its energy-intensive mining industry clamoring for more power and living standards improving, some analysts say Chile must triple its capacity in just 15 years, despite having no domestic oil or natural gas. Chile imports 97% of its fossil fuels and depends largely on hydropower for electricity, creating a crisis when droughts drain reservoirs or faraway disputes affect energy imports.

Supporters say the economic benefits of the dam project justify carving roads through the heart of Chile's remaining wilderness and running 1,000 miles (1,600 kilometres) of transmission lines to power the capital, Santiago.

The dams together could generate 2.75 gigawatts, nearly a third of central Chile's current capacity, within 12 years. The Aysen region will receive less expensive energy, jobs, scholarships and $350m in infrastructure, including seaports and airports, said HidroAysen's executive vice president, Daniel Fernandez.

But people in the sparsely populated area are divided. Only three dozen families would be relocated, but the dams would drown 14,000 acres (5,700 hectares), require carving clear-cuts through forests, and eliminate whitewater rapids and waterfalls that attract ecotourism. They also would destroy habitat for the endangered Southern Huemul deer: Fewer than 1,000 of the diminutive animals, a national symbol, are believed to exist.

"They are all sell-outs," rancher Elisabeth "Lilli" Schindele said of the commissioners.

She lives with her husband and two young children in the Nadis, a sector that would be inundated. Their neighbours have agreed to relocation, but she doesn't want to leave the 1,235 acres (500 hectares) where they raise cattle and sheep.

"There is no land like ours," she told told the Associated Press.

Robert F Kennedy Jr, a lawyer for the US-based Natural Resources Defense Council, appealed to Pinera to call off the project.

"It's the most beautiful place, I believe, on the planet," said Kennedy, who kayaks there every year. "I don't know any place like Patagonia."

Investors have spent $220m on the project so far, but opposition has grown to 61% of Chileans according to the latest Ipsos Public Affairs poll, and the government is concerned about a backlash.

More than 1,000 people gathered outside the hearing in the regional hub of Coyhaique, chanting and carrying signs. Some threw rocks at the cars of commissioners, and clashed afterward with hundreds of police, who responded with a water cannon and tear gas. Several protesters were bloodied in the melee, and the commissioners were kept inside for their safety.

In downtown Santiago, several thousand people blocking a main avenue in protest also encountered tear gas and police water cannons.

The mining and energy minister, Laurence Golborne, had urged opponents to turn to the courts, and they did vow to appeal.

"We're going to keep fighting until this project is unviable," said Patricio Rodrigo, a spokesman for the Patagonia Without Dams coalition. "This project robs us of our sovereignty."

But the interior minister, Rodrigo Hinzpeter, who sent police to contain the protests, said that "the most important thing is that our country needs to grow, to progress, and for this we need energy."

Chile's decision has lessons for a world confronting a future without inexpensive fossil fuels and questioning nuclear safety. The country has abundant renewable-energy potential, from dams on its many rivers to year-round sun in its northern deserts, wind along its long Pacific coast, numerous geothermal sites and biomass from its large agricultural industry.

But Chile gets less than 5% of its electricity from renewable sources other than hydroelectricity, has done little to encourage efficiency, and lacks a strategy for securing future supplies, although a government commission will make such recommendations by September.