“Chain Energy” applies only to cards played or Set from your hand, not cards that are activated when already Set on the field, or to cards placed onto the field by effects like “Cyber Jar”’s Flip Effect.
Netrep Rulings:
“Chain Energy” applies to any cards played after “Chain Energy” resolves.
“Chain Energy” creates a condition where you pay an activation cost of 500 Life Points to play a card. A card is defined as played by either putting it on the field through normal means; for example, a Normal Summon/Set, Activating a Spell Card from the Hand, Setting a Spell or Trap Card, or activating a discarding effect like “Kuriboh” from the hand.
Cards Set previous to “Chain Energy” do not trigger the 500 Life Point cost.
Cards brought to the field through another effect, like Special Summoning a monster through “Monster Reborn” do not trigger the 500 Life Point cost of “Chain Energy”.
Netrep Q&As:
Q: If I have only 500 Life Points remaining with “Chain Energy” active on the field, can I activate “Poison of the Old Man” to increase my Life Points before losing the 500 points from the effect of “Chain Energy” and losing the Duel?
A: When you play the “Poision of the Old Man” “Chain Energy” will cause you to pay 500 Life Points, reducing your Life Points to 0 before “Poison of the Old Man” can resolve. Curtis Schultz, 01/16/2004