Takeaways from Chile Energy Transition 2024 Summit

Decision-makers from Chile and beyond gathered in capital Santiago this week to explore the energy transition, encompassing areas including renewables, electromobility, storage, mining and permitting.

Permitting was a transversal topic, given the complexity and uncertainty of the process in Chile, which is working to implement improvements via two bills in congress. One targets the environmental permitting system, the other sectorial permits. 

BNamericas looks at some of the takeaways from mining and renewables panels.

The event kicked off, however, with an overview and comments on Tuesday’s presidential election in the US.

US elections

The event, Chile Energy Transition 2024 Summit, hosted by London-headquartered energy consulting firm IN-VR, was told that the election of Donald Trump as the next US president was the “elephant in the room.”

Climate change denier and fossil fuel industry champion Trump will have a significant influence on the “rhythm and form” of the global energy transition, the audience was told. 

During his first term in office, from 2017-21, Trump pulled the US out of the Paris Agreement and emphasized energy independence through increased oil and gas production.

The current administration of Joe Biden introduced the Inflation Reduction Act, a pillar of which directs new federal government spending toward reducing carbon emissions. Beneficiaries include clean hydrogen supply-chain investors, which can apply for tax breaks. 

Permitting

Reflecting and synthesizing sentiment felt across the local investment community, Francois Lovens, a member of industry organization the International Lithium Chamber, said permitting was an “enormous” headwind to project development in Chile.

Lovens added that greater innovation and productivity was also vital, especially to spur the country’s development.

Authorities should consider creating a time window for the lodging of challenges to trim uncertainty, in a context where projects can get halted even once a license is finally issued and pickaxes have started swinging.  

Having abundant mineral resources alone is not enough for the region. Favorable above-ground conditions are vital to ensure countries monetize them efficiently and in a timely manner, decision-makers were told. Chile is not alone in facing permitting challenges, the event heard.

Building demand

To wean itself off cash-burning imported hydrocarbons, reduce emissions and spur power infrastructure investment, Chile needs to boost electrification.

Today, electricity accounts for around 22% of Chile’s energy matrix. The big challenge is making that grow, with increased electrification of the mining industry a key opportunity, said Ana Lía Rojas, executive director of local renewables and storage association Acera.

Industry and mining account for some 60% of electricity consumption in Chile. Mining demand is what “moves the needle,” said Rojas.

Lower copper ore grades could help spur electricity demand, given greater volumes of power would be needed for processing, Marcelo Rivas, director of engineering and construction at generator Innergex, said during a panel. 

Last year, 66.6% of the sector's electricity consumption came from clean sources and the figure is expected to rise to 78.1% by 2026, according to a report by copper commission Cochilco. The national mining policy projects that 96% of electric power used in the sector will come from renewable sources by 2050.

In terms of electrification, space is seen in the spheres of mining vehicles and machinery, where electrification has got underway. Green hydrogen and other sustainable fuels, such as dimethyl ether, are also being mulled.

Demand-side growth in the regulated segment, encompassing homes and SMEs, is muted, but an uptick in electromobility could brighten the outlook.  

Regulator CNE, in a supply auction report, estimates average annual demand growth of 2.8% through 2044.

Elsewhere on the map, demand from datacenters is seen as important but not on the scale of mining. Datacenters are expected to add around 1TWh/y to current demand of around 77.3TWh/y.

“Growth and electrification in mining – copper and lithium in particular – is a priority, and there are other important options such as servers/IA and even bitcoin mining among other new businesses,” panel moderator Patricia Dárez, managing director of Latin America-focused engineering consultancy 350renewables, told BNamericas.

Another is keeping clean energy flowing when the sun goes down, especially given that industrial offtakers are requiring green energy 24/7.

“We still need to decarbonize the night,” said Rojas, adding that complementary services also need decarbonizing.

As part of groundwork to help support increased penetration of non-conventional renewables and the retirement of thermoelectric units, regulatory authorities are working on standards associated with grid-forming technology, a control technique which permits the likes of solar PV and wind plants to act like traditional synchronous generators. 

Auctions

An associated challenge is reigniting interest in regulated supply auctions, Rojas said.

The last supply auction saw tepid interest and a single awardee, Enel Chile, which offered to cover demand with existing generation assets. 

CNE had tweaked bidding rules to dangle carrots for generators, such as passing on systemic costs to consumers and offering incentives for storage. In addition, contracts were offered based on geographical location.

Risks are seen in the regulated supply auction segment. Among them are curtailment, which has been climbing apace, accounting for around 15% of renewables output, limited grid flexibility and the potential lowering of the barrier to the nonregulated market.

Other intertwined risks are transmission congestion on some parts of the grid, zero marginal costs for various hours of the day, and price decoupling, a risk particularly important for pureplay renewables generators in the north with supply contracts corresponding to purchasers further south.  

Regulatory uncertainty seen in recent years, stemming from price stabilization mechanisms impacting generator financials, is a potential factor, too.

Energy storage

Chile’s energy storage buildout will partly help combat curtailment. 

The country needs the cheapest and most efficient storage systems, Rojas said. 

Chile is building out storage capacity and is on track to have 2GW of capacity operating or under construction in 2026.

Rising renewables penetration and curtailment, along with favorable spreads between evening and daytime power prices, has whipped up interest in energy shifting applications.

Scope is also seen for energy storage system usage in the ancillary services market, to help keep the grid stable as the country gradually closes or converts coal-fired power stations. Usage in the transmission system is also seen as a demand driver.

On the outlook for storage in Chile, where the sector is waiting for coordination and operations regulations, due by year-end, Vicente Walker, Latin America business development manager of Chinese storage company Trina Solar, told BNamericas: “Today, we see that the new storage projects are focused on the utility-scale market, whether in new solar PV+BESS or in hybridization of PV projects that are today experiencing curtailment problems.

“For 2025, we see that the first large-scale standalone projects will start construction, where [Danish fund manager Copenhagen Infrastructure Partners] CIP’s BESS Arena project stands out. For 2025, it is forecast that 6GWh of new projects in Chile will begin their commercial operations.”  

The BNamericas project database contains US$13.6bn in Chilean energy storage projects in the environmental review phase.

The figure – based on research conducted mid-October – corresponds to both standalone systems and renewables-storage hybrid projects, for a total of around 60.

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