Chile is committed to decisive and ambitious climate action. In 2020, it updated its Nationally Determined Contribution (NDC) and pledged to become a net-zero emission country by 2050, the only developing country to do so and one of the few to begin parliamentary discussion on a climate change bill. Fulfilling these objectives will require transformative actions in Chile’s society and economy.
Three quarters of global greenhouse gas emissions are associated with the energy sector, largely because of its considerable use of fossil fuels. Chile has already set itself on a path to energy efficiency and electrification using renewable energy. Now the country is working on positioning itself as a future strategic supplier for clean energy for Europe or the US.
Increase in renewable energy
The desert in the north of the country has the highest solar irradiance on the planet, while the Patagonia region in the south has strong and consistent winds; these areas provide Chile with the potential to expand its current electricity generation capacity up to 70 times what it is today using renewable sources of energy. The solar and wind power sectors are quickly maturing. In the past 6 years, Chile has increased the generation capacity from these sources five-fold and, by 2030, 70% of the power grid is expected to be renewable. The increasing investment in these energies, as well as in energy storage and transmission infrastructure, is a clear indicator of a decisive transition to a more sustainable power system. This abundant renewable energy will enable Chile to become the cheapest producer of green hydrogen on Earth. Their recently published National Green Hydrogen Strategy is aimed at turning this promise into reality.
Chile can tread the path from a country historically focused on exploitation of non-renewable resources to a nation that adds green value to its exports and produces the clean energy carriers which the world needs to abate emissions.
The strategy is the result of collaborative work between industry, academia, civil society and the public sector, and is an essential piece of Chile’s carbon neutrality plan and commitment to sustainable development. The plan is to be executed in three waves:
Wave I: 2020-2025
Domestic ramp up and export preparation
The shorter-term opportunities are replacing imported ammonia for local production, and replacing grey hydrogen used in oil refineries. The use of green hydrogen for heavy and long-distance transportation also becomes attractive for fleets and machinery operating in concentrated zones.
Wave II: 2025-2030
Capitalizing on export markets
A clear opportunity exists in the medium-term for green ammonia exports, in addition to the first hydrogen exports. More competitive production of green hydrogen will also replace an increasing share of liquid fuels in land transportation, whereas blending into grids becomes economical.
Wave III: 2030 & onwards
New export markets and leveraging scale to expand
Fuels derived from green hydrogen will be crucial for decarbonizing the shipping and aviation sectors, both in domestic and international routes. Export markets will continue to grow as other nations take action to substantially decarbonize their economies.
The competitiveness of Chile in renewable energy production and the global need for clean energy carriers will open the door to the creation of an economic sector that could rival the size of the Chilean mining sector (worth more than USD 30bn)
Swiss companies can make an important contribution with their innovative strength
The goal is clear: Chile wants to greatly expand its production capacities for renewable energies, become a top-5 supplier of hydrogen and thus develop an extremely productive source of income. At the same time, the country wants to modernize the mining of its strategic metals and make it more sustainable. This requires clean technologies, digital solutions and automation, but also a wide range of services. As early as this decade, mobility in the mines and in public transport is to be converted to hydrogen and battery operation. In this way, an internal market is being built up for those technologies that are to become export hits in the medium term.
In addition to a modern energy infrastructure and the use of the latest mining technologies, there has also been a trend in recent years toward the establishment of energy-intensive data centers and IT companies. Large international energy companies are helping to accelerate this trend by investing in solar projects in the north and wind farms in Patagonia, promoting cheap, green electricity. To meet the criteria as a sustainable supplier, the country has been in the process of expanding transparency regulations, CSR and due diligence, financial and tax regimes, and regulations on raw material extraction.
As an innovative country with high environmental standards, Switzerland and its companies can continue to make an important contribution to Chile's development in the coming years. Swiss know-how will be in demand to assist Chile's transformation into a strategic energy supplier, not only in the sustainable production of hydrogen and raw materials, but also in a variety of upstream and downstream branches such as financing, insurance, transport, traceability, and quality testing.