Chile energy transition to boost construction in renewables
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Chile’s energy transition to boost construction in renewables

By GlobalData 17 Nov 2021 (Last Updated November 17th, 2021 17:09)

Chile is making progress in the use of renewables for electricity and is on its way to achieving 70% by 2030, despite coal still being widely used.

Traditionally, Chile has been a net importer of energy, importing non-renewables such as coal and natural gas to fuel a large energy-intensive mining industry. According to the World Bank, 65% of the country’s energy needs was imported in 2015. With the Atacama Desert and Patagonia on its doorstep, Chile has vast natural resources available to generate renewable energy and with the changing tide of global energy demand, Chile is well-positioned to become a world leader in renewable energy production.

Although still heavily dependent on coal, Chile is making headway into achieving the government’s target of increasing the share of renewable energy in electricity usage to 70% by 2030. There was a significant private investment drive into renewables in 2020, when the sector accounted for the largest share of total foreign direct investment (FDI) projects (41.6%) in Chile. The overall construction project pipeline, as tracked by GlobalData, stands at US$218 billion, with 50.6% of projects in the energy and utilities sector. In total, 85% of the energy and utilities project pipeline comprises renewable energy projects and this is skewed heavily towards the pre-planning and planning phases, which will aid construction growth over the following years.

Chile’s core ambitions lie in hydrogen production, releasing the National Green Hydrogen Strategy in late 2020. The Ministry of Energy has set high aims to create an electrolyser installed capacity of 5GW by 2025 and 25GW by 2030. In addition, the government plans to produce the world’s cheapest green hydrogen by 2030. Comparatively, the EU has set a target of creating 40GW of capacity by 2030. The government plans to incentivise the private sector with subsidies and a competitive regulatory landscape for firms to operate in.

Siemen’s is piloting the first green hydrogen project in Chile, the ‘Haru Oni’ plant, which is expected to be operational by 2021. It is estimated to produce 160,000l of clean fuel by 2022 and when in commercial production 2024 this rises to 55 million litres. In addition, Aker Clean Hydrogen and Mainstream Renewables are collaborating with the intent to explore and develop green hydrogen facilities to create 1GW of capacity. Chile already has the infrastructure and expertise in place to export hydrogen with its copper and lithium mining industry. On the back of COP26, Chile is making inroads in global markets by signing a deal with Belgium’s largest port to channel hydrogen to Europe.

Along with benefits to construction growth with plant and infrastructure works, hydrogen should drive down costs in the value chain. However, with technological developments in hydrogen vehicles still in the preliminary stages and hydrogen more than double the cost of diesel, the cost-benefit will only realise in the next ten years. This is a caveat to industry growth as global demand has not yet been realised and technology costs associated with production and consumption are still high. Chile plans to fill the shortfall in demand by integrating hydrogen and renewable technology into the mining sector to drive growth in the medium term.

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