Through the lens of Chile: Four trends motivating the energy sector in 2022
Across Latin America, one of the challenges the energy sector faces is how to project future energy supply and demand in light of numerous possible scenarios. In such long-term planning, these projections must integrate an array of variables that are each essentially uncertain, such as post-pandemic economic recovery, the efforts of different countries to achieve carbon neutrality, and regulatory advances aiming to accelerate the energy transition. This sophisticated and complicated process is a major challenge for the energy sector as it strives not only to ensure the future supply of energy but to integrate trends that are already rapidly transforming the industry.
Here, we look at four trends that are shaping the energy sector, through the experience of Chile.
The National Green Hydrogen Strategy takes shape
Chile has an ambitious agenda: to become as one of the world’s main producers and exporters of green hydrogen. To achieve this, however, it is crucial to lower the cost of production. This will require a large amount of clean and cheap renewable energy.
The mining sector is the highest consumer of energy in Chile. This is proving to be a positive for the Green Hydrogen Strategy, because the mining sector’s enormous energy needs have become a powerful impetus for the country to achieve its green hydrogen goals. Access to green hydrogen could help the sector reduce its emissions by up to 90 percent by 2050 as the nation advance toward zero carbon emissions.
Recently, with the goal of encouraging in the production and use of green hydrogen, the Chilean government awarded significant funds to an array of early-stage and competitive projects, which are aiming to use green hydrogen to start producing e-fuels, ammonia and methanol, among others, by 2025.
Digitalization as a key element of the energy sector
Digitalization will play a disruptive role in the delivery of electricity. Innovations associated with energy technologies, such as smart metering, remote control and automation systems and smart sensors, and, beyond the meter, optimization and aggregation platforms, smart appliances and devices, will see increasing use.
Overall, digitalization is high on the Chilean energy agenda. We expect that the deployment of digital technologies will allow more interconnectivity and reliance on Internet-based platforms and services for the sector. Anticipating the potential risk of exposure to cybersecurity-related acts, the Chilean National Electrical Coordinator, entity in charge of coordinating the operation of the National Electrical System, has already developed the Cybersecurity Standard for the Electricity Sector.
Infrastructure development to enable electrification
Like many other countries, Chile is moving fast to find opportunities to expand electrification, which is regarded as one of the most efficient measures to limit global warming. Electricity currently only contributes a fraction of Chile’s total energy supply, close to 25 percent of the total. However, projections show that the overall share of electric power will increase, as electrification spreads in such areas as transport, heating, air conditioning, and thermal processes.
To allow this, during 2022 we will see the beginning of the development of large scale infrastructure, such as the recently awarded HVDC Kimal-Lo Aguirre transmission line project (2,000 kilometers long, linking Antofagasta and Santiago, with an investment close to US$1.5 billion). However, the growth of such technologies as smart charging, heat pumps, and electromobility will only be possible if we are able to meet the challenges in transforming the existing infrastructure, updating the grid, and adapting our households, which will require a large amount of smaller-scale projects all over the country.
Decentralization of energy will continue to grow
Energy decentralization is transforming the industry in Chile. In 2022, new energy-efficient technologies, distributed generation and storage, microgrids and demand response systems, will continue to grow. These new developments will inevitably force the system to become more flexible, creating a need for new services for the increasingly sophisticated demands of end customers.
Of particular note is distributed energy generation, which as an engine of employment and efficient and sustainable development will play an important role in the post-pandemic economic recovery, creating interesting spaces for the entry of new players in the industry.
Clearly, the electrification process that is being experienced globally in cities, transport, and industrial processes will continue to grow rapidly in Chile during 2022, alongside the strong green hydrogen agenda. Chile’s efforts to promote energy decentralization and develop technology that provides information sources that allow greater traceability will play a key role as well.
Chile is including these trends, which are already impacting the sector at an accelerating rate, in its long-term energy planning, allowing the authority to gradually provide clear, organic and dynamic regulation, set objectives and monitor compliance with them. All of this is taking place with the goal of accelerating the energy transition and promoting the end consumer as an active agent in the overall energy matrix.
Learn more about the implications of these trends for your business by contacting the author or your DLA Piper relationship attorney.