Presentación de PowerPoint - Ministerio de Energía...Ministerio de Energía | 2 Contents •About Chile •Chile energy sector •Green hydrogen GDP 2019 US $294 bn Exports US $69.7

ChileInvestment in the Energy Sector

September 29th 2020

About Chile• Chile is a country open to foreign investment, that has had sustained economic growth, with unprecedented

reduction in poverty and inequality.• It has free trade agreements with 86% of the world’s GDP and a sound fiscal position.

Chile Energy Sector• Chile has one of the highest potentials in the world to produce low cost renewable energy, with broad political

agreement on regulatory and environmental matters.• International markets and regulations will increasingly demand sustainable products.• Chile has a carbon neutrality goal with multiple opportunities to take advantage of renewable energy in a variety

of industries (transportation, industry, heating).• Chile is going to be able to provide the world with green products: mining, food and wood pulp.

Green Hydrogen Strategy• Market is estimated to be USD 2.5 trillion in 2050, half the size of the current oil market.• Chile has the potential to supply 5% of global demand for green hydrogen.• Ministry of Energy is developing a strong strategy to boost the green hydrogen industry.

Summary

Ministerio de Energía | 2

Contents

• About Chile

• Chile energy sector

• Green hydrogen

GDP 2019 US $294 bnExports US $69.7 bnImports US $65.5 bnPopulation 18 millionInflation 2019 3.0% (2000-2018: 3.2% average)Foreign Direct Investment US $18 bn (annual average past ten years)VAT 19%

Robust Foreign Direct Investment Regime

Non-Discrimination: Foreign companies based in Chile enjoy the same rightsand responsibilities as Chilean companies in the country (national treatment).

Free flow of capital and profits: National legislation allows the entry andrepatriation of capital without cost or constraints beyond proceduralformalities.

Pro-business environment: Simple tax structure / Ease to set up companies.

Committed to boost investment: Pro-Investment agenda of the Government.

In past decades Chile has experienced significant economic growth


Basic figures GDP per capita consistent growth

17.468 18.245 17.894 18.952 20.306 21.562 22.610 23.205 23.742 24.131 24.554 25.700 26.317

4,9%3,5%

-1,6%

5,8% 6,1%5,3%

4,0%

1,8% 2,3% 1,7% 1,2%

3,9%

1,1%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

0

5.000

10.000

15.000

20.000

25.000

30.000

35.000

40.000

45.000

50.000

US

D

GDP per capita (PPP) in select American Economies (1990=100)


Chile’s poverty rate & Gini Index Changes in Gini Index & poverty rate across economies

Source: Ministry of Finance

and reduction in income inequality and poverty


• First South American country to join the OECD (2010).

• Chile is among the main exporters of copper, lithium,wood pulp, salmon, cherries, blueberries and grapes inthe world.

0

2

4

6

8

10

12

14

16

18

20

Main national exports (billion USD)

Chile is open to foreign investment


Free trade agreements with 86% of world’s GDP

24%16% 6%

3%

1,5%

2%

2%

23%

1,5%

Chile has a strong fiscal position to deal with the economic crisis


Chile’s Real GDP: Actual & Forecast

Percent year-on-year

Source: Ministry of Finance. Public Finance Report 2020, Q2.

6.87.4

4.3

-0.4

5.3

3.3 3.1

4.1

7.2

5.76.3

4.93.5

-1.6

5.8 6.15.3

4.0

1.82.3

1.71.2

3.9

1.1

-6.5

5.5

-8

-6

-4

-2

0

2

4

6

8

10

1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

*Includes Chile, China and Slovak Republic.

Source: All forecasts are from the IMF’s Fiscal Monitor April 2020, except fromChile wich was taken from IFP 2Q, 2020; Dipres.

Gross Public Debt Forecast for Selected Economies

Percent of GDP, 2021

triggered by Covid-19

1. Investment push

Tax reform:

• Instant depreciation of 100% fixed assets until Dec 2022.

Facilitating private investment projects:

• 138 private projects totaling USD 24.5 billion over 2020-2022 have beenidentified and will be streamlined.

• Bidding and construction of 31 public works projects under concessions for~USD 8.6 billion, including hospitals, airports, highways, among others.

• Tendering of 114 fiscal properties.

Public investment: 2,544 public investment projects totaling ~USD 34 billionin 2020-2022 (12% of 2019 GDP).

Efforts are now focused on strengthening the economic recovery

Ministry 2020 2021 2022 2020-2022

Public Works 2,862 4,239 3,861 10,962

Housing 2,512 3,274 2,969 8,755

Transport & Telecommunications 140 128 181 449

Local governments 1,882 2,101 1,783 5,766

Sports 40 84 136 260

Agriculture 112 187 154 453

Other Ministries 2,502 2,273 2,341 7,116

TOTAL (USD million) 10,050 12,286 11,425 33,761

Source: Ministry of Finance. *Preliminary pipeline subject to review.

2. Promoting jobs

• Wage subsidy schemes in the order of USD 2 billion.

• Job training & reconversion programs.

3. Support for Small and Medium Enterprises

• Special financing instruments and subsidies.

• Technical assistance.

• Promotion of national tourism.

• Roundtables with relevant parties.

4. Facilitating & simplifying permits

• Agenda that includes 28 measures to reduce red-tape inthe preparation processes of private investmentprojects, following the recommendations of theNational Productivity Comission.

• Special focus on reducing bureaucracy for SMEs.


In The Economist Democracy Index, Chile improved its score after the socialunrest• “Owing to the willingness of the people to take to the streets, Chile

improved its score in the political participation category and moved from a“flawed democracy” to a “full democracy”.

Social crisisIn October 19, after a 3,7% increase in the subway fare, Chile witnessed asocial uprising ranging from peaceful protest demanding a fairer and lessunequal society to violent riots attacking public and private infrastructure.

Government efforts focused in:

Broad social agenda• Increase in minimum guaranteed pensions paid by the State.• Creation of catastrophic health insurance.• Increase in minimum guaranteed wage (complemented by the

State).• Reduction in property taxes for the elderly and disabled.• Reduction in subway and electricity price.• New payment plan for outstanding fines in highway tolls.

Constitutional process• Plebiscite in October 2020 to define if a new constitution must be

drafted and the structure of the commission that would write it.• If a new constitution is written, it must then be ratified in a

plebiscite.


and providing a democratic resolution to the social unrest

Contents

• About Chile


• Green hydrogen

Solid regulatory framework

Liberalized power sector with a competitive, technologically agnostic, unsubsidized &economically dispatched market.

Competitive tenders for regulated PPAs with distribution companies.

Transmission is centrally planned, and new lines are tendered. Annual plan ofexpansion reduced risk of curtailments.

Distribution as a regulated monopoly.

Oil & Gas: imports driven, free competition in distribution.

Biomass still has a large share in the energy matrix.

98%

0%

92%

100%

79%

0%

100% 100% 100%

0% 0% 0% 0%0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

-

10.000

20.000

30.000

40.000

50.000

60.000

70.000

80.000

90.000

100.000

Per

cen

tag

e im

po

rted

(%

)

En

erg

etic

(T

erac

alo

ries

)

70% of Chile's energy comes from imported fossil fuels

Chile ranked #2 on the 2019Bloomberg NEF Climatescoperanking of attractiveemerging markets for cleanenergy investments. (#1 in2018)

Attractive for clean energy investments

1,5

2

2,5

3

3,5

2015 2016 2017 2018 2019

Score in Bloomberg NEF Climatescope

#2#1

#7

#2

#3

Ranking

Enormous room to replace imported fossil fuels with cheap local renewables

creates an attractive enviroment to invest in renewable energy


Broad political and enviromental agreement

Renewableenergypotential

International market requirements

2040Phase out of coal-fired power plantsagreement.

2050Carbon neutrality goal.

-80%Reduction of solar energy costs since 2010.

70xChile's potential in renewable energies is more than 70 times its current installed capacity.

$30 USDPer metric ton of CO2 of import tax in European border scenarios.

100%Renewable energy contracts are gaining traction among industries.


Drivers to invest in Chile Energy Sector

Chile renewable potential is +70 times our current installed capacity


295587 15879 Potential(GW)

Concentrated solar Photovoltaic Wind Hydro

Renewable potential allows for change from a thermo & hydraulic matrix

44%2019

Renewableelectricitygeneration


'-

20.000

40.000

60.000

80.000

1971 1980 1990 2000 2010 2019

CSP

Diesel

Natural Gas

Coal

Hydro

Biomass

Solar

Wind

Begin

importation

natural gas

Supply cuts

natural gas

Renewables

breakthrough

Droughts and

rationing

GW

h

44% 70% 95%2019 2030 2050

GW

h

Fuente: PELP / Análisis de Carbono Neutralidad, 2019

… to a renewable matrix


Renewableelectricitygeneration

0

50.000

100.000

150.000

200.000

250.000

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

2037

2038

2039

2040

2041

2042

2043

2044

2045

2046

2047

2048

2049

2050

Diésel

GNL

Carbón

Batería

Bombeo

Solar CSP

Hidro

Biomasa

80%Reduction of solar energycosts since 2010

Tenders average price (USD / MWh)

Regulated clients tenders resulted in price reduction


101

90

131

129

108

79

48

33

0

20

40

60

80

100

120

140

2008 2010 2012 2013 2014 2015 2016 2017

US

D/M

Wh

due to renewable energy potential + cost decreases












Energy accounts for two-thirds of greenhouse-gas emissions

Change of observed and modelled temperatures (°C)

Anthropogenic global warming estimates

Carbon Neutral Scenarioto 2040

Carbon neutral scenario to 2055 without non-CO2 radiative forcing reduction

Carbon Neutral Scenarioto 2055


International market demands greener products

• Since 2017, PPA contracts are being renegotiated to shift supply from coal to

renewable generation. This is a growing trend throughout the industry.

• BHP recently announced they will prepay $840 million to terminate a coal

PPA with AES early.

• The reduction of coal-fired PPA contracts is expected to be 60% by 2025 and

90% by 2035.

Coal PPA volume in MW


Renewable PPAs contracts are gaining traction












Coal-fired power plant phase out agreement, an enabling measure

‐ By 2040 Chile will close all coal power plants.

‐ In 2019, coal represented 37% of the total

gross generation of the electric system.

‐ Three plants have been withdrawn since June

2019, and today there are 25 plants with 5200

MW.

‐ By 2024, 1731 MW will be withdrawn, 31% of

the country's coal-fired generation capacity.


Just Transition Strategy to take care of:

‐ Unemployment

‐ Local communities

‐ Existing infrastructure

‐ Environmental impacts

22

Transversal political agreement to reach Carbon neutrality 2050


Carbon Neutrality plan

Energy sector at the heart of the mitigation

0

40

80

120

2015 2020 2030 2040 2050

MM tCO2e

Reference scenario

Carbon-neutral scenario 50%

(6

5 M

MtC

O2

e)50

%

(65

MM

tCO

2e)

130

65

Industry (25%)

Coal phase-out (13%)

Energy efficiency (7%)

Additional forest capture

Forest capture

Sustainable building (17%)

Electromobility (17%)

Hydrogen (21%)


With economic benefits for the country

Investment and benefits of carbon neutrality (NPV)[Million USD]

• Net values calculated as the difference between reference scenario and carbon-neutral scenario.

• Does not include offsetting or emissions trading market.

• Does not include co-benefits for local emission reductions and health improvement effects.

• A discount rate of USD + 6% was used.

-41,300

37,100

-50.000

-40.000

-30.000

-20.000

-10.000

0

10.000

20.000

30.000

40.000

50.000

Inversión Ahorros O&M Beneficios

+78,400


BenefitsO&M SavingsInvestments

Opportunities in generation, transmission and storage

More than 20 billion USD of renewable projects under development

New generation and transmission to 2050

Wind

Hydro

Solar CSP

Solar PV

Technology:

43%

47%

8% 2%

Preliminary statusUnder

evaluation

Under construction

22,627MM USD

Environmentally Approved

40%

33%

19%

8%

Wind

Hydro

Transmission

Solar22,627MM USD

Estimated investment of over 4,500 Million USD in expansion projects

Transmission expansion projects

Expansion plan Expansion projects

2017 60

2018 68

2019 67


Source: Long Term Energy Planification, Ministry of Energy 2019

2021 will be a record year for new renewable projects


0

500

1000

1500

2000

2500

3000

3500

4000

4500

MW

New capacity per year (MW)

Thermal1%

Hydro14%

Wind34%

Other renewables

4%

Solar47%

2021 new capacity by technology

0

200

400

600

800

1000

1200

1400

1600

1800

dic

-14

jun

-15

dic

-15

jun

-16

dic

-16

jun

-17

dic

-17

jun

-18

dic

-18

jun

-19

dic

-19

jun

-20

Buseseléctricos

Híbridos conrecargaexterior

Autoseléctricos abatería

Low cost of electricity will fuel the penetration of electric vehicles


Electric vehicles

Plug-in hybrid

Electric buses

Electromobility growth in Chile

Main Public Policies

• National Electromobility Strategy (2017):• 100% of urban public transport vehicles are electric by 2050.• 40% of private vehicles are electric by 2050.

• Energy Efficiency Law, currently under discussion in Congress,will set the energy efficiency standards for the fleet of newvehicles.

1st largest e-bus city fleet (Santiago)Outside China’s cities

Opportunities

• Tenders for public transport network• Electric buses fleets.• Charging stations.

• Taxi/Shared Taxi/Commercial Fleets• Taxi renewal programs, with subsidies for electric vehicles.• E-mobility incubator & heavy duty vehicle programs.

House size:

81m2

Price of firewood

$45 - $70 m3

Discounted rate:

0,151 USD/kWh

Electricity will also help reduce pollution for 1/3 of Chile´s population

Rancagua urban area - example


$93

$95

$135

$142

$204

$272

$317

$441

$448

$449

$93

$146

$135

$220

$225

$272

$351

$441

$453

Split inverter with discount

Firewood

Split Inverter

Kitchen firewood

Natural Gas rediators

Pellets

Open flame Natural Gas

Electric heating

Kerosene

LPG heating

Annual average cost of heating (USD)

$607

Contents

• About Chile


• Green hydrogen

CommoditiesHydrogen is produced through seawater by means of electrolysis generating gas on a large scale.

1 2 3 4

Renewable EnergiesThe electricity obtained through clean energies is used to break down the water molecule.

ElectrolysisThe molecular components are separated by the process of electrolysis.

StorageThe hydrogen is then stored in special facilities and containers such as gas.

• Hydrogen is the most abundant element in nature.• Hydrogen can be obtained from natural gas (called gray and blue hydrogen) or from water (green hydrogen).• The H2 molecule has a high energy density per unit mass (3 times more than gasoline and 120 times more than lithium batteries).

Green Hydrogen

O2 H2 H2 H2

Source: ECN.


It would mean up to US$ 500 billionin global investment by 2030Imports are replaced by local production

Does not need much waterLess than 1% of the water used by mining could replaceall its diesel consumption

Cost depends mainly on renewable energyBetween 50 and 80% of the cost of producing greenhydrogen is electricity.

Higher energy density than lithiumbatteriesComplementarity for other cleansolutions

As safe or safer than other currentlyused fuels

Only emits water vapour when used

Key concepts

of Green H2


(Source: McKinsey & Co)

Hydrogen applications are close to mass development

transport will be the next wave


1. Defined as sales >1% within segment 2. Market share refers to amount of production that uses hydrogen and captured carbon to replace feedstock.

3. DRI with green H2, iron reduction in blast furnaces and other low-carbon steel making process using H2.

4. Market share refers to the ammount of feedstock that is produced from low-carbon sources.

5. Commercialization data for France adjusted from global roadmap un acoordance with ramp-up date.

2018 2020 2025 2030 2035 2040 2045 2050

Start of communication Mass market acceptability1

Industry(feedstock)

Building heating and power

Transportation

Industry energy

Power generation

Forklift

Medium and large carsCity buses

Vans Minibuses

Coaches

TrucksSmal Cars5

Trams and railwaysPassenger ships

Synfuel for freights ships and airplanes

Refining

Ammonia methanol

Production of methanol

Descarbonization of feedstock4

Steel3

Hydrogen blending

Medium/low industry heat High –grade industry heat

Capex decreases 76% for electrolyzers, due to scaling,

learning curve and technical improvements.

Efficient size is increased from 2 MW to 80-90 MW.

Plant factor of 28% for generation.

Efficiency improvement from 64% to 70% in 2030 results

in lower electricity consumption and less capacity

required.

O&M costs are reduced by following equipment and

learning costs to operate.

PV solar energy cost falls from 31 to 19 USD/MWh

assuming direct connection to H2 production. No

transmission cost.

Cost reduction for H2 with electrolysis connected directly to

a solar or wind power plant in Chile(Source: McKinsey & Co)

2020 Capex 2030

5.9

2.5

0.7

0.6

2.0

0.2

-67%

Efficiency others Energy costs

The cost of green hydrogen will fall by 2030

due to reduction in Capex


Global energy demand supplied by hydrogen, PWh(Source: McKinsey & Co)

18%final energy demand

6 Gtannual CO2 abatement

$2.5tnannual sales (hydrogen and equipment)

30 mjob creation

2050:

By 2050 it is projected to be half the size

of the current oil market

2015 2020 2030 2040 2050

2 34

8

22

3

3

5

3

6

3Generation, storage

Transportation

Residential heating and energy

Industry

New Uses

Existing Uses


Chile appears as the most competitive producer in the world

(Source: McKinsey & Co)

Cost of green hydrogenin different regions,in USD/kg in 2030:

USD 1.5-2/kg

USD < 1.5/kg

USD 2-3/kg

USD > 3/kg


Renewable Energy Transport Vectors

Liquid green hydrogen

Green copper and other minerals

Green Ammonia

Methanol/ Synthetic fuels

Wine, salmon and food.

Chile to Japan & Korea

Chile to U.S.Australia to

Korea & Japan

Rusia a EuropaNorway to

Europe

Middle East to U.S.

Middle East to Europe

Distribution

Production

1.2

2.2

1.5

1.4 2.0

1.1

3.52.9

Import TerminalShippingLiquefaction

0.20.70.5

2.5

Cost of liquid H2 at destination port in 2030(Fuente: McKinsey & Co)

Global H2 transport routes

Wood pulp

1.4

Chile will be able to export renewable energy

through the products it sells to the world

LH2

Cu

NH3

CH4OH


Potential market for Chile 2050:

• Capture 50% of the Japanese and South Korean market, and 20% of the Chinese market.

• Production of 25 million tons of H2 per year.

• More than 30 bn USD of income per year.

• 5% of global hydrogen demand.

• 1% of global energy demand.

6 keys to produce on a large scale:

1

5 2

34

6

Positive and stable regulatory

environment

Financial investorsTo invest in the disruptive Latin American energy market.

Engineering and technologyContribution for design, construction and operation.

Electricity provider / developer

Existing or new.

H2 productionResponsible for operating

the process.

Buying group (offtaker)Actors who create and lead the partnership to ensure demand volume.

(Fuente: McKinsey & Co)

Chile can provide a significant part of the world’s green hydrogen

must coordinate value chain actors


Green Hydrogen Strategy with a participatory process: political leaders, experts,

academy and citizen participation.

Promotion of pilot projects: follow up of more than 15 pilot projects.

Regulation: we identified the gaps and are drafting the required regulation.

National Green H2 Strategy

to boost its development


International cooperation: Germany, Japan, Australia, Singapore, UK and others.


“Countries categorized as hidden champions, like Chile,typically demonstrate fundamentally unexplored renewableenergy potential framework and sufficiently stronginstitutions - that are often underestimated in the generalperception of Latin American countries”

“Power to X could readily become a serious topic if facilitatedappropriately. These countries may well be in the lead in themarket penetration phase, fostering the development ofPower to X technology”

(World Energy Council, 2018)


https://www.greenh2summitchile.com/

https://www.greenh2summitchile.com/

ChileInvestment in the Energy Sector

September 29th 2020

Documents

Presentación de PowerPoint - Ministerio de Energía...Ministerio de Energía | 2 Contents •About Chile •Chile energy sector •Green hydrogen GDP 2019 US $294 bn Exports US $69.7