CHILE: An Introduction to Energy & Natural Resources

The New Energy Moment in Chile  

Chile is a country known for its vast energy potential. Its diverse geography and favourable climatic conditions make it one of the most suitable countries in the word for the development of renewable energy. Currently, more than 60% of its total energy production comes from Renewable Energy Sources (Energías Renovables No Convencionales, or ERNC) – a percentage that continues to rise owing to public policies aimed at promoting ERNC development, facilitating transition processes, building infrastructure, strengthening commitment to sustainability, and attracting investments. These factors are contributing to a significant shift in how energy is generated and consumed in Chile, marking a new era in its energy history towards a cleaner, more sustainable, and diversified future.

National carbon neutrality expectations 

Chile’s ERNC potential has led to ambitious energy goals, such as aiming to achieve a 100% renewable energy grid by 2050 and eliminate at least 21 coal-fired power plants by 2040 (either by closing or converting them). In October 2023, the maximum hourly share of ERNC reached 93.5% in the National Electric System.

Chile as a leader in green hydrogen 

Globally, 95% of hydrogen is currently generated using energy from hydrocarbons. However, concerns about global warming, environmental protection needs, technological advancements, and business, social and political interests all indicate a trend towards reducing this dependency. By 2050, at least 12% of hydrogen is expected to be green. In this respect, the International Renewable Energy Agency has identified Chile as one of the countries with the greatest potential to promote, generate, and export green hydrogen worldwide.

Chile has significant comparative advantages for the development of this industry – namely, high-quality renewable energy resources, abundant territorial availability, a coastline along its entire length, and consensus among authorities on the importance of exploiting this industry (with the intention of becoming a key global actor). Presently, there are more than 60 project initiatives to generate green hydrogen in the country, such as the development of new roads for machinery and the transportation of necessary components for building power plants in Patagonia (along with the transportation of the products and by-products).

However, the main current obstacles for this emerging industry at the national level are applicable regulations and delays in obtaining the required permits for its development.

Facing challenges to electric power transmission 

Chile faces major challenges regarding electric power transmission in the coming decades, including the need to expand and modernise the grid, integrate renewable energies efficiently, overcome obstacles in infrastructure construction, address geographic and climatic contingencies, and promote greater regional interconnection. Addressing these challenges requires a combination of investment, technological innovation, and collaboration between the public and private sectors to ensure a reliable and sustainable power supply. In this context, a clear and stable regulatory framework becomes crucial, as knowledge of permits, tariffs, and return on investment is essential for generating the necessary confidence to strengthen investments in this sector.

Chile stands out for addressing these demands, aiming to advance firmly to position itself at the forefront in these matters. Examples of initiatives aimed at tackling these challenges include various bills – for example, Ley que Fortalece la Institucionalidad Ambiental y Mejora su Eficiencia (Law that Strengthens Environmental Institutions and Improves Their Efficiency) – and draft bills such as Proyecto de Ley de Transición Energética (the draft Energy Transition Law).

Opportunities in energy storage 

To further advance the integration of renewable energies and efficiently manage clean energies over time, it is essential to have energy storage systems that allow for greater deployment. Chile has significant opportunities in energy storage, which can contribute to the transition to a more sustainable, reliable and efficient electrical system. Exploiting these opportunities requires appropriate energy policies to promote the development and adoption of storage solutions.

In this respect, Law No 21,505 (enacted in 2022) marks a milestone by promoting electric energy storage and electromobility. This regulation allows investment in related technology and participation in the short-term electricity market. Furthermore, the aforementioned draft Energy Transition Law also includes the organisation of a public and international tender for large-scale storage system infrastructure, with the aim of promoting energy storage in the Chilean electrical system.

Regulatory changes in Chile to promote the energy market

As mentioned earlier, Chile has various bills aimed at modernising environmental and energy regulations so as to address the country's short-, medium- and long-term challenges in these areas. The following are among them.

Proyecto de Ley de Transición Energética 

This initiative aims to propel the country towards achieving carbon neutrality goals by 2050, in accordance with the Climate Change Framework Law (Law No 21,455). The main objectives are to mitigate harmful effects derived from the climate crisis and to reduce pollution levels in different cities in Chile. The project seeks to create energy policies that enable concrete actions with specific goals, such as:

• achieving 100% zero-emission energy by 2050 in electricity generation;

• reaching 6,000 megawatts in energy storage systems in the National Electric System by 2050; and

• reaching at least 2,000 megawatts before 2030 in renewable technologies and energies (eg, batteries, pumped hydro, compressed air, liquid air).

The project aims to create a transmission system enabling a low-emission electric sector that also allows:

• facilitating more investments in renewable and clean energies;

• incorporating the goals and mandates of the Climate Change Framework Law as elements of various instruments in the General Electricity Services Law;

• accelerating the participation of renewable and clean energies in the national electric matrix through increased deployment of electric transmission infrastructure; and 

• promoting competition in the sector and encouraging the implementation of necessary energy storage systems to continue advancing in the energy transition process.

Ley que Fortalece la Institucionalidad Ambiental y Mejora su Eficiencia

In 2023, the Council of Ministers for Sustainability and Climate Change (CMSCC) approved a proposal to strengthen the environmental institutional framework contained in the General Bases of the Environment Law (Law No 19,300). This project includes changes aimed at improving the functioning of environmental management instruments, promoting citizen participation, and resolving uncertainties for communities and investors in project processing.

Major aspects of the project include:

• modifications related to the Environmental Impact Assessment System (SEIA);

• modifications to the application of Strategic Environmental Assessment (EAE);

• modifications related to liability for environmental damage; and 

• modifications related to the functioning of the Council of Ministers for Sustainability and Climate Change.

These changes aim to gather contributions from different sectors, improving environmental standards, investment security, and efficiency in project processing.

Proyecto de Ley Marco de Autorizaciones Sectoriales 

In early 2024, the President of the Republic presented Message No 293-371 to the Chamber of Deputies to initiate the processing of the draft Framework Law for Sectoral Authorisations (Proyecto de Ley Marco de Autorizaciones Sectoriales). The objective is to establish a common standard for the actions of authorities responsible for processing and approving permits with the capacity to “enable” projects in regulated sectors. This involves modifications to 37 normative bodies, eliminating instances of repeated reviews, and reducing response times from authorities.

The most relevant measures sought by this legal initiative include:

• creating a unified mechanism for entering and starting procedures to obtain sectoral permits through what will be called the “Unified Sectoral Permits Information System”;

• establishing substitute deadlines for the application of administrative silence regarding potential reports required from a particular public body by the processing authority;

• setting maximum deadlines for resolving sectoral permit requests and necessary conditions for administrative silence to operate; and 

• creating a technical body dedicated to ensuring the proper functioning, standardisation, and co-ordination of the new Sectoral Regulation and Evaluation System.

These bills are a significant step in improving our institutional framework, strengthening Chile’s authorities with the necessary resources and powers to facilitate the permit processing and approval crucial to the development of regulated markets in Chile. They contribute a forward-looking vision of simplifying bureaucracy by avoiding permit politicisation, which currently hampers our productivity and investment. They will also help improve the quality of projects, with high environmental standards that will undoubtedly attract investment and play a significant role in the country’s development and growth.