Chile’s Copper Mines: An Investment Hard-Wired for Climate Resilience?

 

By Joseph Kirschke

It’s no coincidence that Chile, the planet’s leading copper exporter and home to some of its most intense geographies, is also one of the world’s fastest-growing green economies. But as global commodities markets rebound after a years-long slump, it will soon become something more: a climate-rich investor opportunity within COP21’s $13.5 trillion commitments.

In 2010, Chile faced an energy crisis: officials struggled with blackouts and mass protests while electricity grids were 65 percent dependent on fossil fuel imports. These days, Latin America’s sixth-largest economy is the destination for over 50 percent of the region’s clean tech investment. And Chile’s copper industry – which exceeds half of exports and 20 percent of GDP – has been playing an integral role.

Copper is one of the most important metals with myriad uses – from construction, railways and heavy machinery to power transmission and telecommunications to semiconductors, microchips, photovoltaic cells for solar panels and other high-tech applications. Moreover, alongside other "base metals" – encompassing iron ore, nickel, zinc aluminum and tin – the red metal is elemental to the world economy.

It was also the core of the greatest commodities super cycle in modern history, when much of China and India grew beyond recognition from 2000 until 2013 as global energy prices soared 260 percent. In the lean times since, mines worldwide have been working to streamline billions through wind and solar power – and Chile’s are on the cutting edge.

As one of the world’s first countries to privatize its energy industry, Chile’s high-quality infrastructure and progressive, investment-friendly government are enabling a ripple effect. In December, for instance, reports emerged that alternative energy use by mines is prompting fossil fuel suppliers to consider using renewables as well.

With 261 projects in the pipeline, Chile has also announced 60 percent of the energy serving Santiago’s subway system, Latin America’s second-biggest, will be solar and wind-driven by next year. In total, Energy Ministry officials have a 70 percent clean energy target by 2050 and want to extend the national transmission system to neighbors including Argentina, Peru, Ecuador and Colombia.

Extreme geographies have accelerated the narrative. The Atacama Desert of Northern Chile, 10,000 feet above sea level, most notably, hosts one-third of the planet’s copper reserves. And mining for copper has been a traditional strain on the region and the country – consuming 30 percent of national energy supplies.

But installations like the 2,620-photovoltaic (PV) one covering 36,000 sq meters at Codelco’s Gabriela Mistral mine are shifting the landscape. One of the world’s biggest solar projects, it generates 51,800 thermal megawatt Hours (TMh) annually, supplying 85 percent of the mine’s energy, in lieu of trucking 67,000 barrels of diesel to one of the world’s highest elevations.

Cerro Pabellón became South America’s first geothermal plant this year after the site was discovered by Codelco workers testing for water. The 48-megawatt (Mw) project now delivers electricity to the grid with a 165,000-household capacity – while underscoring Chile’s seismic “Ring of Fire” potential.

During construction by a subsidiary of Italy’s Enel Green Power and a state-owned hydrocarbon firm, meanwhile, local businesses grew nearby for the transport, food and other needs of 800 onsite workers. The nearby community of Ollagüe already enjoys solar-based electricity from another partnership between Enel and Phoenix-based mining firm Freeport McMoran Inc.

Other commercial industries are thriving within this growth. In particular, Google’s Chile unit now gets 100 percent of electricity from 776,000 solar panels in the Atacama which can electrify 250,000 homes. The El Romero plant, one of the largest and built by Spain’s Acciona Energy, powers a data center along with offices in Santiago. El Romero is grid-connected and covers 16 million feet and has created 900 jobs.

Chile is also turning to wind with a 52-project pipeline. One of its largest current installations is the 115-Mw El Arrayán Wind Farm co-owned by Antofagasta Minerals and built by California’s Pattern Energy. In a coastal region 250 miles north of Santiago, its Siemens-produced turbines serve 200,000 homes annually.

New regulations have been critical, along with growing distribution -- including a 1,865-mile transmission line underway connecting Northern Chile to the rest of the country. Timing is important: Chilean mining officials, for one thing, forecast industry-driven energy demands to increase 53 percent in 2026.

But it's technology and capital inflows from China, which consumes 90 percent of Chile’s copper and is also the world's clean energy leader, which will be a true game-changer. In addition, Beijing’s “One Belt One Road” initiative, a multi-trillion-dollar road, rail and infrastructure initiative impacting 60 countries, coupled with domestic growth in a nation of 1.3 billion, mean Chile’s copper is an increasingly solid bet for investors.

These include Chinese mining companies as well as other financiers from the mainland privy to the clean energy challenge their own country shares with Chile: namely, a lack of transmission lines, allowing power from solar and wind in interior provinces go unused rather than connecting with teeming cities like Beijing and Shanghai.

The U.S. is tied to Chile’s clean energy sector, too. In particular, the Colorado-based National Renewable Energy Laboratory (NREL) is collaborating with Chile’s National Commission on Energy to establish a renewable energy center as a clearinghouse of information, capacity building and finance expertise for the entire region.

Chile is a pioneer in a region leading a global transition to a low-carbon economy, with 53 percent of capacity from renewables versus a world average of 22 percent, reports the International Energy Agency (IEA). This is unsurprising: Polls have cited 80 percent of Latin Americans deeply concerned over climate change effects, including droughts, flooding, storms and glacier erosion.

And while the White House continues to defy such evidence – along with the international community, economic sense, and its own military – Chile’s mines and pioneering clean energy have a story to tell.

It’s worth a listen.

Joseph Kirschke is a Consultant for Energy Shift, an initiative accelerating clean energy use by mines which share electricity with local communities. Energy Shift is sponsored by RESOLVE, a leading Washington non-profit.