Despite its historic ties to fossil fuels and copper mining, in recent years Chile has accelerated its energy transition. With a population of just under 20 million, Chile is now targeting 80% renewable electricity by 2030 and a 100% zero emissions power grid by 2050. Last year wind and solar overtook coal as renewables now dominate the local energy sector. Containing massive lithium reserves, a metal critical for renewables, this April Chile’s leadership announced a new national lithium strategy aimed at ensuring that future mining and development proceed equitably as well as environmentally friendly. Already offering global policymakers a playbook for a successful transition towards renewables, Michael Buchsbaum reviews Chile’s emerging plans for its lithium future.
Already a renewable energy leader
Taking advantage of its sun-baked Atacama Desert, which receives some of the world’s highest levels of solar radiation, plus a 4,000 km coastline and consistently strong mountainous winds, since 2016 Chile’s rise in electricity demand has been met entirely by new wind and solar development.
As energy and climate-think tank, Ember, reports, Chile’s solar and wind electricity generation has doubled from 9 TWh in 2018 to 18 TWh in 2021. And over this four year period, annual emissions dropped by 6%, despite overall electricity demand rising by 11%.
Due to this rapid expansion, solar and wind generated 27.5% of Chile’s electricity over the 12 months from October 2021 to September 2022, for the first time overtaking coal power (26.5%).
According to a study conducted by Chile’s Ministry of Energy in cooperation with the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), due to its vast renewable potential, Chile is capable of producing more than 5,000 annual terawatt-hours of electricity from clean-energy sources, far more than the average electricity consumption in the country, which currently is less than 100 terawatt-hours per year.
Since assuming office in early 2022, President Gabriel Boric, leader of the left-wing Social Convergence party has continued to rapidly expand and accelerate the nation’s energy transition with an eye towards capturing a sizeable portion of the emerging international green hydrogen market.
The nation’s relatively predictable supply of wind and solar energy has led the Chilean government to estimate that 13% of the world’s green hydrogen could one day be produced within its borders — a hope bolstered by estimates that Chilean green hydrogen could be among the most affordable in the world.
New Lithium strategy
For the renewable energy transition to continue, the world needs lithium, particularly for batteries in electric vehicles (EVs) and electricity storage.
The International Energy Agency (IEA) estimates that lithium supplies will grow sevenfold by 2030 — which translates to opening 50 new lithium mines. But to supply enough lithium to limit global warming to 2°C, the IEA suggests output would need to explode some 40 times by 2040. And much of that lithium lies in Chile.
Already accounting for over 26 percent of current production, a study published in early 2023 by the U.S. Geological Survey states that Chile’s borders contain over 36 percent of the globe’s economically recoverable lithium reserves.
As the world’s second largest producer of this metal, Chile now wants to adopt strategies that help meet global demand while protecting biodiversity and sharing mining benefits with indigenous and surrounding communities.
To this end, on April 20, Boric’s government announced a new National Lithium Strategy, which aims to give control of the country’s industry to the state.
“This is the best chance we have at transitioning to a sustainable and developed economy. We can’t afford to waste it,” Boric said in a televised speech.
Under his plan, future lithium contracts would only be issued as public-private partnerships with state control slowly transferring from miners SQM and Albemarle, which dominate production, to a newly formed state-owned company.
Looking ahead, Boric said Chilean state-owned Codelco, currently the world’s largest copper producer, will be tasked with finding the best way forward for a state-owned lithium company.
Chile’s announcement follows Mexico’s which nationalized their lithium deposits last year, as well as Indonesia, which banned exports of nickel ore, a key battery material, in 2020.
All lithium is not created equally
Much of the world’s lithium comes from the so-called “lithium triangle” located in Chile, Argentina, and Bolivia. The area contains about 54% of the world’s lithium reserves, amounting to 11 million metric tons according to the USGS.
The world’s other largest producer is Australia, which owns 24 percent of known global lithium reserves and produces 47 percent of world supplies.
But where this lithium comes from and how it is processed into matters a great deal.
Australia produces lithium from hard rock mining, whereas Chile produces lithium from brine deposits, which are underground lakes of saline groundwater located under salt flats.
Though mining from brine operations requires longer lead times than hard rock mining, producing lithium from brines has a much lower greenhouse gas emissions intensity than lithium produced from hard rock mining.
Conversely, Australia’s lithium is more easily processed into lithium hydroxide, used in high-end batteries that include nickel, manganese, and cobalt (so-called NMC batteries).
However, lithium from brines is more easily processed into lithium carbonate, which works better in another type of battery that includes iron phosphate, so-called LFP batteries.
Additionally, since the LFP batteries that use lithium carbonate are less energy dense, they are considered cheaper and safer. They can also run more cycles than NMC batteries that use lithium hydroxide.
As a result, LFP batteries are essential to enabling electric vehicles to be accessible for middle and lower-middle-income households, as well as the faster addition of battery storage on the grid.
Reflective of this, the share of LFP batteries in total lithium-ion batteries grew from 20 percent in 2020 to a projected 40 percent in 2023.
According to the USGS, there are only about 8 operations in the world using lithium brines. Of these, Chile is by far the most important producer, holding 61 percent of global lithium carbonate in 2021.
So, while Chile’s role is important in the wider lithium sector, it is particularly vital for the lithium carbonate market.
Additionally, producing from Chile’s lithium resources also helps reduce the global reliance on problematic minerals such as nickel, which is in relatively short supply, as well as cobalt with all its associated human rights issues.
As experts at Columbia University in a recent policy brief relate, “the development of a sound and predictable policy framework—that attracts private investors while advancing environmental, benefit-sharing, and value addition objectives—could make all the difference” as Chile moves forward with its development and sustainability goals while also helping satisfy global demand growth for the lithium which is increasingly vital for the clean energy transition.