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Francisco López

Undersecretary of Energy

Ministry of Energy, Chile

June 17, 2021
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Ep 30: Francisco López - Undersecretary of Energy, Chile
00:00 / 01:04

Adam Zuckerman
Welcome to the Energy Impact Podcast. I'm your host, Adam Zuckerman, and today we have a fantastic guest joining us today from Chile. It's Chile's Undersecretary of Energy, Francisco Javier López Díaz. Francisco, it's wonderful to have you today.

Francisco Javier López Díaz
Thank you very much, Adam. It's a pleasure for me also to talk about this fantastic topic: energy.

Adam Zuckerman
Let's hop in. Tell us a little bit about your background. How did you get to where you are today? It's a prestigious position, a lot of influence, a lot of shaping of the country's policy. How did you get to where you are?

Francisco Javier López Díaz
First of all, I'm a lawyer and I'm also married with three kids. I started in the Pontificia Universidad Católica de Chile and also I have an LLM in the Northwestern University in in Chicago, and also with a special program in Kellogg, a management program in Kellogg. All my career has been close to the public policy. There were three areas. I work in a few central think tanks related to a think tank steering team, and working with different areas, but specifically we deal with regulatory areas. Then, during the first government of President Piñera, I worked in the ministry, the budget office here in Chile. And from 2019, I'm the Undersecretary or Vice Minister of Energy hear in the Ministry of Energy. Also, I worked for one and a half years in the Ministry of Public Works related also with these topics of regulatory areas.

Adam Zuckerman
You've matriculated yourself around the government in multiple different capacities. You have a very strong understanding of what's happening in the country, and as a result, when you have events like what just happened last week in Chile - congratulations on the successful hosting of the 12th Clean Energy Ministerial and 6th Mission Innovation Conference - you're able to really dive in. Now, we'll revisit the conference in a few minutes, but do you have any quick takeaways of what happened last week?

Francisco Javier López Díaz
It was a fantastic week for us. We hosted the CEM and MI. Both events, international events, are the most important events related to renewable energies and we had conference of a first level - Bill Gates, the IAEA, different ministers and actors from different countries. It was an excellent place to talk about this topic that is fantastic, that is energy. Also, we have places to see the opinions, to see companies, to see different projects and it was a ... We spent many months in preparing the site, we prepared the space. I think we we had the opportunity to share, to talk, and to see what is happening different places in the world and also to tell you the same pathway to carbon neutrality, renewable energies, and also how energy is changing the world and is changing the quality of life and the goals that we have for the next years, next months, and see and hear what is happening in different countries in Europe, America, USA. To hear Bill Gates and different people was a great, great opportunity to to discuss and to have this event here that was hosted in Chile was a remarkable experience for all of us. I think that the consensus was that the event was a big success. I prefer the in person events, but under this this circumstances, was excellent, was great, and was the opportunity to also make a change in the way that this kind of thing is made. I also have some space on the side to share, to make networking, and we try to bring to the web what is happening in this event in a real or professional event.

Adam Zuckerman
It really was an opportunity for Chile to showcase what's going on in the country. It's the first time at this conference has ever been held in South America, and for a country that is so well-positioned to make change, the idea of bringing everybody together from both government and private industry and public entities to collaborate is wonderful. Now, we have a bunch of international listeners. For those of you who are unfamiliar with the landscape of Chile. Here are a few quick facts. It's a country that's in western South America. It has the Andes Mountains to the East and the Pacific Ocean to the West. It's a population of just over 19 million people. The length of the country is one of the most interesting things about it. It is wider - or it is longer - top to bottom, North to South than America is East to West, but we'll get back to that in a second. Now, the energy ecosystem is somewhat unique because of this landscape. What should people know about Chile's energy landscape and its ambitions? You gave a great description about how is Chile. Today, renewable energy accounts for 46% of delivery to the grid. Mostly hydro, solar and wind power, and expect to reach 70% by 2030 and 95% by 2050. Also, we have a large desert, the driest desert in the world, the Atacama Desert in the north part of Chile. It's a desert, it's dry, and it's difficult to live there and, until some years ago, was hard to make any a commercial exploration there only mining. But now we can see that, in the Atacama Desert, we have the best solar radiation in the world to develop energy projects. And also in the southern bank of Chile, in the Patagonia region, we have a windy city, these are Windy City in the Marianas and these are... higher than 70% to the wind power plants. So, we have, in the different parts of Chile, different kinds of different resources. Indeed, central, central south, we have hydro, a lot of rivers and we can develop solar, wind, and hydro energy. Last year, in Chile we committed to phasing out all the coal-fired power generation by 2040 and to achieving carbon neutrality by 2050. We have the challenge of incorporating renewable energy for this, a goal that we set, energies like solar or wind into the grid of... We are working on that. We're working to develop more projects to have more of foreign investment in Chile, and also to phase out the power plants. It's a great goal which, at the beginning we set a goal by 2040. This said 2040, it's still there. But a few months ago, one month ago, we made a new announcement that 50% of the carbon in the coal-fired power generation will be phased out by 2025. We are advancing- -2025?

Francisco Javier López Díaz
Yes, 2025, we're advancing. And I think that 2040 is a good goal, but we're working to have already done that.

Adam Zuckerman
You're pursuing a very ambitious target. Is the government working both with entities that are in the industry and also taking innovative steps from without, but within the Ministry itself, what are the specific steps and how are you defining the goals? Are there specific tenants, so four different buckets so to speak? Or is there another approach that you're taking? Yes, our main goal, mainly, in the Ministry of Energy is the carbon neutrality by 2050. Why energy? Because almost 75 or 80% of the emissions are related with energy. So, we have huge and very ambitious plan and almost all the different areas or the development that we are having in this Ministry is related to the carbon neutrality. We have four pillars. The first pillar of a way to achieve carbon neutrality is the internal development of renewable projects and the phase-out of a coal-fired power generation plants. Second one, electromobility. It's very important to have more movement here in Chile and to improve the development of electromobility in my country. The third one is energy efficiency. It's the most important An action that we are taking to reach carbon neutrality is energy efficiency, and also green hydrogen, the development of grid hydrogen. The goals that we've set for Chile for the next - maybe we can talk later about that - but our goal is to be the producer of the cheapest green hydrogen in the world by 2030. By these four main actions, each of these actions has many, many different or several actions included to reach carbon neutrality. Also, we have our social area here in the Ministry to reach or to get that the other people know that all the families in Chile has electricity 24 hours in a week with a good quality. In Chile, more than 99% of the families has electricity. But we have an important plan to get this... for 24 hours electricity. What are some of those challenges? If you have 19 million people in the country and 99% already have reliable access to energy, what are the challenges to get the last 1% on board? It's to have different options or different mixtures to get there, because the best partner to get these families electricity is renewable energy. I have visited people from the north and almost within the limits with Peru or Bolivia, with solar panels, now they have electricity 24 hours. But also, I have families in the Patagonia where it rains a lot, where it's cold, but they where also with a solar panel they can get electricity 24 hours. Yeah, so I think that the best partner, the best way to get that all the families from all the people in Chile has energy is with renewable energies. Also, we are working with expansion of lines and other ways, but I think that this last 1% or less than 1% is the most hard to cover and we are working on investment and investing money - public money, private money - and also getting public private partnerships to get these families good energy. It is the work that we have made, because it's needed for these times. I think it makes sense. As you go through those four pillars, the first is is very well known. We need to get the country moving away from coal-fired facilities. How much is the generation capacity for coal-fired in the country right now? It was about 50% or 60%, but now we are getting the renewables and this year, only this year, six gigawatts of renewable energy will introduce in the system. Six gigawatts for Chile is a huge amount. It's the same amount that we have developed in our history in renewable energies. So, this year is a key year for the developing of energy and will help us to change the energy. If we looked at what happened in Chile 20 or 30 years ago, we had an energy matrix hardly related with the hydro, but then we had drops and we had to a start to the importation of gas coming from Argentina, natural gas. There are two lines that connect the two countries correct? Yes. We had some troubles in the early 2000s and we the gas was cut. We have to make a change and we expanded the generation in diesel petroleum and then to coal. Then we have a serious problem of how we can produce the energy for the development of Chile. So, now when we see what is happening or what happened in the last five or seven years, now we are having a tremendous amount of energy or energy projects under development and under construction or are working there right now. It's a change that, not only can change the face or the way that we that where we get our energy, it's a way how we can change our country. Because we are changing, we are developing and we are working to help. We are focused on sustainable development. We are seeing how we can produce different products, green products. For example, when we changed our generation matrix, now we can change our mining. We are thinking to start in next year green mining and have a green tourism, to have green fishing. So, we're changing our country and we hope that, in the next year, we can see a huge transformation in Chile as we transform Chile into a sustainable country. And that goes to the second pillar. You talked about the National Electromobility Strategy. Well, many people don't realize that Chile actually has the largest fleet of electric buses outside of China anywhere in the world. You have more than 800 in operation now. The original tender I believe was for 2,000. How does electromobility impact the country? Is it a small percentage and it's more of a signal of what the country is producing? Or is electromobility something to really change the fundamental tenor of how the country approaches energy?

Francisco Javier López Díaz
Chile has the production, it's not only important for the environmental areas, Also, Chile is a great producer of copper and lithium, which are very important products to produce the electric cars. In 2017, we launched the National Electromobility Strategy and the objective of which was to outline the actions that Chile must take in the short and the medium term to ensure that 100% of the public transport vehicles are electric by 2050, now it's 2040 and 40% of the private vehicles are electric at the same year. Now we are working to update this say this electromobility strategy. Our focus is to get the conditions in the market, get the regulatory conditions, and work to prepare the cities, their roadways, and to prepare all the country. I think that is happening and will happen. For example, we are working now to promote interoperability of the charging system for electric bicycles in the public network. As you mentioned, Chile has the largest fleet of electric buses and last week we announced that Arica, in the northern part of Chile, will be the first regional city, the first city in Chile with a total electric fleet of buses, public buses, in Chile. And next week, the Ministerio de Transportes will get a new announcement about that. Also, we are working some programs to develop that. It is closely related with the carbon neutrality plan and that's something we're gonna take. We'll launch, for example, a program that is called Mi Taxi Eléctrico, My Electric Taxi. It's a program with a subsidy for taxis. From the Minister and with an agency that is related with the Ministry, we provided 50 electric cars, creating demand, and we get 20% of this count of the of the taxes and also, under this price, we are a a giving subsidy to the taxes. We will have, in the next weeks, the first public fleet of taxis in Santiago. Now, we are working to develop this same program in different parts of Chile. At the same time, essentially to promote the durability in the private sector, we had a public private agreement of electromobility. Some weeks ago, we have the fourth version of the this agreement which had the participation of almost 70 signatories from the companies and public institutions. This agreement aims to foster electromobility initiatives through actions and projects that contribute to share the benefits of electromobility and the fostering of this kind of technology in the short term. I mentioned the electric taxi and also we are working differently. One of the main focus is to prepare the regulations to be ready when the the price of the electric vehicles and the combustion vehicles get they guarantee we will be prepared for that. But now we are working very close with the fleet of auto they the fleet of cars or fleet of companies that now is economically convenient to be electric.

Adam Zuckerman
Now, when we talk about the pursuit towards a carbon neutral economy, it's important to note that everything takes place within a framework that's set by the government. Have you seen the priority of the government change over the last decade as it relates to energy planning? We can see that now. The carbon neutrality is not only ambiental necessity. It is also a social, cultural, and economic demand. From the study that we made in Chile integrated to be carbon neutral, we can see, and we show, that it's good economically for the country to be carbon neutral because we have large or mixed spaces which work for investment, to attract foreign investment, and to develop capacity here in Chile. So, it's not only ambiental or social importance. It's also economically good for our development. So, we can make a huge difference about that, because now all the different interests are aligned to this focus. Do you think that will shift even further in the upcoming years? Or do you think there is already widespread acceptance of that fact throughout the government and the populace? I think that, in the next years, we can, and I hope that this happens, we can advance in a faster, positive way in the the next year. Now, we are having the basis, a solid basis to bring and to build about that, but I think we need the efforts of everybody, not only in Chile, but everybody in the different places. And as I mentioned recently, I think Chile has the capacity, has the natural conditions to lead in South America, in America, to lead this process. Let's talk about that. When we talk about policy and the theoretical, this is the framework we want to operate in, the reality is that impact is seen and realized in actual development. So, let's talk about infrastructure and project development in Chile. And it's a wonderful topic. Now, we spoke a little bit about the geography earlier. The stats are thus: from North to South, Chile extends 4,270 kilometers, it's 2,600 miles and change. But it's very small East to West, only about 110 miles or 177 kilometers. Now, that's a very small sliver of a landmass East to West, very long North to South. How do the environmental factors affect power development in the country? Is there a challenge to transmission infrastructure, the development of renewables, are some areas more prone to earthquakes than others? Where do you start?

Francisco Javier López Díaz
Yes, it's an excellent question. We are, by the geography of our country, almost every place is close or relatively close to a port or a sea. For the reason this is excellent for export, for other products wind, hydrogen, mining and other ones. But we have a huge challenge that is transmission, because we have are changing the way, as we talk, it's changing the way that we produce the energy. It was common to install our power plants near or closer to the big cities, or closer to the places where the energy is consumed. Now, we have to go to the places where it's located the best a natural conditions to produce the energy. So, we have a challenge, not only the development of the project that has a different kind of challenge, for example, the environmental challenge. The relation with the community is a challenge, is a huge challenge that we are working on. We are working together from the Minister of Finance, but also we have a big challenge related to develop and to build transmission lines that help us to transport all these amounts of energy. Now, we are under the tendering process of the largest line in Chile, ... and would help us to transport three gigawatts from the North to the central part of Chile. But together with this big project, we are also working with the development of the smallest project, as the projects that we are built or developed close to the cities, ... until nine mega and also the generation is very important. We have programs here in Chile to show that the energy is not only for the big projects, it's also for the smaller projects. For example, the... we are working to decentralize the energy system and making the households part of this process and this has been an important part of the this work. This project they will launch just last year to install solar panels on individual houses, so medium incomes in Chile and this initiative received more than 70,000 applications and plans for the leader in this year many projects in all the different regions in Chile at the same time. Yes, it's a program that I love, because it's the best way to show that the renewable energy is not only for big plants or big projects. It's to show that this kind of these project, finance can help the transition that we are leading in Chile and with areduction in the bills. So, it's a win-win for everybody money and the government has to help to develop these types of initiatives. For example, with the first meetings that we made, or first timeframe that we made for this project, because we are tendering employees by different regions or different zones of cities, we get a 37% of these codes discount of the installation of deployed. So, we are creating more competence and we are getting that the prices of the these kinds of offerings decrease. So, it's also a very good initiative. Together, with this frame, we also launched last year a program called "put energy to your company." The proposal is to support the small and medium enterprises with a reduction in their energy bills through the implementation of energy efficiency measures and the use of renewable energy was also a success. And we are working to get more resources to land and another goal for this program.

Adam Zuckerman
Now, let's talk about the the actual structure of how the companies interact. Is Chile's energy ecosystem unbundled, can there be independent power producers? If you own your own company, can you have embedded generation of solar on your roof if you like?

Francisco Javier López Díaz
Yes, energy may be similar to our country, but we have three different a area I've seen that negative iteration is a competitive sector and under any proposal by private companies, they have to be pro private companies transmission is although it is also a sector that where the private companies develop the and develop the projects that the Minister of Energy the commission as well as next year, we're now led through to the site we decide to quantifications transmission by a process that is regulated on a on a law and all these processes giving a better way is developed by the Ministry, but are a private companies that have that make offer them develop the display and the distribution sector is actually someone locally to me is also a only yes the only private companies or small comparative a companies working in this sector by now, we are we were sent a bill to the to the Congress to make a change and to separate the bar that is that is a that is a monopoly that is the lines the wires the transmission into the fees and to open come a competition in the district with distribution a our focus is to improve the quality of service is to give the possibility to the families to decide where to buy energy and what what kind of energy they want to buy. For example, a family wants the prefer to buy only renewable energy will choose will have the possibility of choose where to which company they buy energy of for example, if this is a family that is not a during the day for example, in the in the house, not now because we are here but then it but it is the people he over funding is nothing during the day and they only are in their houses in some hours of the day they can decide that they can have some a hours to a better prices or for the site.

Adam Zuckerman
How granular is that ability to choose? Can you say I'd like to only purchase electricity or energy from this company or can you say I only want solar, I only want hydro.

Francisco Javier López Díaz
You don't have the possibility. Also the clients a ... can choose now they in the in the distribution sector people can choose because it's they sell monopoly. And with this bill with this point we want to open the market, we want to open to have different ways or different options, where we will come to for example, as you mentioned, I want only to buy a solar energy, I want to, I want to only buy energy or coming from I don't know a renewable energy, hydro. I so we will give a new space of competition and new space of of liberty where the families will be the protagonist of the interview. Now it's not it's not possible. But a we saw that in different places in different cities in UK in many states in US now it's possible now within the where material to make this change and to to make the change that the distribution sector needs. The distrubution sector in Chile has not been has not having a big changes in the last 40 years. So I think that it's time to make this change.

Adam Zuckerman
Now let's talk about what happened last week. The Ministry of Energy announced via the minister Juan Carlos Jobet that you are creating to large scale green hydrogen valleys and it's not only just Chile but it's also in partnership with Australia with the UK with the EU. What is a hydrogen valley?

Francisco Javier López Díaz
A place where we can join renewable energies a with the development with electrolysis and to produce a green hydrogen you have places in Chile I mentioned places in the northern part where the energy can be generated in that very cheap, very cheap price. We have seven times a capacity to produce energy and the energy we can consume here. So we need to export we need to produce Do we have the capacity to, to to export energy and the best way we think that the best way to export energy is by a hydrogen, ammonia can all the rebates so we're working together with a with different companies, private companies to make this development in Chile now we are we have more than 40 a pilot projects under development one of them in the in the Patagonia nine the Magallanes region was approved by the a by a one of two months ago and is advancing in their process. We need more projects, we need more energy, but we need that though all these projects will be in a language a with the law with governmental process and the work with the communities. And I can see the future of Chile is a green future.

Adam Zuckerman
Now with 40 projects under development right now one of the questions that I have to ask is, how quickly can they be developed? Is Chile a country that is bogged down in red tape? So what might seem simple actually takes a decade to do or is there an accelerated process right now, where if it's green technology, it can actually move through very quickly.

Francisco Javier López Díaz
We want to accelerate and accelerate the process. And also, we launched some, one or two months ago, funding for $50 million from the for a from we'd call for to fund a project of green hydrogen in Chile. Also, we are working with the different agencies that are related to with a with a review on the approval of the audit of the projects, to to to be sure that they have the capacity to review these kinds of projects and to undertake those projects be review on time. So, we are creating all the conditions that Chile has the capacity to to receive this project to approve this project to and also to build and start to produce green hydrogen in the in the next month next next years we have a goal that by 2025 we have a idea of what all choices capacity and by 2030 has the cheapest a green hydrogen in the world. We are not the closest country to the to Asia or not the closest country to... but we can be cheapest a electricity engineer and also we are very close that where we could produce the energy or the green hydrogen to the port so the shipping is really fast. But the key in Chile is the is the cost of energy.

Adam Zuckerman
And there's one project specifically which has always caught my eye It's the world's first integrated efuels plant Haru Oni it's amazing Can you share with the listeners what Haru Oni is?

Francisco Javier López Díaz
Yeah. That is in the in the in south part of Chile. If the this project they say is advancing is a project that will produce agreen hydrogen and then to produce a green fuel and to export the a one of the partners of this project is Porsche. And is a project that is more advancing that environmental process and is located in in Magallanes as I mentioned, Magallanes is a windy city, windy place in the in Patagonia and has the capacity to produce energy but it's not interconnected with the central part of Chile because it's it's it's very far and hard to to build lines to interconnect Santiago with Magallanes and so the almost all the energy that they can be producing Magallanes can be used a to export on to produce green hydrogen and is a fantastically a project that is a we are following and we are working very close to today.

Adam Zuckerman
But it's absolutely amazing as synthetic fuels for automobiles even for planes with the announcements recently from boom, there will be a significant opportunity there. One last question for you and it's so wonderful to have you today. Thank you for joining. What should people know last final words about the prospects for Chile in the clean economy globally?

Francisco Javier López Díaz
I'm sure that Chile it's recognized outlook Chile by their mining. I know that in the future will be renowned by being sustainable country because all the process that we are having internally that we are leading here in Chile will help us to change our face to be the main producer of green copper, of being the main producer of green hydrogen have received tourists that want to see a sustainable tourism. So I think that is changing the face and is taking thanks to the transformation in the energy that we are having right now until. Tomorrow with the president will there will be the the the integration of the first CSP in Chile and in Latin America, a several ... and it's also an excellent... And it's appropriate that the that show that we can receiving innovation we can we can receive and have innovation here in Chile and to go on to produce different kinds of a different ways to produce energy. You've seen the conditions for coming from natural resources.

Adam Zuckerman
I don't think that we could end this on a better note. Undersecretary of Energy Francisco Javier Lopez Diaz, thank you so much for joining us today.

Francisco Javier López Díaz
Thank you very much. It was a real pleasure.

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