Panel Discussion - "Semana del Clima"

"Semana del Clima", by the Konrad-Adenauer-Stiftung

On 7 October, within the framework of “Semana del Clima”, an annual event focused on the dissemination of research and initiatives to counteract global warming, a panel discussion focused on Germany-Chile Cooperation for Energy Transition was held.

This panel was moderated by Christoph Meyer, Project Manager Energy, Mining & Sustainability at AHK Chile, and included the participation of Macarena Alvarez, Director of Community Affairs and Best Practices of the Chilean Association of Generators, Carlos Barría Quezada, Head of the Division of Policies and Studies of the Chilean Ministry of Energy, Philipp Litz, from Agora Energiewende, and Rainer Schröer, Director of the 4e Programme and of the Energy Partnership Chile-Alemania at GIZ Chile.

The event began with a presentation by Rainer Schröer, which contextualised the national energy scenario, and detailed the progress in the decarbonisation of the national energy matrix, highlighting feasibility studies for the conversion of coal-fired power plants, as well as the implications that this conversion would have on aspects of just transition.

Next, Macarena Alvarez spoke about the commitment of the Chilean Generating Association to carbon neutrality in the country, expressing her interest in the social aspects of the reconversion of power plants.

Carlos Barría then explained the country's plan to achieve carbon neutrality by 2050: the electrification, based on renewable energies, of energy uses that are currently met by fossil fuels, with a focus on energy efficiency.

Finally, Philipp Litz highlighted the similarities and differences in the decarbonisation processes of the energy matrices of Chile and Germany. Among the differences, it was mentioned that, while in Chile the Just Transition targets workers in power plants, in Germany it targets coal miners, so that strategies in both countries should have similar and different approaches at the same time.

The presentations were followed by a round of questions, where the panellists expressed their observations on the closure of coal-fired power plants and their possible conversion, highlighting the importance of the social aspects of just transition, and the role of a model for the exit from coal as a model for the rest of the world.

Carlos Barría (Ministry of Energy): "We are indeed facing a historically complicated scenario for the electricity system. The good news is that there are already plans in place to prepare the electricity system for the worst case scenario. The system must be prepared to be able to meet the climate commitments that have been made. On the question of "when" the retirement of coal plants will take place, the essential thing is that the electricity system is prepared; we cannot make security subservient to the idea of closing the plants. There are problems in erecting transmission lines, as these must pass through productive or inhabited sectors. These are key to achieving the decarbonisation of the electricity matrix. Another factor is energy storage, which allows for the best possible management of electrical energy. This is where GIZ's work in this area stands out, as well as the conversion of power plants."

Macarena Alvarez (Generadoras de Chile): "I can't give dates; that is a technical issue. Among the elements to consider when defining dates, we have to consider the social aspects; the people and workers in the territories that will be affected".

Macarena Alvarez (Generadoras de Chile): "Our member companies have been closing power plants for a number of years now, and prior to these, there has been a dialogue with the affected population. The entry of renewable energies provides another opportunity, as workers can be placed in other projects of the same companies, with training plans and even early retirement plans. We understand that, in many cases, these are companies that have been in the territories for a long time, and in this sense we are committed to generating shared value in the territories, leaving community infrastructure".

Philipp Litz (Agora Energiewende): "On the social side, there are certain elements that come into play; the most important strategy is the replacement of the jobs that will be eliminated by the coal phase-out with new and suitable jobs in industrial sectors. The government seeks to achieve this through investment in the affected regions, be it in transport or digital infrastructure, for example, to make the area more attractive for companies to set up in these regions. In addition, part of the funds are allocated to investment in research and development. Finally, there is money specifically designated for the communities, who use it for whatever purposes they deem appropriate.

In addition, there are other elements that apply to the affected workers; firstly, older miners can take early retirement, without affecting their income. There is also the opportunity for miners to find jobs in other sectors, either within their own companies or in other companies."

Carlos Barría (Ministry of Energy): "A few weeks ago we published the strategy for the just transition of the energy sector for public consultation. First of all, just transition, or taking care of the social and territorial issues of the energy transition, is much broader than the closure of coal plants. The energy transition is about technological change and societal adaptation; whole economies are involved around the technologies that will be replaced. Therefore, this is not only the responsibility of the Ministry of Energy, but also of the Ministry of the Environment, the Ministry of Labour and the Ministry of Economy. Today, the energy transition also gives us opportunities as development poles for areas that have potential for energy development, as expressed in the Long-Term Energy Planning."

Rainer Schröer (4e Programme, GIZ Chile): "I don't think you can compare the realities of the two countries. The impact in Germany is on entire regions, not just municipalities, as in the case of Chile. For Chile the social aspect is not such a big problem either; perhaps in a particular municipality where energy generation is the only source of employment. The indirect effects are the biggest source of concern, but, as Carlos points out, there are already plans in place. Another fundamental difference is that Germany relies on energy supplies from its neighbours, while Chile is an island system. In view of this, maintaining energy security in Chile is more complicated, which is why we are proposing to convert the coal-fired power plants, apart from not affecting the workers."

Philipp Litz (Agora Energiewende): "Absolutely. Countries like Chile, UK or Germany offer future lessons for the rest of the world. We have worked directly with countries like Indonesia or South Africa, who have already looked for examples to solve their problems. Despite the differences between the political and energy systems of the countries, the issues discussed are similar: how to keep the lights on, how to decarbonise energy, how to control security of supply, what to do about the employment of people working in mines or power plants. The questions are repetitive, so the experiences of these first-world countries are endlessly valuable. Chile has taken a bold step forward in terms of defining how the coal phase-out will be carried out, through its commission, and it is something that several countries are watching closely. This contribution could be incredibly valuable for other countries.

Carlos Barría (Ministry of Energy): "Chile has been, particularly in the energy sector, a model for other countries. We were one of the first to liberalise the energy market, creating a competitive market for generators. Today, one of the most critical issues for decarbonisation is to take care of the technical requirements. Electricity is not yet stored in large quantities, it has to be stable, and the supply has to be permanent. These are basically the core elements that allow electricity to be permanently flowing. Chile could be a model there because it could be one of the first countries to incorporate such a significant proportion of variable renewable energies. This means a huge challenge for the electricity system. We will stop relying so much on rolling machines and move to power electronics. Chile can be a laboratory for the massive integration of these technologies, so probably many countries will be watching how we do it."

Macarena Alvarez (Generadoras de Chile): "I share the vision; I don't know if it is an example, but as a reference. In that sense, we can learn a lot from the process we are going through. I think the important thing is that as an economy we move towards carbon neutrality, and that as a country we think about the vocations we want as a territory, thinking everything in an integrated way and incorporating the different actors. If this works, we could be an example or model to replicate in other countries".

Rainer Schröer (4e Programme, GIZ Chile): "In addition to what Carlos Barría and Macarena Alvarez have said, we are in contact with 13 countries that want to learn from Chile's experience with the conversion of power plants. If this works in Chile, it will be applied in more countries. Chile is already a model for the rest of the world".

Carlos Barría (Ministry of Energy): "Today Chile has an economic instrument which is the green tax, which charges the different CO2 emitters. It is a general tax, not only focused on electricity generation. In 2023, a new mechanism will be incorporated that considers power offsets. One of the important parameters is the price assigned to emissions; today it is defined as 5USD per tonCO2. For an instrument of this nature to be efficient, it has to reflect the externalities, not only of GHGs, but also of particulate matter. As part of the green hydrogen strategy, it was established to formulate a working group to generate a roadmap of how the carbon price should be in order to accelerate the energy transition to cleaner energies in the country. The price of carbon in Chile is a complement to the technological changes that occur in the world".

Philipp Litz (Agora Energiewende): "Carbon pricing has an essential role to play in coal phase-out and the energy transition in general. I think it makes sense in liberalised markets, as it makes it possible to define the right price for CO2 emissions.  It would not only increase the price of fossil fuels, but also helps to finance renewable energy projects. However, based on the German experience, it can be considered that this instrument per se is not sufficient; it must be accompanied by other policies, such as zoning for the installation of renewable energy, to be successful".

Rainer Schröer (4e Programme, GIZ Chile): "It depends on the particular plant. In some cases, it is not worth converting for power generation, because, for example, the location is not so important in the context of the country's electricity system. These could be converted to plants for water desalination, or for the production and export of green hydrogen and its derivatives, since all coal-fired power plants in the country have ports for coal imports. In this way, the economy of the affected areas can be kept alive. In the future, we should not only convert thermoelectric power plants, but also increase variable renewable energies, supported by technologies such as CSP".

Macarena Alvarez (Generadoras de Chile): "In addition to the above, it is important to consider that there are international examples of when it is not possible to convert to other uses or technologies linked to energy, it is also possible to convert for other purposes. In this way, the infrastructure becomes part of the territories, even thinking about an environmental reconversion".