Chile Copper Industry: Electricity Consumption Projections for 2023-2034

Electricity is a cornerstone of modern mining operations, serving as the lifeblood that powers a wide range of operations critical to extracting and processing minerals. From operating heavy machinery, processing plants, and ventilation systems, electricity plays a foundational role for mining operations.

The Chilean mining industry is a great example where the reliance on expensive carbon-based fuels were resulting in high prices that were starting to impact the bottom lines of local mining operations.

The warning bells started ringing in 2014 when the Chilean energy market was reaching its breaking point. At the time, the government regulators warned that the country needed to urgently ramp up its installed power capacity by 18,000 gigawatts to meet the future demand of miners. In addition, the mining sectors energy operating costs represented roughly 14% of total production costs, equivalent to 27% per pound of metal, the highest level since 2000.

Chilean miners had watched their energy prices climb 11% over a decade leading up to 2014, some were paying twice as much for their energy as their peers in neighboring Peru. There were concerns from the mining industry that energy prices would affect future investment.

That was the start of the Chile’s energy transformation. Since then, the country and a result the mining industry, has completely changed its energy matrix towards renewables. Currently, Chile has over 80% of its production certified with the internationally recognized Copper Mark which is more than any other mining jurisdiction in the world.

Last week, our blog provided a summary of a report by the Chilean Copper Commission (Cochilco) which outlined the projected water usage for the Chilean mining industry between 2023 and 2034.

Cochilco has released another report that outlines the projected energy usage for the Chilean mining industry between 2023 and 2034. Below we have provided a summary of the most important conclusions from the report.

Chile Mining Energy Usage Projections 2023 – 2034

• The Cochilco report forecasts the demand of water taking into consideration new projects that are expected to be built. In addition, it considers the growth of desalination and seawater pumping plants which mining operations are increasingly moving towards.
• The report assumes that based on the projected pipeline of project between 2023 -2034, copper production in Chile should reach 6.43 million tons, at an average growth rate of 1.7%.
• As a result, electricity consumption is estimated to grow from 26.0 TWh in 2023 to 34.2 TWh in 2034, which represents an increase of 31.4% versus a 20.7% increase in copper production in the same period analyzed. It should be noted that new copper projects alone will be responsible for 25.3% of the expected electricity demand in 2034.
• The report all concludes that the growth in electricity usage is attributed to the higher utilisation of concentration plants, a process that alone in 2034 will consume 20.2 TWh, representing 58.9% of the electricity in the sector.
• The second highest intensity of electrical consumption is for desalination and seawater pumping. It is another process where a significant increase is projected, going from 2.98 TWh in 2023 (11.4% of the total) to 6.5 TWh in 2034 (19.0 % of the total).
• Interestingly, the report discusses how there will be a decrease in energy consumption used for the leaching process. A significant drop is projected from 4.9 TWh in 2023 (18.9% of the total) to 2.7 TWh in 2034 (8.0%).

Renewable Energy in the Chilean Mining Industry

Back in 2014, it may have been worrisome to many that the electricity demand from the mining industry were going to increase significantly in just a decade.

This concern has been alliviated in some ways. One of the reasons is that the country is blessed with the Atacama Desert in the north, where the average solar irradiation is approximately double the average irradiation in Spain.

The result has been a huge explosion in solar and wind projects which have dramatically increased the solar and wind capacity year over year. It has done so without any major government subsidies which is a major accomplishment.

For example, during 2023, 102 new solar/wind projects and storage systems were installed, totaling 1,827 MW. As of December 2023, there were 374 projects under construction for a total of 6,806 MW.

The Chilean energy matrix is changing as well. As of December 2023, the report states that 64% of the net installed capacity corresponds to renewable sources (21% hydraulic; 25% solar; 14% wind; mini hydro 2%; 2% biomass; 0.33% solar power concentration and 0.25% geothermal) while 36% corresponds to thermal sources (13% coal, 11% natural gas and 12% oil).

A significant number of mining companies carried out renegotiation processes of electricity contracts with the aim of focusing them on renewable energies and with more convenient prices. Already in 2023, 66.6% of mining electricity consumption is from clean sources and in 2026, 78.1% of the industry’s electricity demand is expected to come from renewable energy.

Most Chilean mining companies contact renewable energy supply by either directly investing in projects, through PPA Agreements which the mining company has participated by investing, or through a PPA contract where the mining company is a client to the generator.

The last is the most chosen option by Chilean mining operations who have been able to renegotiate contracts with the largest Chilean generation companies, with the aim of changing from thermal sources to renewables with better prices.

Conclusion

Electrical energy is a strategic input for copper mining, given that it is required in its various production processes and services. Its impact on the country’s overall consumption is also significant since it consumes about 34% of the country’s electricity.

The reality is that more electricity will be required in the coming years due to several trends –

• Progressive drop in copper grades, resulting in more material having to be ran through the plant which requires more energy to power processes such as crushing and grinding.
• Increasing use of seawater and desalination plants with water then needing to be pumped from the coast up to the mining operations, with the whole process requiring significant amounts of electricity.
• Focus on the production of copper concentrates, a process that has intensive use of electrical energy.

While the country has made considerable strides in diversifying its energy matrix with significant contributions from solar and wind, it also has important challenges to overcome if it will transition to carbon neutrality by 2050.

Among the main challenges are congestion in the transmission system, the increasing cost and time frames to build out new transmission lines, increasing storage capacity, and improving permitting.

The Chilean copper industry has been a pivotal part of the country’s overall transformation since 2014. As one of the countries top energy users, it has considerable purchasing power which helped create a stable market for renewables. The PPA’s that mining companies signed allowed generators to receive financing and build out renewable projects. Mining companies also negotiated with the countries largerst power producers forcing them to invest in renewables which helped accelerate the build out of solar and wind production.

The transformation that Chile is going through may have never happened if it was not for the mining industry. Now it will be the renewable industry that allows the mining industry to overcome its own challenges of increasing energy for its operations, moving away from carbon based energy sources, and stabilizing prices.

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