Demand for copper and lithium will grow significantly in the coming decades due to the energy transition, especially with the adoption of electric vehicles worldwide. Hence, the sector and its sustainability are considered crucial to promote renewable energy in Chile and globally, says the lender.
The global energy transition bodes well for Chile's important copper and lithium industries (A2 stable) in the long term, but there are obstacles that will delay their full potential in the short term.
On the one hand, the energy transition around the world will also increase the demand for some commodities over the next decade, including metals such as copper and lithium, which are abundant in Chile.
However, Chilean mining companies will have to find a balance between the need to expand production of these commodities , which are crucial for the energy transition going forward, and the need to reduce carbon emissions from copper and lithium production.
This is the main message of the study "Carbon Transition – Latin America and the Caribbean: Global efforts indicate long-term strength for renewable energy, copper and lithium in Chile", published this Monday by Moody's Ratings.
Demand for copper and lithium will grow significantly in the coming decades due to the energy transition, especially with the adoption of electric vehicles worldwide.
But this growth will depend on government policies on energy transition and the pace of emergence of renewable energy and electric vehicle technologies, as well as related technological advances.
"Chile could become a key leader in the energy transition, given that it has the largest reserves of copper and lithium in the world. However, a series of natural, structural and operational factors contributed to a decline in its share of the copper market," the entity said in its report.
On the other hand, Chile has made several formal commitments to decarbonization at national and international level. And in all this, the mining sector is crucial to promoting renewable energy in Chile and throughout the world.
the world.
"With the decline in renewable energy costs, the energy matrix will become cleaner and more competitive, in line with Chile's commitments to reduce greenhouse gases (GHG)," says Moody's Ratings.
Copper is also an important component in renewable energy infrastructure, and electric vehicles use large amounts of copper in motors and charging systems.
STATE CONTROL
Chile's four largest power companies - Colbún, Aes Andes, Enel and Engie - now face the difficult task of preparing to meet increased demand from the mining industry, while also undertaking their own energy transition.
Renewable energy production continues to expand as the power sector invests in it, but the transition is riskier because the volatility inherent in renewable generation requires greater transmission system robustness and battery storage capacity.
The domestic expansion of the lithium industry will benefit Chile as energy transition efforts intensify around the world.
Moody's Ratings' analysis bets that local lithium demand will likely double by the end of the decade, especially with the widespread adoption of battery-electric vehicles. Moreover, Chile's lithium extraction, in the form of brine, while water-intensive in one of the driest ecosystems on the planet, consumes less energy than in other producing countries.
"However, the Chilean state will begin to exert much more control over the domestic lithium industry from 2031 onwards, and will likely focus more on long-term sustainability and socio-economic benefits than purely commercial considerations," the entity warns.
