With its vast deserts, long coastline and extensive reserves of critical minerals, Chile is a potential renewable energy powerhouse.
The government’s goal is to have only clean energy by 2050 and to become one of the world’s top green hydrogen exporters by 2040. The European Investment Bank is helping the country make this green transition. In 2023, it signed a €200 million loan to BancoEstado, financing mortgages for some 2 600 new housing units with improved energy efficiency standards.
In 2024, the Bank signed another $110 million loan with BancoEstado to finance the green transition of small and medium-sized enterprises and industries by promoting energy efficiency and renewable energy. BancoEstado is one of the largest banks in Chile, with branches throughout the country.
“This is important,” says Juan Gorriño Larrañaga, the European Investment Bank loan officer who negotiated the recent loan. “It’s how we can reach smaller projects and small mining companies trying to improve the energy efficiency of their production.”
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Supporting energy efficiency and renewables
Energy prices have risen in Chile in recent years, following the COVID-19 crisis and Russia’s invasion of Ukraine. For a while, the government froze prices to help residents and industries, but it recently removed the price cap, and energy prices are soaring again. Companies are eager to find ways to cut energy costs.
“In this context we expect a lot of demand for loans to help industries improve energy efficiency and adopt renewable energy,” says Paola Mendez, an engineer at the European Investment Bank.
As the world’s largest copper exporter and a key lithium producer, Chile plays a central role in the global green transition. The financing will increase investment in green technology while cutting emissions in crucial supply chains.
The loans will not only benefit mining companies. “Chile is an exporting country – in addition to mining, it exports fruits and other resources,” Mendez says. To be eligible for funding, the projects must involve energy efficiency or renewable energy, she adds.
Green hydrogen
A combination of characteristics makes Chile a potential leader in the production of green hydrogen in Latin America and the Caribbean (alongside Brazil and Colombia).
Green hydrogen is produced using electrolysers, which split water into hydrogen and oxygen through a process that requires substantial electricity. To qualify as green, this electricity must come entirely from renewable energy sources.
“Around 65% of the cost of green hydrogen production is related to electricity,” explains Enrique Rodriguez Flores, an energy transition specialist at the European Investment Bank. “The electricity needs to be green, so we look for places with the best renewable energy conditions for electricity generation. Wind and solar are intermittent by nature, but in some areas of Chile, especially in Patagonia in the south and in Atacama in the north, the conditions are so good that they offer a degree of stability.”
Chile also has political and economic stability. “Promoting billions of euros in private investment requires a secure environment for making investments,” Rodriguez Flores says. “This includes regulation, government support and other such aspects.”
The Green Hydrogen Fund for Chile – a Team Europe initiative by the European Investment Bank, the German development bank KfW and the EU delegation in Chile – will support a wide range of hydrogen projects, from water desalination and renewable power generation to storage and transport. As part of this initiative, the European Investment Bank is providing a €100 million loan to Chile to support private sector projects.
“The plan is to have the private sector develop green hydrogen, initially with the support from the public sector, via subsidies and other support from multilateral development banks, which offer more than just financing,” says Gorriño Larrañaga, the EIB loan officer. “They also offer their expertise and high environmental and social standards.”
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A marathon
Chile’s goal is to make its main sources of energy renewable and clean and to reach carbon neutrality by 2050. This strategy includes having 25-gigawatt electrolyser capacity by 2030, says Ana María Ruz, executive director of the Green Hydrogen Council at Corporación de Fomento de la Producción, known as CORFO, the government agency charged with accelerating the green hydrogen industry and channelling funds to related initiatives. “It’s a lot, if you compare it with Europe, where you have ambitions for 40 gigawatts.”
Currently, seven green hydrogen projects totalling $25 billion in investment are in the process of obtaining the necessary permits from Chile’s Environmental Evaluation Agency, Ruz says. In addition, several new projects totalling $63 billion in investment are expected to apply for permits in the coming months. Ruz expects that the financing from the European Investment Bank and KfW will lead to greater private investment.
For the green hydrogen initiative, the European Investment Bank is partnering with several other development banks, such as the World Bank and the Inter-American Development Bank.
“We have a very unique platform,” says Rodriguez Flores, the EIB energy specialist. The group created one shared management system to approve transactions quickly and make sure the projects meet all the banks’ criteria. The initiative is in its early stages. “This transaction is kind of a marathon, because it’s a new technology,” says Rodriguez Flores.
But on second thought, he adds, “hydrogen was mentioned for the first time in the 19th century by Jules Verne. He already imagined a world where water would be used as fuel. That’s basically what's happening here.”
BANCO ESTADO ECOVIVIENDA - ENERGY MBIL
Loan to Chile's public bank BancoEstado to finance mortgages for the acquisition of new housing units with improved energy efficiency standards.
BANCO ESTADO - GLOBAL GATEWAY GREEN TRANSITION
Framework Loan to Chilean public bank BancoEstado to finance energy efficiency and renewable energy investments mainly for SMEs and industries, including the local value chains companies for Critical Raw Materials (CRM) in the country, in line with the EU Global Gateway Investment Agenda (GGIA) in Chile and fostering partnerships to develop sustainable local value chains in the CRM segment.
CHILE - TEAM EUROPE GREEN HYDROGEN PLATFORM
EIB financing, to be structured as a framework loan (FL) with the Sovereign, will be integrated in the Team Europe Green Hydrogen Fund for Chile which is a platform to finance the incipient green hydrogen market, foster local supply chains and strengthen the potential for green hydrogen exports to Europe.
