Economic Assessment of the Changes in the Energy Sources on the Chilean Mining Sector Patricio Aroca, Loreto Bieritz, Juan Eberhard, N. Garrido , Anett Grossmann, Anke Moennig udp FACULTAD DE ECONOMIA Y EMPRESA
Motivation • Chile is the leading cooper producer in the world (> 25%), and it represents more than 50% of its exports • The energetic efficiency of the mining process has many components which are changing: ore proportion; open pit vs undergraund mines; technology for processig concentrate • As December 2013, installed renewable capacity represented 6.3 per cent of the energy mix in Chile. By June 2016, this amount doubled, reaching 12.65 per cent of total electrical capacity (20,151 MW). The 2035 government plan has the target of 60% of electricity consumed in the country being produced by Renewable Sources
Overview of the presentation • Energy sources in Chile • Literature review • Method • Scenarios – Analysis • Main Conclusions
Energy Sources in Chile • During the period 2002-2004, the Argentina government decided to stop gas exports to Chile • Increasing local demand due to hard winter • Bolivia did not want to sell gas to Argentina to be re-sold to Chile • Crisis, produced a period of research and policy conversations • Production of dirty energy. Electricity based on fuel and carbon • 2015 produced the Energy Agenda • Change in Regulations, increasing competition and investments without public participation • Integration of the Transmission system • Increases the Energetic Efficiency • Territorial inclusion and equality, environmental care. • Former Minister of Energy, Máximo Pachecho (2018), Revolucion Energética en Chile
Agenda of Energy Policy Energía 2050, Energy Minister
Outcomes 30000 140 140 100 131 129 90 120 120 25000 80 108 Number of Offerings 101 100 100 70 20000 90 US$/Mwh US$/Mwh 60 80 80 79 Gwh 15000 50 61 60 60 40 53 48 10000 30 40 40 20 5000 20 20 10 0 0 0 0 2006 2007 2008 2010 2012 2013 2014 2015 2016 2006 2007 2008 2010 2012 2013 2014 2015 2016 demand supplied Price Offerings Price • What are the effects of this changes? • What is the effect on the GDP? • How investment plans does affect the economy? • What is the effect on labor market? • What is the effect on the mining production?
Literature • The 70s oil crisis open many works on input-output models focused on energy, Blair (1979), Hybrid approach, Blair and Wyckoff (1989), Dietzenbacher and Sage (2006) • Energy & Environmental analysis in Chile • R. O’Ryan; C. de Miguel & S. Miller, (2003), CGE, 100% increases on fuel taxes, -0.5% of Real GDP growth • C. Benavides; L. Gonzales; M. Diaz; R. Fuentes; G. García; R. Palma-Behnke; & C. Ravizza (2015), DSGE, increases on carbon tax reduces GDP growth • Renewable Energy Frameworks • A. Stocker; A. Großmann; R. Madlener & M. Wolter (2011) Austria 2020
The Model • Multisectorial model, input- output information • Inforum phylosophy (Almon (1991))
Scenario Analysis Change in the source of the energy Change in efficienciy of mininig • Increases of investments in energy • Increases of investment in mining sector sector • Price reduction of electricity • Small Reduction of fuel consumption, due to more • Decreases of fuel consumption, efficiency due to substitution • Reduction in energy coefficients • Decreases on the import of fuel (gas, fuel and electricity) and gas
Scenario Analysis Change in the source of the energy Increase the efficiency of mining • Increases of investments in energy • Increases of investment in mining sector sector • Price reduction of electricity • Small Reduction of fuel consumption, due to more • Decreases of fuel consumption, efficiency due to substitution • Reduction in energy coefficients • Decreases on the import of fuel (gas, fuel and electricity) and gas Change the Sources of energy Minimum 60% • Data are calibrated until 2015 Changes • Data representing scenario is Keep the Improve the Base Line trend Matrix Efficiency introduced Improvement Increase Improve Total • Simulation is made until 2035 efficiency Efficiency Improvement
Aggregate results Total Efficiency Change Total Efficiency Change Difference in Difference in Accumulated 11% 5% 7% Accumulated 3% 1% 2% growth vs base line growth vs base line
Employment by sector (32) Electricity, gas and vapor 35 • The evolution of employment is % Change Scenario as compared to Base Line 30 compared for every sector. 25 • For instance, the employment of the Electricity, gas and vapor 20 sector in the year 2035 will be 15 • 10% greater in the Efficiency 10 Forestry scenario than in the Base Line 5 • 29% greater in the Change scenario than in the Base Line 0 -10,0 -5,0 0,0 5,0 10,0 15,0 20,0 25,0 30,0 35,0 -5 -10 %Efficiency Scenario as compared to Base Line
Copper and metallic mining extraction sector Production
Conclusions • Changes in the sources of energy in Chile are producing multiple impacts, and this work is in the way to contribute in the assesment of the economic impact that this change in generating • There is no much increases on the sector of copper production as consequence in the three scenarios analyzed • There are sectors that under the renewable energy scenario, get additional boost, like Forestry, where as biomass, wood offers some of the highest levels of energy and carbon efficiency
Additional Slides
Energetic Efficiency of Mining Electricity Consumption / tn • The energetic efficiency is given 90 by exogenous factor and by the +13,5% 75 technology used to produce. 76,3 67,2 60 • Increase in investment could 45 lead to better technology, 30 therefore to increasing efficiency 15 0 Mina Rajo - Kwh/TM mineral extraído Mina Subterránea - Kwh/TM mineral extraído Concentradora - Kwh/TM mineral procesado LX/SX/EW - Kwh/TM mineral lixiviado
Assumptions Process to Change Process to keep historic evolution • Cost reduction in electricity • Copper Production • Energetic efficiency • Changes in investment • Share between Fuel and Electricity in • Energetic efficiency the production process • Change in the process of production (from open pit to Underground) • Structural characteristics of the the Mining (Ore)
Energy Matrix Coal • How it is balanced the consumption of energy accross different sources Basic Scenario Analysis
Construction of Variables From 2013 to 2035
Output Price: copper mining • Copper price was obtained from WorldBank forecast • http://pubdocs.worldbank.org/en/678421508960789762/CMO-October- 2017-Forecasts.pdf • Nominal Dollar each mt
Output Price: Fuel Production • Crude oil was obtained from WorldBank forecast • http://pubdocs.worldbank.org/en/678421508960789762/CMO-October- 2017-Forecasts.pdf • Nominal Dollar each bbl
Output Price: electricity supply • The electricity prices for the north system was obtained from the CNE • https://www.cne.cl/estadisticas/electricidad/ • Prices/Costs
Output Price: Institution • https://www.cne.cl/en/tarificacion Total Efficiency Change Diff in Accumulated 11% 5% 7% compared to base line case
Domestic Input Coefficient: electricity supply to copper • There are multiple process in the copper mining that requiere electricity. ELECTRICITY USE PER TON OF ORE MINED AND PROCESSED, BY PROCESS Weighted Average Unit Ratio, Chilean Copper Industry 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Open Pit 5,8 5,4 5,3 4,9 4,9 4,8 5,1 5,0 4,8 4,1 (MJ/MT Ore Mined) Underground Mine 17,1 20,7 18,8 19,2 19,8 21,7 23,8 21,3 22,3 19,2 (MJ/MT Ore Mined) Mine Weighted Average 7,2 6,8 6,6 6,2 6,4 6,0 6,5 6,4 5,9 5,3 (MJ/MT Ore Mined) Concentrating Plant 73,6 76,8 73,4 72,9 79,5 66,5 79,7 80,3 81,0 82,5 (MJ/MT Ore Processed) Smelter 1.207,2 1.229,4 1.112,3 1.143,0 1.171,4 1.212,0 1.337,3 1.219,8 1.129,5 1.157,0 (MJ/MT Concentrate Processed) LX / SX / EW 49,6 42,5 45,1 41,1 46,3 43,2 41,2 40,5 38,0 33,3 (MJ/MT Ore Processed) Source: Cochilco
Domestic input coefficient: fuel supply - copper • Fuel Use per Ton of Ore Mined 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Open Pit 47,5 46,6 47,3 48,5 56,9 50,3 57,4 57,8 57,3 61,9 (MJ/MT Ore Mined) Underground Mine 18,2 12,8 14,6 10,4 12,6 9,7 10,4 9,1 17,9 21,5 (MJ/MT Ore Mined) (1) Mine 44,1 43,6 44,2 45,3 52,6 48,9 54,1 55,6 54,9 58,7 (MJ/TM mineral extraído) (MJ/MT Ore Mined) Concentrating Plant 1,5 2,0 1,9 1,6 1,8 1,4 1,9 1,6 1,8 2,3 (MJ/MT Ore Processed) Smelter 1.437,8 1.401,3 1.395,7 1.353,3 1.563,8 1.607,8 1.440,1 1.381,4 1.245,8 1.366,4 (MJ/MT Concentrate Processed) LX / SX / EW 14,7 12,2 13,2 12,3 12,5 11,3 11,5 9,8 8,2 6,3 (MJ/MT Ore Processed) Source: Cochilco
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