NATIONAL GREEN HYDROGEN

1 Chile, a cleanenergyproviderfor a carbonneutral planetNATIONALGREEN HYDROGENSTRATEGYN ational GREEN HYDROGEN StrategyPublished by the Ministry of Energy, Government of ChileAlameda 1449, Santiago Downtown Tower II, 13thFloorSantiago, ChileNovember, 2020 TheauthorswouldliketothankMcKinsey& ,aswellasallthepublicinstitutions,privat ecompanies,civilassociations, :Max Correa A. Carlos Barr aQ. Benjam n Maluenda : Patricia Escobar : UnsplashCover:PabloAcevedo;Page4,LaTerce ra;Page5,AntonioGarc a;Page14,AlexanderSchimmeck;Page15,KurtC otoaga;Page16,AntonioMart nez;Page20,TiloMitra;Page24,WillianJuste ndeVasconcellos;Page25,EduardoCabrera;Pa ge26,BrunaFiscuk;Page27,ClaudioRolli;Pag e28,JuanManuelN ezM ,M,B,andTusedthroughoutthisdocumentsymbo lizethousands,millions,billions,andtrill ions, document is a preliminary version released for a public consultation process.

2 The definitive version, as well as all analytical annexes, will be made public once the comments of the public are collected and in the public consultation atenerg 1 Time for actionChapter 2An opportunity for ChileChapter 3 Our strategyChapter 4 Pillars591520 Chapter 5 Action plan24 Juan Carlos Jobet ,theatomcomposedofjustoneprotonandoneele ctron, , , ,smallestatominouruniversemightholdtheke ytoconfrontingclimatechange,ourlargest,m ostcomplexchallenge?Likehydrogen,Chileis smallbynatureand,accordingly, , , ,withthehighestsolarirradianceontheplane t,andinthePatagoniaintheSouth,withstrong andconsistentwinds, ,academia,civilsocietyandthepublicsector , , , , , GREEN HYDROGEN STRATEGY| 2 NATIONAL GREEN HYDROGEN STRATEGY | 3 This NATIONAL GREEN HYDROGEN Strategy marks an essential starting point for a profound transformation of the country's productive identity.

3 VivianneBlanlotRicardoLagosJeannette von WolfersdorffKlaus Schmidt-HebbelMarcelo MenaGonzalo Mu ozOurcountryiscommittedtoreducingitsgree nhousegasemissionstohelpslowdownglobalcl imatechange, 'swealthofcleanenergiesthatweseeanengine todecarbonizethecountry'sactivities, , ,fromelectricityproducedwithlow-costrene wableresources,formsanenergysourceforloc aluseandexportation, sbrand,addingagreenvaluetotheproductscre atedinChile, ,forexample,wouldbetobecometheworld' ,promotegrowthandlocalemployment, ' , ,displacingtheconsumptionoffossilfuelsin themining,transportandagriculturalsector s, , ,clearsignalsregardingfinancialsupport, ,wemustalsofacilitatethedevelopmentofane xportindustryforhydrogenanditsderivative s, ,Chilewillbecomeanexporterofrenewableene rgytotheworld, ,weareveryexcitedtopromotethisopportunit yforthecountry,helpingtolaythefoundation sforwhatwillbeanewindustryforChile, FROM THEADVISORY BOARDF ormerExecutiveSecretaryoftheNationalEner gy Commissionand FormerMinisterofNationalDefenseFormerPre sidentoftheRepublicFounderoftheObservato ryfor Fiscal Spendingin Chile and economistFormerChief Economist oftheOECD, academicand consultantFormerMinisteroftheEnvironment and academicHigh-LevelChampionCOP25, cofounderSistemaBand entrepeneurThepathtoa participatorystrategyTechnical roundtablesRoundtableswerecarriedoutwith participationfromcompanies,universities, researchinstitutions, , sessions throughout June and July 2020 Participants.

4 66 roundtableDiscussionroundtablestookplace betweenkeypublicstakeholderstorefineadia gnosis,proposeobjectives, sessions between April and October 2020 Participants: The Ministries of Energy; Science, Technology, Knowledge, and Innovation; Mining; Economy; Transportation and Telecommunications; Environment; Foreign Affairs; as well as CORFO, InvestChile, and the German agency sessions between May and August 2020 Members: Former President Ricardo Lagos, VivianneBlanlot, Marcelo Mena, Gonzalo Mu oz, Klaus Schmidt-Hebbel, Jeannette von sessions in August 2020 Participants: 90 ConsultationThis document is currently under public consultation. To participate, please visit the Ministry of Energy s website at energ GREEN HYDROGEN STRATEGY | 4 Time for action1 The simplest molecule to confront the most complex challengeBolero solar photovoltaic plant, Antofagasta RegionWe are facing a climate crisisSciencehaswarnedthattheworldwillex perienceaclimatecrisiswithoutprecedentin history,causedbyhumanaction, ,itupdateditsNationallyDeterminedContrib ution(NDC)

5 Andpledgedtobecomeanet-zeroemissioncount ryby2050, production and utilization are at the center of the challenge we , ,complementarysolutionsareneededtodecarb onizeeconomicsectorsandapplicationsinwhi chdirectelectrificationorothersolutionsa renotcost-efficient,reliable,accessible, warming referenced to 1850-1900 ( C)Estimated and probable anthropogenic warmingGlobal CO2eqemissions reach net zero in 2055 Global CO2eqemissions reach net zero in 2040 Non-CO2radiative forcing is not reduced after 2030 ScenariosGlobal greenhouse gas emissions by sectorSource: Ritchie, H. (2020). Published in with data from Climate Watch and the World Resources GREEN HYDROGEN STRATEGY | 6 , forestry, and land and and : IPCC. (2019).

6 Special Report: Global Warming of power of GREEN hydrogenNATIONAL GREEN HYDROGEN STRATEGY | 7 Anindustrialgasusedwidelyformorethanacen tury,elementalhydrogen(H2) ,watercanbeseparatedintoitsconstituents, hydrogenandoxygen, , is a means for using the inexhaustible renewable energy found in various forms on the hydrogenCO2 Fossil fuelsH2 GREEN hydrogenO2 WaterRenewable powerH2 Decarbonization potential of GREEN hydrogenSource: Adapted from Siemens, powerHeating and coolingTransportationGreen hydrogenElectrolysisTurbines, engines, fuel cellsFuel cells,dual combustionBoilers and gas gridsPetrochemical industryGreen synthetic fuelsSubstitute for grey hydrogenChemical industryAgricultureAmmonia and GREEN fertilizersSteelOther industriesSubstitute for cokeSubstitute for grey hydrogenIt functions as an energy carrier that emits no greenhouse gases when can replace the use of fuels in the production of electricity, heat, and multiple time for HYDROGEN has arrivedAfterseveraldecadesofwaitingforth epotentialofhydrogenasanenergycarrier, energy demand supplied with HYDROGEN (PWh)Source: HYDROGEN council .

7 (2017). HYDROGEN : Scaling generation and storageTransportationHeating and residential usesIndustryNew usesExisting usesHydrogen council , energy demand18%Total HYDROGEN (PwC), market300 BUSDE lectrolyzercost reduction80%By2050,theworld ,aswellastheneedfordeeperdecarbonization ofalleconomicsectors, GREEN HYDROGEN STRATEGY | 8 NATIONAL strategy availableNational strategy under preparationPilot and demonstrative project supportPreliminary discussionsNo relevant activitiesNot evaluated22 Countries representing almost 90% of global GDP have policies or initiatives for public support of hydrogenSource: LBST. (2020). International HYDROGEN Strategies. Prepared for WEC opportunity for Chile2 Clean energy for a global transitionPunta Sierra wind power plant, Coquimbo RegionThe most powerful solar radiation on the planet is found in Chile s factors of 35% can be achieved in monofacialsolar photovoltaic plants with 1-axis generation in the central part of Chile is already more competitive than fossil-powered electricity renewable potential is located close to large consumption centers, gas grids, and logistical hubs, such as ports and distribution in the far South end of the country blow with the same power on land as wind turbines are able to achieve capacity factors of over 60% on-shore, equivalent to off-shore performance in other.

8 McKinsey & GREEN HYDROGEN STRATEGY | 10 Levelized cost of renewable electricity(USD/MWh)Center(Solar photovoltaic, Metropolitan Region)North(Solar photovoltaic,Antofagasta Region)South(On-shore wind, Magallanes Region) ,Chilehasincreasedthegenerationcapacityf romthesesourcesfive-foldand,by2030,70% ,aswellasinenergystorageandtransmissioni nfrastructure, renewable energy potentialamounts to 70 times current installed + GW1180GW191GW6GW+++A country rich in the energies of the future4050101520253035352020253040452050 Concentrated solar powerSolar photovoltaicOn-shore windRun of river hydroThe cheapest GREEN hydrogenon the planetLevelized cost of GREEN HYDROGEN (USD/kg H2)Potential for a 160 Mtonyearlygreen HYDROGEN production*Reductions in electrolyzerand renewable power costs will lead to highly competitive GREEN HYDROGEN production for domestic use and ,strongcorporatecommitmentstodecarboniza tion, HYDROGEN produced in the Atacama Desert and in the MagallanesRegion will achieve the lowest levelized cost of production* on the planet by quality and abundance of the renewable resources found in these regions will enable a large-scale competitive production.

9 *Does not consider compression, transport, and distribution costs, which vary according to the end-use of : McKinsey & GREEN HYDROGEN STRATEGY | *Source: International Energy : McKinsey & unique opportunity:A new, clean industry as large as the Chilean mining sectorNATIONAL GREEN HYDROGEN STRATEGY | 12 Projection of Chilean markets for GREEN HYDROGEN and its derivatives(BUSD)31116192457892151623283 3 CAGR+15%Associated renewable capacity(GW)2045202520302035204020505-84 0145200300250 Source: McKinsey & competitiveness of Chile in renewable energy production and the global need for clean energy carriers will open the door to the creation of an economic sector that could rival the size of the Chilean mining , applicationsExportsCumulative necessary investment (MUSD)845150220330270 Projected development of GREEN HYDROGEN applicationsUncertainty level, market size, and estimated year of breakeven for some applications of HYDROGEN in Chile.

10 Does not consider carbon price. List of applications not exhaustive.*: Includes GREEN methanol and synthetic fuel break-even yearUncertainty level in technological , , , , , opportunity will unveil in 3 distinct wavesNATIONAL GREEN HYDROGEN STRATEGY | 13 Ammonia for domestic shippingSUV0,55 Mton of equivalent H2 AmmoniaOil refineriesHeavy-duty trucksAmmonia exportsHydrogen exports*Blending into gas gridsMedium-sized trucksMining haul trucks (CAEX)Long-range busesWave 1 Wave 2 Wave 3 Source: McKinsey & equivalent H2 Synfuel and GREEN methanol opportunities increase in 2035+ NATIONAL GREEN HYDROGEN STRATEGY | 14A new productive identity for once-in-a-century opportunityTherenewableenergypotentialof ourcountryallowsfortheproductionofgreenc opper,cleanenergycarriers, ,upto25% ,largeamountsofinvestmentwillgenerategro wthandlocalvalueinourregions, , in Providencia, Metropolitan RegionOur Strategy3 Ambitions for clean industryDesert plateau.