Chile’s green hydrogen ambitions have faced a significant reality check after AES Andes, the Chile based subsidiary of US utility AES Corporation, canceled its planned US$10 billion INNA green hydrogen and green ammonia complex in the Atacama Desert.
The decision follows a portfolio review under the company’s Greentegra strategy and underscores a broader recalibration underway across the global power sector, where capital is increasingly flowing toward lower risk renewable generation and energy storage rather than large scale hydrogen exports.
The timing is notable. Chile has positioned itself as one of Latin America’s most competitive locations for green hydrogen, citing high solar capacity factors in the Atacama and policy alignment with long term decarbonization goals. Yet even in this favorable context, AES Andes concluded that execution risk, permitting uncertainty, and capital intensity outweighed near term strategic value.
AES Andes operates a diversified fleet across Chile, Colombia, and Argentina, spanning thermal generation, wind, solar, and storage assets. Since launching Greentegra, the company has committed more than US$4 billion to renewable energy and energy storage projects, securing or developing approximately 2,181 MW of renewable capacity in Chile. Management has stated an ambition to lift renewables to around 70 percent of its generation mix, a target increasingly supported by grid scale battery deployments rather than hydrogen based pathways.
Under this strategy, solar and battery energy storage systems have emerged as the preferred investment class. AES Andes is completing the 215 MW Andes Solar III project alongside the 200 MW Bolero battery energy storage system. Beyond these assets, four additional BESS projects Arenales, Cristales, Pampas, and Atacama are under development, collectively expected to add 2,363 MW of storage capacity by 2027. In a system with rising solar penetration and congestion during midday hours, storage offers immediate revenue opportunities through peak shifting, ancillary services, and capacity provision.
By contrast, the INNA hydrogen and ammonia project faced structural hurdles from its earliest stages. Entering Chile’s Environmental Impact Assessment System in 2024, the project drew scrutiny due to its proximity to the European Southern Observatory’s Paranal site, home to the Extremely Large Telescope. Scientific and community stakeholders raised concerns over light pollution, dust emissions, air quality impacts, and water use in one of the driest regions on the planet. While AES Andes proposed mitigation measures, the permitting process remained complex and open ended, extending development timelines and inflating risk.
These challenges highlight a recurring issue for gigawatt scale hydrogen projects. Even where renewable resources are abundant, hydrogen production requires extensive supporting infrastructure, including water sourcing and treatment, compression or conversion facilities, and export logistics. In remote locations, these requirements amplify both capital expenditure and environmental sensitivity, complicating stakeholder acceptance.
AES Andes has not exited hydrogen entirely. The company continues to operate the Adelaida pilot project in Mejillones, Antofagasta, which includes a 2.5 MW electrolyzer producing approximately 1,000 kilograms of green hydrogen per day. The hydrogen is used to supply on site refueling stations, allowing the company to test operational performance, logistics, and cost structures at a manageable scale. Such pilots reflect a growing industry preference for incremental learning over immediate large scale deployment.
The contrast between INNA and Adelaida illustrates the current fault line in hydrogen development. Smaller projects can be integrated into existing industrial or energy ecosystems with clearer offtake and lower permitting risk, while export oriented mega projects remain exposed to policy gaps, uncertain demand, and volatile cost assumptions.
Green hydrogen production relies on renewable powered electrolysis to split water into hydrogen and oxygen, while green ammonia adds a renewable powered Haber Bosch process to bind hydrogen with nitrogen. Although ammonia simplifies storage and transport compared to compressed hydrogen, both pathways demand significant upfront investment and coordinated infrastructure. Until electrolyzer costs decline further and market structures mature, these systems struggle to compete with more modular renewable solutions.
