Almost a year after Argentina pledged to manufacture green hydrogen in the context of the 26th Climate Summit (COP26), the discussion on the legislative framework for this crucial industry to reach decarbonization targets remains postponed.
In the meanwhile, time is running out not just for international investors, but also for nations interested in importing this renewable resource, which have been impacted by the energy crisis and the conflict in Ukraine.
Green hydrogen is considered “the fuel of the future” due to the minimal environmental effect of its production method, which emits only water vapor and no carbon dioxide. This energy source is produced by electrolysis, a method that uses electricity to separate the components of a compound, such as hydrogen and oxygen, using renewable energies like as wind and sun power.
Due to the winds of Patagonia and the sun of the Northwest area, Argentina has significant potential in both sorts, which has piqued the curiosity of foreign firms that have already settled in the country.
This is the case with the Australian company Fortescue Future Industries, which last November announced at the COP26 held in Glasgow, Scotland, an investment of US$ 8.4 billion to build a green hydrogen production plant in the Sierra Grande region of Ro Negro; and the American company MMEX Resources Corporation, which plans to invest US$ 500 million to build a wind farm and its respective plant in Ro Grande, Tierra del Fuego.
In addition, a third project pushed by the administration of Jujuy in conjunction with the French Development Agency (AFD) and based on solar energy is now in the planning stages.
The most ambitious of the three initiatives now underway in Argentina is that of the Australian company, which is in the “pre-feasibility” stage, awaiting federal legislation to govern this nascent global business.
Fortescue’s regional manager of Government and Communities for the Latin American Region, Sebastián Delgui, told LA NACION: “In this first phase, all the specific and necessary studies are being conducted to begin its development, including the analysis and study of lands to determine the viability of constructing wind farms, transmission lines, and the plant and port facilities there.”
And he added: “This includes the environmental and social impact studies as well as the wind measurement analysis, which must be conducted across all four seasons to ensure accurate and scientifically sound data. In the meanwhile, we are making work on the final project’s optimization “.
Nevertheless, despite the fact that the “pre-feasibility” stage does not necessitate a law in the near future, Delgui emphasized the significance of progressing in the legislative procedure in the medium term. “Prior to the final investment decision, a regulatory framework that provides guidelines for the development of the green hydrogen industry in the country and, in turn, permits Fortescue to collaborate with Argentina’s, the region’s, and the world’s decarbonization ambitions will be essential,” he said.
In response to a question regarding the factors that a Green Hydrogen Law should take into account, Delgui noted that, owing to the scope of the project, foreign organizations and banks must also provide money, therefore incentives are necessary. “It is necessary to find a mechanism to ensure the payments of debt services, suppliers, and shareholders; to ensure fiscal and legal stability; to guarantee the free availability of the product to be exported abroad, since the dollars coming from exports make the project feasible and the repayment of contracted obligations; and, finally, there must be a tax framework to ensure the competitiveness of the project at regional level,” he said.
Juan Cruz Azarri, a member of MHR Abogados, a legal company specializing in, among other areas, energy, infrastructure, and technology, said that it is essential that the regulatory framework consider a “long-term promotional development program”. According to him, such a scheme should include 50-year tax benefits, such as accelerated amortization, early VAT return, and tax certificate issuing for national investment.
He believed that “the law should be approved based on a fiscal stability framework that assures the regulations will not change over the project’s duration” and that “exchange rate stability should be assured” since “the green hydrogen sector is driven by the international market.” In this regard, Azarri emphasized that an industry-appropriate rule should not include export tariffs (retentions), which would discourage investment, because “it is not an extractive endeavor, such as mining, but an industrial one.”
Rio Negro’s petition for a legislation
The opposition, represented by UCR deputy Gustavo Menna, and the officialism, represented by Frente de Todos senator Martn Doate, have both introduced proposals seeking to regulate the green hydrogen business in the current Congress session. To date, none of them have proven successful. In the meanwhile, the National Executive Branch has not yet offered its own idea, as President Alberto Fernández indicated at the start of the regular sessions in March.
The provincial authorities of Ro Negro are confident that the Green Hydrogen Law will be enacted in 2022 despite the recent changes in the Cabinet that involve key dependencies in the subject, such as the current Production Secretariat, now led by José Ignacio de Mendiguren, and the Energy Secretariat, of Flavia Royón, who has just assumed one of the most deputized portfolios by the ruling coalition.
The governor of Ro Negro, Arabela Carreras, informed LA NACION that the long-term regulatory framework for this business with so much potential in our region will be addressed by the end of the year. According to the governor, the project would create between 15,000 and 50,000 direct and indirect employment.
In May of last year, Carreras attended the Green Hydrogen Global Assembly and Exhibition, which was organized by the GH2 Organization and held in Barcelona, together with the president of Forestcue, Andrew Forrest, and other business executives and representatives. There, Forrest accepted the project’s declaration of provincial public interest, which also outlines the criteria for the call for public bids to license the use of 625,000 hectares for the building of the plant in the region of Punta Colorada and the Somuncurá Plateau. Nonetheless, this is the initial step toward the project’s formalization, which requires federal legislation to become a reality.
“Without the regulatory framework, the call for public bidding cannot be issued because investors need to know the production and export conditions, as well as whether or not there will be incentives and what those incentives would be,” the governor stated. “By incentives, I mean tax restrictions so that they do not overlap with other fees, availability of cash for the payment of investors, and limits to export retentions (either none or some),” she said. And he concluded: “Investors will not come if there are no clear criteria.”
The President stated to LA NACION that they will call Secretary Royón and the new authorities of the Economy, with whom they have “excellent conversation in times of crisis,” to “begin working together as soon as feasible.” “Argentina has the chance to enter itself, with the green hydrogen sector, into a world afflicted by an energy crisis, therefore we must reach an agreement swiftly,” he stated.
In the meanwhile, Forestecue continues to advance in the “pre-feasibility” stage, as verified by the Secretary of State for Planning of Ro Negro, Daniel Sanguinetti, in accordance with what the Australian business previously stated.
“The installation of 17 wind measuring masts, which must remain in place for a full year, is scheduled. The masts are 110 meters tall and are equipped with an anemometer and several equipment that transmit data to a computer for processing. After winter conditions improve, the Secretariat of Environment and Climate Change has allowed the erection of six poles in a first zone “the official stated.
Fortescue’s project foresees, in its final stage, a green hydrogen production capacity of 2.2 million tons per year for export, which would cover an energy production equivalent to 10% of the electricity consumed by Germany in a year. Once the “pre-feasibility” stage is completed, the company will proceed with the pilot stage, which would begin once a regulatory framework is in place and would end in 2024, and then proceed with two more stages, ending in 2030.
