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Chile awards six new green hydrogen projects

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In late December, the Chilean National Development Agency (Corfo) selected six green hydrogen production projects for development, advancing the country’s efforts to become a global leader in the developing clean energy sector.

The winning bids would result in the addition of over 45,000 metric tons (mt) of green hydrogen capacity per year, with each facility projected to commence operations in 2025 or sooner.

The following projects represent over $1 billion in investment commitments by worldwide energy and chemical companies:

Faro del Sur (South Faro). Green Power Enel Chile, a subsidiary of the Italian energy company Enel, will manufacture 25,000 metric tons of carbon dioxide per year in the Magallanes Region, utilizing 240 megawatts of fresh wind energy. “The green hydrogen will be sold to HIF Chile, which will produce ethanol and e-gasoline for sale to Europe,” Corfo stated. The principal developer is Chilean industrial business AME, which is joined in the collaboration by state-owned oil company Enap, German engineering firm Siemens, and Enel. This project has begun construction.

Aconcagua HyPro. Linde, a German chemicals company, will create 3,000 metric tons of green hydrogen per year in the Valparaiso region, using 20 megawatts of electricity. Corfo stated the output will supplement the current production of gray hydrogen at the Aconcagua oil refinery for the National Oil Company (ENAP).

HyEx-Environmentally Friendly Hydrogen Production. Engie, a French utility and oil and gas company, will produce 3,200 mt/year in the Antofagasta Region using new power capacity of 26 MW. Enaex, a Chilean mining services company, will purchase the green hydrogen to use as a feedstock for the production of green ammonia for export.
Renewable Energy from Antofogasta Mining. Air Liquide, a French industrial gases company, will generate 60,000 mt of e-methanol using green hydrogen, CO2 recovered from the atmosphere, and 80 MW of renewable energy.

Bahia Quintero Hydrogen Green GNL Quintero, a Chilean natural gas and LNG company, will create 430 million tons of green hydrogen per year from a plant in the Valparaiso Region, using 10 megawatts of additional power.

CAP H2V. CAP, a Chilean mining and steel firm, intends to manufacture 1,550 metric tons of green hydrogen per year in the Biobio Region by utilizing 20 megawatts of renewable energy.

Additionally, in December, the H2 Magallanes project was unveiled, which will utilize ten gigawatts of wind energy in southern Chile to power an eight-gigawatt green hydrogen electrolyzer and an ammonia factory. The project’s principal developer is Total Eren, the developer unit of French energy company TotalEnergies.

Chile already has more than 40 proposed or under development green hydrogen projects, according to a September research by IHS Markit Senior Director, Latin America Gas and Power Etienne Gabel.

“Chile wants to be a powerhouse in the global hydrogen industry. It’s taking quite relevant steps from the policy side to place itself as one of these front-runners in Latin America and worldwide,” Gabel said 20 January in an interview.

“The country has unparalleled solar and wind resources and business-friendly power regulations,” Gabel added. “On the policy side, they are doing everything they can.”

Large, established global companies recognize the government’s interest in green hydrogen and the advantages that Chile’s access to renewable power can bring. “The private sector is answering the call,” Gabel said. “Overall, this [round of approved projects] is very promising…. Whether this will materialize in billions of dollars of investment remains to be seen. But this first step looks good.”

Chile’s audacious aim was detailed in its National Strategy for Green Hydrogen in November 2020. It set targets of developing 5 GW of electrolysis capacity by 2025, becoming the lowest-cost green hydrogen producer in the world by 2030, and becoming one of the world’s top three hydrogen exporters by 2040.

According to the International Renewable Energy Agency, it chose a promising area at a vital time (IRENA).

Chile was highlighted by IRENA as one of many nations (together with Morocco and Namibia) who are currently net energy importers but are “on track to become green hydrogen exporters.”

According to IRENA, green hydrogen might attain cost parity with natural gas-derived hydrogen by 2030, and even sooner during periods of high natural gas prices, such as in Europe in 2021.

With carbon emissions as the driving force, IRENA estimates that hydrogen will account for up to 12% of global energy consumption by 2050, potentially rewiring energy trade as countries previously reliant on Middle Eastern or Russian fossil fuels will have new options from emerging green hydrogen exporters.

Chile has undoubtedly positioned itself for export markets, as Gabel observed that the country has free trade and tax treaties with countries that account for more than 80% of global GDP, the highest share of any country. However, it must now create green hydrogen at a low cost to compete with other possibilities, with the national strategy plan setting a target price of $1.50 per kilogram by 2030.

Chile requires additional renewable energy to manufacture green hydrogen, and the National Energy Commission (CNE) revealed the parameters of its new power auction on 17 January. It is soliciting proposals for 5,250 GWh/year for a 15-year period beginning 1 January 2027.

Bids must be received no later than 17 June.

Chile’s most recent power auction last year was for 2 GW of wind, solar, and storage, and bids were received for more than 16 GW of generating and storage.

The government’s goal for green hydrogen alone is to install 200 GW of renewable energy capacity by 2040. According to the government, this will cost $220 billion. To put this in context, renewable energy capacity to meet domestic energy needs would be approximately 24 GW in 2040, or less than one-tenth of the capacity envisioned for green hydrogen.

Chile now has nearly 8 GW of renewable energy capacity, according to IHS Markit.

The push for green hydrogen complements the country’s ambition to harness solar and wind energy in arid desert areas and wind-prone regions, according to the Institute of the Americas’ 2022 Energy Landscape and Outlook report.

According to government estimations, the country has a solar energy potential of approximately 1,700 GW and an onshore wind energy potential of nearly 200 GW. According to Corfo, this is nearly 70 times the country’s current energy requirements.

While Chile appears to be ahead of the majority of other countries in terms of creating green hydrogen, the country confronts a number of obstacles if the industry is to attain its full potential.

For one thing, Gabel explained, the country’s location on South America’s southwestern coast isolates it from predicted important markets in Asia and Europe. Chilean exporters will need to overcome a shipping cost disadvantage. This is why lowering the cost of hydrogen is critical to the nation’s green hydrogen strategy.

Costs may also have an effect on the manner in which hydrogen is exported. The majority of the 40 proposed projects, Gabel stated, are designed with ammonia as the principal end product, not hydrogen. This is because ammonia is significantly easier and less expensive to export, he explained. Ammonia can be utilized directly by an importing country or converted back to hydrogen at a cost.

Another issue is that the Chilean government does not provide many direct financial incentives to developers. Six projects were approved in December and are expected to earn a total of $50 million in government support. However, this represents only 5% of the expected total investment of $1 billion—and the funds will be given to each business only after production begins.

In the best-case scenario, green hydrogen will increase at the same rate as renewable energy in Chile, where the country’s present 8 GW of installed capacity has already exceeded the country’s 2025 goal of providing 20% of electricity generation.

The government itself poses another potential hurdle for the green hydrogen business, since the country’s politics have been tumultuous since late 2019 societal unrest. These ultimately resulted in the election of Gabriel Boric, 35, as the country’s new president in December 2021. Boric’s left-leaning politics, as the youngest president in the country’s history, signal a possible shift away from the business-friendly governments of the previous decades, as he has spoken about raising corporate taxes and giving affected communities a greater say in infrastructure decisions, such as energy projects.

Chile is currently revising its constitution. According to the US-based Wilson Center, the process has had a “rocky start” from the constitutional assembly’s first meeting in July. By July 2022, the assembly is required to propose a draft constitution.

Certain issues critical to infrastructure could be altered as a result of the constitution’s rewriting, Gabel explained.

There is a lot of discussion on water, which is unsurprising given the country’s 10-year megadrought. “At the now, private parties can own water, but it is likely to become a public right under the new constitution,” Gabel added. “Additionally, there is discussion on inserting an article on environmental protection in the constitution. There may be others relating to indigenous peoples’ rights. And when the second referendum on the new constitution is held, civil discontent may erupt once more.”

Add it all together, and the country’s objectives may shift, making it more difficult to sustain the momentum on green hydrogen.

However, there are also significant indications that green hydrogen cannot be abandoned. Minister of Energy and Mining Juan Carlos Jobet revealed an update to the country’s hydrogen strategy on 19 January, titled “Plan + Energy: Green Hydrogen,” which would be published by the end of the month. It will include information on how public lands will be used for hydrogen and energy projects; procedures for expediting the construction or expansion of hydrogen and ammonia export terminals; and outreach to the public regarding the environmental review process for projects, according to news reports.

“Both the left and right [politically] desire a sizable hydrogen industry,” Gabel explained.

Nedim Husomanovic

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