Chile’s green hydrogen sector, once hailed as a global frontrunner, has struggled to convert early enthusiasm into tangible project deployment. Now, a $2.8 billion tax credit program—capped at $5/kg of green hydrogen—is the government’s latest effort to unstick stalled developments and inject financial certainty into the market.
The tax incentives, announced under the Green Hydrogen Action Plan 2023–2030, are aimed at projects that have already secured permits but remain stranded in pre-final investment decision (FID) limbo. These include high-profile ventures like TotalEnergies’ $16 billion H2 Magallanes, a cornerstone initiative intended to transform the remote Magallanes region into a global hydrogen export hub.
Chile’s Energy Minister Diego Pardow described the program as a decisive intervention. “This is not about subsidising ideas,” he stated, “but about supporting execution.” The move comes amid rising concerns that despite vast renewable potential and favorable conditions—particularly in wind-rich southern Patagonia—Chile has yet to break ground on any commercial-scale green hydrogen export projects.
The country’s first hydrogen strategy, unveiled in 2020, identified a 160 GW renewable energy resource base and envisioned Chile becoming the world’s lowest-cost producer of green hydrogen. However, lack of offtake agreements, limited infrastructure, and high capital costs have slowed progress.
The new tax credit directly addresses these pain points, offering developers more predictable returns and improving project bankability. In parallel, Corfo—Chile’s economic development agency—and the Ministry of Finance have committed to a public infrastructure package, including port upgrades, transmission lines, and water desalination systems critical for electrolysis-based hydrogen production.
The southern region of Magallanes, historically dependent on fossil fuels and fisheries, is a strategic focal point. Projects there are expected to deliver not only export-ready hydrogen and derivatives (such as ammonia), but also broader industrial decarbonization, employment, and regional economic development.
H2 Magallanes alone could generate over 5,000 direct jobs during construction and several hundred permanent roles in operations. Moreover, developers are being pushed to integrate local supply chains and workforce training, aligning Chile’s hydrogen push with inclusive development goals.
Yet, questions remain over the speed of implementation. Despite political momentum, project timelines are tight: most developers expect first production by 2027 or later, provided FIDs can be secured in the next 12–18 months.
Chile’s ambition is not limited to regional decarbonization. With ammonia exports to Asia and Europe on the radar, hydrogen is framed as a new pillar of the country’s export economy—one that could rival lithium and copper. But this hinges on international coordination, particularly around certification schemes, trade agreements, and shipping infrastructure.
By offering direct tax incentives rather than pure capital grants, Chile hopes to align project economics with production performance—effectively rewarding operational output rather than speculative planning.
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