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Green Hydrogen H2 News

Green Hydrogen: Latin America’s Untapped Potential and Challenges

Arnes BiogradlijaBy Arnes Biogradlija18/09/20233 Mins Read
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Latin America, blessed with vast water reserves, competitive labor costs, and existing clean energy infrastructure, seems poised for green hydrogen production. However, challenges in building a robust production infrastructure and a coordinated market persist.

The Latin American Green Hydrogen Potential

The Food and Agriculture Organization (FAO) reports that Latin America harbors nearly one-third of the world’s freshwater resources, providing a significant advantage for green hydrogen production. In addition to abundant water, the region boasts competitive labor costs and ample clean energy generation capabilities, including solar and hydroelectric power. When combined, these factors create a favorable environment for green hydrogen production.

Chile took the lead in 2021 with the H2Magallanes project, marking a pioneering effort in Latin America’s green hydrogen landscape. Subsequently, 62 similar projects emerged across 13 countries in the region, often involving foreign investments. Argentina, recognizing the economic potential, organized a global forum to propel green hydrogen initiatives and signaled its intent to pass hydrogen legislation, instilling investor confidence.

Europe’s pursuit of green hydrogen dovetails with Latin America’s capabilities. European Commission President Ursula von der Leyen’s visit to Latin American countries underscores this convergence of interests. Amid energy price spikes in Europe due to the Ukraine conflict, green hydrogen offers an attractive, cleaner alternative to gas imports. Latin America could potentially fill this need.

Challenges and Roadblocks

While Latin America’s green hydrogen potential is undeniable, roadblocks exist. Regulatory frameworks, investment incentives, certification standards, export infrastructure, research, qualified workforce, and environmental impact assessments remain underdeveloped. These gaps are partly due to the nascent nature of green hydrogen production in the region.

Private investment faces challenges typical of emerging sectors: a lack of volume, strategic direction, and institutional support, compounded by excessive risk capital. Meanwhile, Latin American states’ strategies often align with the World Bank and multilateral organizations’ recommendations, offering little differentiation. This has sparked interest from non-European investors like the United States, which has heavily subsidized green hydrogen production since 2022.

In the broader landscape, the Asia Pacific region leads in green hydrogen production and long-term planning. Japan, Australia, South Korea, China, Singapore, India, Indonesia, and Thailand all have extensive green hydrogen projects. These initiatives are underpinned by ambitious strategic goals, including establishing global, asymmetric supply chains similar to those in the hydrocarbon sector.

Latin America’s Choice

Despite these promising prospects, Latin America faces a critical choice. Should it prioritize exports to Europe or consider regional cooperation and domestic utilization? Exporting clean energy may disrupt negotiations over international pollution quotas. Alternatively, Latin American economies could benefit from green hydrogen as an agricultural fuel and an ingredient in environmentally friendly fertilizers.

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