“Up until now, one of the barriers to green hydrogen production is that it has a higher cost than gray hydrogen, and the cost of electricity is one of its greatest components.”
Hydrogen has historically been used as fuel in refineries, the production of ammonia, and the steel industry, among others, but new uses are currently under development, which will help reduce industry emissions and provide fuel for trucks, public transport, or ships, making it a potential replacement for oil and other fossil fuels used in these processes.
According to the International Energy Agency, Chile could produce up to 160 million tons of green hydrogen per year, doubling the current demand of hydrogen across the board, while Bloomberg estimates that the price of green hydrogen will be competitive with that of diesel in the course of around 10 years.
“Chile’s advantage in becoming a key player in the green hydrogen market is its abundance of renewable energy sources, allowing for lower cost electricity production. Few countries in the world boast the same characteristics as ours for the production of green hydrogen at prices the international market will require.”
Experts believe that Chile is poised to become a global leader in production, with an industry that could become a new center of progress for the country and the necessary potential to emerge as an essential production sector like copper mining is today. For Acera's Research Director, the time to act is now, not only so that Chile can become a green hydrogen exporter, but also, “The country must take advantage of the opportunity to use its natural resources as leverage to participate in those stages of greater added value within the hydrogen value chain. It would be a shame to limit ourselves to the export of green hydrogen without also participating in the export of technology, knowledge, and human capital for this global industry. To make that a reality, we have to work with a sense of urgency.”
And while Northern Chile has loads of wealth in terms of solar power, the south of the country has enormous potential in the development of wind power. “From this perspective, there is no limitation in terms of the site of green hydrogen production, as long as 100% of our electricity is produced using renewable energies.”
Chile’s growth in NCRE
During recent years, Chile has become one of the leading countries in the world for the development of renewable energies, aimed at mitigating the effects of climate change and generating non-contaminating sustainable energy. According to the 2019 Climatescope ranking prepared by Bloomberg NEF, the country holds first place in Latin America and second place in the world, behind India, as an attractive emerging market for investment in this area, out of a total of 104 countries.
In June, “non-conventional” renewable energies represented 18.2% of the national energy matrix, with an accumulated share of 19.2% in the electric matrix as of July 2020, according to information provided by the Renewable Electricity Generation Sector Statistics Report prepared by Acera. This is in addition to the contribution of conventional hydraulic energy, which brings the share of clean energies to 38.7% in July 2020.
The progress made in terms of renewable energies enhances the value of green hydrogen production for the country.
“Green hydrogen has enormous potential to become a relevant economic sector in Chile. It is important to work towards converting that potential into a reality and not merely an aspiration,” affirms the Acera representative.
“Green hydrogen has enormous potential to become a relevant economic sector in Chile. It is important to work towards converting that potential into a reality and not merely an aspiration.”
The first major milestone
Although the green hydrogen industry development strategy is just taking its first steps in Chile, there is already a pioneering project to start its production.
Enel Green Power announced that together with AME and other companies will be part of a project for green hydrogen production, baptized as Haru Oni. The first green hydrogen generation pilot plant has already obtained approval of its Environmental Impact Statement by the Magallanes Regional Commission for the Environment. It will be built in Cabo Negro, north of Punta Arenas, since the area has one of the world's best wind conditions onshore, due to its proximity to Antarctica from where air masses arrive.
The project consists of a wind turbine that will generate energy activating an electrolyzer that will separate the oxygen and hydrogen molecules contained in water, a process that is carried out without emitting CO2. Thus, by the beginning of 2022, Chile would have its own green hydrogen production, helping to accelerate the decarbonization process and bringing a just energy transition for all.