Chile’s green hydrogen strategy
In November 2020, the Chilean Ministry of Energy published its National Green Hydrogen Strategy, a roadmap which seeks to increase the energy matrix while also reducing greenhouse gas emissions.
The geographical characteristics of Chile create unique opportunities for energy production. Northern desert lands in Chile have some of the highest radiation levels on the planet. Strong winds in the south, on the other hand, create opportunities for generating Energy. Through Non-Conventional Renewable Energy (“NCRE”), the country is seeking to produce the cheapest green hydrogen on the planet by 2030, to be among the three main exporters by 2040, and to have 5 GW of electrolysis capacity under development by 2025.[1]During 2021, NCRE generation corresponded to 26.7% of Chile’s total electricity generation, having an installed capacity of 11,400 MW.[2]
Although Chile has lead in the promotion of NCRE, neighbors in Latin America—such as Colombia, Argentina, Uruguay and Brazil—have also developed similar strategies.
The development of NCRE requires not only policies, but also regulations which provide legal certainty to investors. Accordingly, the Ministry of Energy in Chile approved a guide in early 2021 to support applications for green hydrogen projects. There are also several working groups focused on enacting Hydrogen Law and Hydrogen Facility Safety Regulations in Chile. If enacted, these regulations would control the installation, design, construction, operation, maintenance, inspection and final termination of operations in Chile.
To date, there are already more than 60 projects. A quarter of these will start operating and producing green hydrogen before the year 2030.
Hydrogen applied in mining
The production of green hydrogen will also benefit Chile’s mining industry. Green hydrogen can be used in the manufacturing of low-emission explosives, the moving of ore by high tonnage trucks and subway mining, metallurgical processes, backup power generation, the transportation of personnel and supplies to the mine, and the sustainable export of ore.[3]
Mining represents around 12% of the Gross Domestic Product (GDP) and 60% of the exports in Chile, making it a fundamental pillar of the country’s economy. [4] [5] As such, the improvement of energy efficiency due to the development of green hydrogen in Chilean mining sites will result in a considerable reduction of CO2.
In August 2021, a hydrogen station generated the first molecule of green hydrogen for powering mining vehicles in Santiago, Chile. The station specifically dispenses fuel powering a forklift used at a mine site. The most advantageous implementation of hydrogen relates to the powering of mining trucks (used both in underground and open pit mines) with fuel cells or dual combustion, resulting in reduced CO2 emissions. For example, a well-known British mining company managed to power a mining truck with green hydrogen, with the truck’s engine powering 2 MW of energy (enough to supply approximately 1,000 homes) and containing eight parallel fuel cells and seven large lithium batteries. The engine is expected to be used to power a mining truck at an open-pit platinum mine in South Africa.[6]
These technological developments are expected to be implemented on a large scale during this decade, with strong governmental incentives to promote investment and innovation in mining.
Chile’s hydrogen industry – challenges with development
Hydrogen development in any country also comes with its fair share of complications and obstacles, which may include:
(i) Development of governmental regulation, granting legal certainty: As noted above, Chile is slowly generating a regulatory regime for hydrogen, and aims to soon regulate the entire hydrogen value chain (production, conditioning, storage, transportation, distribution and consumption).
(ii) The construction and development of adequate infrastructure and technical safety for hydrogen handling: This includes either altering existing infrastructure or building new infrastructure altogether to develop each stage of the value chain, from production to consumption. For example, in Chile some studies allow the injection of hydrogen into existing natural gas networks in percentages of up to 20%, depending on the tolerance of the pipeline.[7] Similarly, the “H2GN” project is in the design stage in Chile, which will incorporate hydrogen into the country’s gas networks.[8]
Other technical difficulties exist with respect to using water in electrolysis for the generation of green hydrogen. For example, it is estimated that between nine and 12 litres of water are needed to generate 1 kilogram of hydrogen. This consumption may even increase, due to the amount of de-mineralized water required for the process.[9] In Chile, there is abundant drought in the country, and seawater desalination projects linked to mining projects have been promoted. Eight desalination plants are currently in operation and there are 15 new initiatives. By 2031, it is projected that 47% of the water resources to be used in mining will come from seawater.[10]
(iii) The development of an appropriate market to commercialize hydrogen at a competitive price: Developing a regulatory regime in Chile for hydrogen production requires active commercial relations and effective cooperation agreements, in order to ensure the correct balance between supply and demand. Recently, international agreements in Chile, such as the “Energy Partnership Chile-Germany,” as well as several memoranda of understanding with European ports (Rotterdam, Antwerp and Zeebrugge) and with Asian countries (Singapore, Korea), have been signed.
Compared to other jurisdictions which only have the potential to produce gray or blue hydrogen, Chile also holds significant advantages as a potential producer of green hydrogen – given the country’s wealth in the supply of renewable energies, which assists in competitive pricing. Studies indicate that the cost of hydrogen could be $2.50 per kilogram at the beginning of this decade and could reach $1.20 per kilogram in 2030.[11]
Chile’s ability to successfully develop and transition our thinking of green hydrogen from a “fuel of the future” to the “fuel of the present,” will therefore depend on the country’s ability to overcome several obstacles, including: political will, technological innovation, and human capital. Chile is uniquely positioned as a pioneer in the production of green hydrogen in Latin America, and aims become one of Latin America’s largest producers in the medium and long term.
[1] National Green Hydrogen Strategy. Ministry of Energy, Government of Chile. November 2020. See more in https://energia.gob.cl/sites/default/files/estrategia_nacional_de_hidrogeno_verde_-_chile.pdf
[2] Report by “Chilean Association of Renewable Energy and Storage AG (ACERA)”. Renewable Energy Generation Sector. December 2021. See more in https://acera.cl/wp-content/uploads/2022/01/2021-12-Bolet%C3%ADn-Estad%C3%ADsticas-ACERA.pdf
[3] Report of Chilean Green Hydrogen Association (H2 Chile, November 2021). https://h2chile.cl/wp-content/uploads/2021/11/20211118_H2V_Mineria-4-1.pdf
[4] Information obtained from the Chilean Copper Commission (COCHILCO) database. “Gross Domestic Product (GDP) by class of economic activity and sectoral participation.”
[5] “Annual Foreign Trade Report”, prepared by the Research Department of the National Customs Service of Chile (2021).
[6] Global Hydrogen Review 2021, International Energy Agency (IEA).
[7] Study “Hydrogen injection in natural gas networks“. Publication prepared on behalf of the Project “Decarbonization of the Energy Sector in Chile” implemented by the Ministry of Energy of Chile and Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH in the framework of the intergovernmental cooperation between Chile and Germany. Santiago de Chile, August 3, 2021.
[8] See more in: https://www.gasvalpo.cl/noticiavisor.aspx?4,Pionero_en_Am%C3%A9rica_Latina:__ANUNCIAN_PRIMER_PROYECTO_DE_CHILE_QUE_INYECTAR%C3%81_HIDR%C3%93GENO_VERDE_EN_REDES_DE_GAS_
[9] “Wells to wheels: water consumption for transportation fuels in the United States”. Energy &Environmental Science. David J. Lampert, Hao Cai, and Amgad Elgowainy.
[10] Directorate of Studies and Public Policies. “Projection of water consumption in copper mining 2020-2031“. Chilean Copper Commission (COCHILCO).
[11] Hydrogen Council. (2020). “Path to hydrogen competitiveness. A cost perspective.” Hydrogen Council.
