The global effort to reduce carbon emissions has forced countries to seek innovative ways to meet their renewable energy targets. Green hydrogen results from the electric power generated by renewable energy sources through a process called “water electrolysis,” which is the separation of oxygen and hydrogen. Chile has ambitious goals for green hydrogen and has released a national strategy to become a leading low-cost exporter by 2040.
Strong Renewable Energy Fundamentals
We believe that Chile is an ideal location to develop green hydrogen because of the strong wind and solar resources in the country. Northern Chile has the highest irradiation levels in the world which support strong solar power generation. At the same time, due to its proximity to Antarctica, southern Chile generates substantial amounts of wind power.
Green hydrogen can utilize renewable energy sources that are too far from demand centers to be used as electricity. Green hydrogen is a clean burning molecule and can be used for ammonia production, in oil refineries, as well as to power heavy-duty and medium-sized trucks.
Chile is also a good location to develop green hydrogen because of its small area, which reduces the cost of infrastructure from the energy source. The government also expects initial domestic demand for green hydrogen to be driven by the mining sector, which has been under pressure to reduce its carbon footprint. In fact, green hydrogen can be used in the large mining trucks to help reduce the industry's carbon emissions.
Government Support for Pilot Projects
Chile has a robust strategy to develop the policies and framework to encourage the development of the industry. The government believes that Chile could produce up to 160 megatons annually of green hydrogen. The long coastline and port infrastructure could facilitate low-cost exports to Europe.
The domestic market for green hydrogen may be worth more than $30 billion, while exports could generate upwards of $20 billion. This would make the green hydrogen industry roughly the same size as the country's copper industry. Chile seeks to be a low-cost exporter of green hydrogen by 2040.
To stimulate investment in the sector, Chile has committed $50 million in financing to encourage the development of pilot projects. The Ministry of Energy has also formed a task force to improve the permitting and regulatory environment to increase foreign investment.
Our Outlook
We believe that the strong wind and solar fundamentals, along with the need for energy security in Europe, will drive investment in green hydrogen in Chile. Latam Energy Advisors provides social impact studies, environmental assessments, and project finance for renewable energy projects in Chile.
