How Chile’s green hydrogen story may unfold in 2023

Bnamericas Published: Thursday, December 29, 2022
How Chile’s green hydrogen story may unfold in 2023

A big question often asked about Chile and green hydrogen surrounds the type of projects that will take position in the vanguard.

While gigawatt-scale, export-focused projects are in the pipeline, plants geared initially to local offtakers, those production facilities with smaller capital requirements and territorial footprints and that leverage existing infrastructure and renewables capacity, will probably be the first out of the starting gate. Such configurations, especially if offtake is secured, should also be favorably placed to secure financing. 

Rumblings reinforcing this outlook are growing louder – a trend that should strengthen in 2023. 

State development agency Corfo is supporting a portfolio of projects via subsidies for electrolyzer acquisition, and, in parallel, has agreed to invest up to US$46mn in a US$300mn local green hydrogen fund that is poised to pump cash into its first projects in 2023. Other projects are emerging too, notable among them an initiative by power generator AES Andes, which has launched an open season for offtake from a future project, Adelaida. Likely buyers include the mining sector, an industry working to decarbonize, to burnish its environmental, social and governance (ESG) credentials. 

What is interesting about Adelaida is that the project piggy backs an existing environmental permit granted for the power station where the plant is due to be built. In these early, pioneering days of green hydrogen, companies are playing it smart, leveraging the knowledge, infrastructure and demand already in place. Multiple projects involve foreign players who have partnered with local stakeholders. 

Tailwinds are there: state support for green hydrogen, a need for economic reactivation, a 2050 carbon neutrality goal, ESG considerations, and, crucially, the potential for turning a healthy profit and economic diversification. 

Some of these local offtake projects may blossom into plants that also export, with e-gasoline, e-methanol and green ammonia the chief derivatives. These would likely come online in parallel, or after, the commissioning of the first major export-focused projects planned for Magallanes region, for example. Roughly the size of Greece, Magallanes is largely uninhabited and has abundant wind resources. 

Such gigawatt-scale projects are already being devised but, given their scope and complexity – coupled with the need to ensure community engagement and, in places, to adapt and build infrastructure – may only start breaking ground from end-2024.

Among the most advanced export-oriented projects is a major expansion of the Magallanes region Haru Oni e-gasoline pilot plant, which was recently launched (pictured). An environmental impact statement for an associated wind farm should re-enter the evaluation system in 2023. 

While environmental concerns and opposition exists, there is no lack of political support locally in Magallanes, and nationally, for green hydrogen, given the billions of dollars in investment, the flurry of jobs that would come and the green credentials of the industry. 

In terms of policy, a national green hydrogen strategy is in place and the energy ministry has launched a public consultation on a sector development roadmap. Officials are also sharpening their focus on areas such as territorial organization. 

All in all, 2023 should see a fair bit of movement in terms of strategy, projects, permitting news and planning. Challenges abound, in areas including project permitting, supply-demand coordination and skills training – and so do opportunities. Chile’s green hydrogen map is already populated by more than 30 projects, and more will be under wraps. Locally and internationally, demand for sustainable fuels and industry feedstocks will edge up, driven chiefly by carbon-reduction pledges. 

Coordination, policy support and public-private dialog is key for Chile to ride the wave and convert green hydrogen into a new, sustainable industrial pillar, a new source of jobs, export revenue and specialist knowledge that, one day, could also be leveraged.

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