Green hydrogen: The state of play in Latin America, project leaders

Latin American countries best positioned to ride the green hydrogen wave – or rather attract associated investment – are those that not only have abundant renewable energy resources but also favorable policy environments and country risk profiles.

While the industry is still in its diapers in the region, the potential is significant in terms of exports and local adoption in areas such as transport and industry, particularly steelmaking in major producer Brazil.

CHALLENGES FOR THE REGION

Latin America faces various challenges. These include implementing certification systems, supportive policy frameworks, project de-risking and community-engagement mechanisms and demand-side measures, along with ensuring power grids are ready and offer competitive prices. Having the requisite midstream infrastructure - particularly for export operations – is another. 

For building an exporting industry, where the region could benefit from the global focus on energy resilience and security, public-private collaboration and coordination is deemed vital to tap opportunities.

“If there’s no public-private alliance, it’s going to be difficult to position ourselves as leading global exporters,” said Eduardo Bitran, an academic from Chile’s Universidad Adolfo Ibáñez and chairman of business innovation hub Club de Innovación. “The commitment of countries is fundamental, with national strategies, route maps that show the road ahead and a participative, shared vision. Only a few countries have this today.”  

Bitran spoke during a seminar hosted by regional industry alliance LAC Green Hydrogen Action, where Eclac environmental affairs official José Javier Gómez echoed his comments.

“Coordination is key,” Gómez said. “Masses of factors are moving at the same time.”

Citing Latin America’s depleted state coffers, Gómez said tax exemptions, partial subsidies for pilot projects, and carbon taxes, were among investment-promotion options for the region.

TOP 5 COUNTRIES BY PREPAREDNESS

Chile – followed by Colombia, Brazil, Uruguay and Argentina – has progressed the most along the green hydrogen highway, according to the second H2LAC Index.

The index was compiled by sustainable energy and transport consultancy Hinicio, using survey results from 21 countries.

Researchers looked at the policy and incentives sphere, level of ecosystem development, number of projects in operation or under development, level of adoption of hydrogen-based transport and mobility, and level of international cooperation and hydrogen-export planning.

Chile also led the first H2LAC Index. “And the reason behind this is because the country has continued to see incentives from the public sector; it has seen high interest from the industry and also many agreements on international cooperation,” said Hinicio senior consultant Juan Pablo Zuñiga ahead of H2LAC 2022, an industry event being held in Colombia next month, organized by US company New Energy Events and co-hosted by the IDB.

The export-focused nation scored 65 points, with 100 indicating that a country is starting to have a mature hydrogen market. Colombia scored 57, Brazil 51, Uruguay 42 and Argentina 37.

The top three, a Hinicio presentation said, lead the index “due to the development of new energy policies, growth in the hydrogen ecosystem together with a display of projects and cooperation agreements.”

Chile has 25 projects under development, targeting both the export and domestic markets. Among the biggest is 10GW initiative H2 Magallanes, planned for the country’s windswept, barren south.

Colombia jumped to second place from fifth last year, displacing Costa Rica, on account of various factors including publication of a hydrogen roadmap, the founding of an industry association and the promotion of financial incentives, among them tax breaks. 

While one of the region’s smallest countries, Uruguay punches above its weight thanks to factors such as a roadmap, funding for research and development, and a planned export-focused methanol project.

“We are far from having a mature market … countries such as Germany, Japan, which are well-established, would accomplish probably 100 points in an index like this one,” Zuñiga said. “That’s the benchmark.”

Bitran also ranked Chile, Brazil and Colombia as the three most-prepared countries. 

For the H2LAC 2022 index, Hinicio surveyed 21 countries, with 17 returning full data sets: Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Panama, Paraguay, Peru, Trinidad & Tobago, and Uruguay.

The results will be explored further during H2LAC 2022, being held in Cartagena from October 4-5.

PROJECTS BY COUNTRY

Survey results showed that Latin America was home to 89 projects, with 74 under development and 15 pilot units operating. 

Together, Brazil and Chile account for half of those in the development phase. Projects in the conceptual phase or that have not registered progress, were excluded.

Chile is building a pilot production complex, know as the Haru Oni demonstration plant. Plans are already underway to convert it into a utility-scale facility. A US$500mn associated wind farm, Faro del Sur, was recently submitted for environmental evaluation.

Chile: 25 under development, 3 operational
Brazil: 20 under development, 4 operational
Colombia: 10 under development, 2 operational
Argentina: 6 under development, 1 operational
Mexico: 4 under development
Paraguay: 4 under development
Costa Rica: 1 under development, 4 operational
Uruguay: 2 under development
Bolivia: 1 under development
Peru: 1 operational
Trinidad & Tobago: 1 under development

BNAMERICAS PROJECT DATABASE

The BNamericas project profiles database lists early-stage green hydrogen projects that have been announced publicly and for which specifications are available. 

Capex, disclosed for 14 of them, ranges from US$8.4bn to US$47mn. The five jurisdictions with the most projects are Magallanes region, Chile (5); Río Grande do Norte state, Brazil (3); Antofagasta region, Chile (3); Ceará state, Brazil (3); and Pernambuco state, Brazil (2).

Visit the project profiles section of the BNamericas platform to conduct a bespoke search.

Picture credit: HIF