Chile has announced that it wants to become one of the top three biggest exporters of green hydrogen by 2040. Yet some major hurdles remain. Does the country have the ability to cross them? Rebecca Bertram takes a closer look.
Chile is a country with immense potential to become a major player in the global green hydrogen market. Green hydrogen, produced through renewable energy sources, is gaining traction worldwide as a sustainable alternative to traditional fossil fuels, especially in hard-to-abate sectors, such as the chemical and steel industries. Chile boasts abundant renewable resources, a strong commitment to environmental sustainability, and a strategic geographic location that positions it well for green hydrogen production and exports. However, several challenges remain to realize the country’s full potential.
Chile’s government has undertaken considerable steps to present itself to the world as the green hydrogen superpower of the twenty-first century. Not only does the country plan to receive 70% of its energy from renewable sources by 2030 but it also intends to become carbon neutral by 2050. By 2030, the country aims to produce some of the cheapest green hydrogen in the world and be among the top three green hydrogen exporters in 2040. Chile’s government has realized that it cannot go it alone and has entered into various strategic partnerships with European and Asian companies and countries to reach its ambitious goal. Yet a clear action plan on how to get there is still missing. This leaves room for doubts about its ability to reach its ambitious goals.
Chile meets the first prerequisite for producing green hydrogen: the country is blessed with an abundance of natural resources suitable for green hydrogen production. The country has vast solar and wind energy potential, particularly in the northern desert regions, where the Atacama Desert receives about 308 watts per square meter – some of the highest solar radiation levels on the planet. Additionally, the southern regions of Chile experience consistent winds, making them ideal for wind energy production.
Harnessing these resources efficiently, however, is a major challenge. The long distance between these remote regions and the industrial hubs create logistical challenges in transporting the renewable electricity to where it is needed. In recent years, the build-out of solar in the North of the country has led to transmission lines being congested repeatedly. Attracting infrastructure investments will be crucial if the country wants to build out its renewable capacities in these remote areas. The Chilean government has taken note and has attempted to decrease pressure on current power lines by passing a recent e-mobility bill intended to give storage projects the ability to be paid for power they inject into the grid during off-peak periods. This is an important first step although much more is needed.
Another challenge to its green hydrogen dream is the issue of the balance water usage. Electrolysis – the process to produce green hydrogen – requires large amounts of water. Yet water scarcity is a pressing issue in many regions in Chile. Therefore, it is of utmost importance to find a viable and sustainable solution on how the available water can be balanced with different sectors, such as agriculture and industry. An opportunity could be to use sea or wastewater for its green hydrogen production. Yet electrolysis of this type is still in its infant phase and not yet a viable commercial option in the short term.
Other social and environmental concerns of green hydrogen production exist, and although green hydrogen is generally a popular topic among many Chileans, local opposition is beginning to gain traction. Especially the Magallanes region in the south of the country, where major investments by European companies and Chile’s oil company Enap are made into green hydrogen export projects. Planned are more than 3,000 wind turbines, ammonia plants and export terminals, in a region otherwise famous for its ecotourism. If Chile wants to become a global leader in green hydrogen production it needs to showcase how stakeholder engagement and community support can contribute to making the project truly sustainable and avoid potential conflict.
As the global demand for green hydrogen increases, it will become ever more important for producers to prove that its production is done in a socially just and sustainable manner. Global certification schemes that prove these points are likely gain traction. For import centers, such as the European Union, proving that its green hydrogen imports are actually sustainable and result in a lowering of overall carbon emissions is of utmost importance for its public acceptance. This is Chile’s chance to get ahead of the game and take adequate account of the environmental and social impacts of green hydrogen production. Ensuring that projects are environmentally sustainable and do not harm local ecosystems is crucial in becoming a green hydrogen superpower.
Positioning itself in the global market will be a key determinant of whether Chile can reach its leadership position in green hydrogen exports. The market is highly competitive, and a number of other countries, such as the United States, Australia and Spain, are already way ahead of the game. In Latin America too, competition is fierce, with Brazil and Colombia also jumping on the green hydrogen bandwagon. Chile’s advantage lies in its abundance of renewable energy but it has been slow in developing a concrete plan on how to meet its ambitious goals.
Investors miss a clear set of rules and market incentives to attract capital investments needed to get Chile to where it wants to be. Every new industry needs regulatory incentives to take off while costs remain uncompetitive. That is why Chile’s President Boric has called for a strategic action plan to be finalised in early 2024 to provide a new momentum to the green hydrogen cause.
Chile has the potential to become a major green hydrogen exporter, leveraging its abundant renewable resources, geographic advantages, and commitment to sustainability. However, several challenges must be addressed, and reaching its goals will not be a straightforward journey. Yet Chile can shine by providing a unique way forward for sustainable, cost-effective green hydrogen that contributes to a greener and more sustainable future for all.