Chile may be affectionately known as the country of poets, but it could soon become better known as a global leader in green hydrogen. By 2030, the government aims to transform the country into the world’s cheapest source of alternative fuel and eventually become a leading international exporter.

Stretching from the Atacama Desert in the north to the glacial fjords of the Patagonian south, Chile can draw on an abundance of renewable sources of energy. Renewables capacity has already grown five-fold over the past six years and the government expects 70 percent of the national power grid to be supplied by renewables by 2030.

“Chile has the most potent solar radiation on the planet, located in the north of the country,” says Adalberto Castañeda Vidal, research assistant at the Center on Global Energy Policy at Columbia University, in New York. “Wind power in the south of Chile yields capacity factor of over 60 percent, which is one of the highest in the world.”

Chile also boasts infrastructure that could be repurposed for green hydrogen production, particularly the mining sector in the Atacama Desert. “Given its status as an exporter of commodities such as copper, Chile has a much-needed infrastructure base to position itself as one of the largest exporters of green hydrogen over the next decade,” says Andres Labbe, director of green hydrogen investment at public-private non-profit Fundación Chile.

By 2025, the government expects to reach 5GW of electrolysis capacity and by 2030 to produce green hydrogen below $1.5/kg, equating to electricity generated at roughly $15-20/MWh. According to research from information provider IHS Markit, the levelised cost of energy in Chile could be $25-30/MWh by 2030 for an average utility-scale solar PV unit and an onshore wind project. This should result in hydrogen production at around $2-3/kg, which is closer but still almost double the original target.

Chile will also have to compete with other nations for market share. Likely entrants include Australia, given its extensive renewable resources and access to Asian markets, while Middle Eastern producers have the industrial capability and know-how to adapt to green and blue hydrogen production.

Already, early mover Saudi Arabia has greenlit what could become the world’s largest green hydrogen plant, near the planned city of Neom. The kingdom realises it needs to radically diversify its economy away from oil and gas dependency if action matches rhetoric and the world finally breaks with fossil fuels.

Testing the waters

The Chilean government maintains that proactive public-private co-ordination will be key to lowering barriers to entry. Several asset managers and public operators have already taken strides in that direction.

In January, Copenhagen Infrastructure Partners announced it was teaming up with renewables providers AustriaEnergy and Oekowind to develop a 1.7GW green hydrogen project in southern Chile. The $3 billion project will produce ammonia from green hydrogen, powered by onshore wind power.

Fundación Chile also aims to raise $300 million for its hydrogen fund and ultimately plans to invest in 12 to 15 ventures. Over the next decade, the firm expects Chile to capture around 5 percent of global green hydrogen investment, roughly $23.5 billion, and reach at least $10 billion annually in exports.

“Given that these are relatively new technologies, and a market is in the process of formation, traditional financial institutions are cautious about the businesses that they finance,” says Labbe.

“In this sense, public-private cooperation through blended finance structures will facilitate the reduction of certain risks and enable the entry of long-term private capital.”

In late December, the Chilean government also sanctioned six new green hydrogen projects, valued at more than $1 billion in investment. This takes the country’s total to more than 40.

The largest development is the H2 Magallanes project in southern Chile, led by a subsidiary of French energy giant Total. The venture is projected to add 10GW in installed wind capacity once it launches in 2027.

The increase in green hydrogen should also ease the expansion of renewables capacity. The government anticipates 200GW of renewable capacity by 2040, up from a power base of just 25.5GW in 2021.

“Without hydrogen as a long-term storage solution for renewable energy, we will have to either continue to rely on natural gas to meet peak demand or waste renewable power during periods of low demand,” cautions Jo Bamford, founder of UK hydrogen distributor Ryze Hydrogen.

Anne-Sophie Corbeau, global research scholar at the Center on Global Energy Policy, highlights that the ‘colour’ of hydrogen hardly matters at this early stage. “I think we ought to be colour-neutral on low carbon hydrogen and try to kick-start the hydrogen economy as much as possible,” she says.

“We also need to reduce the cost of hydrogen. Remember $1/kg is about $8 per million British thermal units, so cheap hydrogen is actually not so cheap in million British thermal unit terms.”

Mirco Hilgers, a partner at law firm Baker McKenzie, agrees that cost could be one of the main barriers. “The biggest challenge in developing a green hydrogen project nowadays is that it’s still too expensive to be as beneficial as desired,” he says. “Other challenges include the current lack of engineers and other human capital specialised in green hydrogen production.”

But the Chilean government is at least conscious of some of these factors and plans to make things more transparent for the private sector. Measures being discussed include a public and private roundtable to decide the tax regime, regulations to protect the hydrogen value chain and a task force to accompany project developers.

Last December, a bill was introduced in the lower chamber of the National Congress to establish a blending mandate for hydrogen into the gas network. The mandate is still under review.

Opportunity knocks

While Chile may be a frontrunner in Latin America, several other nations have also started to make baby steps into green hydrogen. Last year, Colombia published its green hydrogen roadmap and expects 1-3GW of electrolysis installed capacity by 2030. Hydropower already generates 75 percent of the country’s electricity supply, while wind and solar potential in the north could prove an abundant supply of green hydrogen.

The government estimates that by 2030 green hydrogen will be cost-comparable with both Chile and Australia. Before then, blue hydrogen is seen as the most favourable low-carbon hydrogen blend considering Colombia’s industrial infrastructure and rich hydrocarbon resources.

From 2030, the government expects green hydrogen in the north to reach cost parity with blue hydrogen. The green variety should become the most competitive blend in the country from 2040.

The government is also projecting at least 1,500-2,000 light-duty fuel cell vehicles, 1,000-1,500 heavy-duty fuel cell vehicles and the industrial sector taking 40 percent consumption of low-carbon hydrogen feedstock by 2030.

Like Chile, Colombia hopes to eventually become a global exporter of green hydrogen. The government puts Asian hydrogen demand at 190Mt by 2050, with 60Mt from the EU and 60Mt from the US. Strategically close to North America, Colombia has direct access to Europe through the Caribbean and to Asia via the Panama Canal or its Pacific coastline.

Last year, Latin American neighbour Uruguay also released its green hydrogen strategy plan. The country is offering between 8 and 18 blocks off the coast to increase wind production for potential green hydrogen production. The World Bank estimates that the country has 275GW in offshore wind capacity, while the government estimates that project investment could eventually reach between $1 billion-$3 billion.

Brazil is another South American country starting to think about green hydrogen. “Even though a specific regulatory framework has not yet been established, foreign investors and partners have shown a special interest in developing green hydrogen in the country, while local governments have been fostering the creation of hydrogen hubs,” says Ligia Schlittler, partner at Brazilian law firm Felsberg Advogados.

As a case in point, renewables provider Enegix is developing the $5.4 billion Base One project in the northeast state of Ceará. The project is expected to produce over 600 million kg of green hydrogen, tapping into 3.4GW of baseload capacity generated by wind and solar power.

Chile may be affectionately known as the country of poets, but it could soon become better known as a global leader in green hydrogen. By 2030, the government aims to transform the country into the world’s cheapest source of alternative fuel and eventually become a leading international exporter.

Stretching from the Atacama Desert in the north to the glacial fjords of the Patagonian south, Chile can draw on an abundance of renewable sources of energy. Renewables capacity has already grown five-fold over the past six years and the government expects 70 percent of the national power grid to be supplied by renewables by 2030.

“Chile has the most potent solar radiation on the planet, located in the north of the country,” says Adalberto Castañeda Vidal, research assistant at the Center on Global Energy Policy at Columbia University, in New York. “Wind power in the south of Chile yields capacity factor of over 60 percent, which is one of the highest in the world.”

Chile also boasts infrastructure that could be repurposed for green hydrogen production, particularly the mining sector in the Atacama Desert. “Given its status as an exporter of commodities such as copper, Chile has a much-needed infrastructure base to position itself as one of the largest exporters of green hydrogen over the next decade,” says Andres Labbe, director of green hydrogen investment at public-private non-profit Fundación Chile.

By 2025, the government expects to reach 5GW of electrolysis capacity and by 2030 to produce green hydrogen below $1.5/kg, equating to electricity generated at roughly $15-20/MWh. According to research from information provider IHS Markit, the levelised cost of energy in Chile could be $25-30/MWh by 2030 for an average utility-scale solar PV unit and an onshore wind project. This should result in hydrogen production at around $2-3/kg, which is closer but still almost double the original target.

Chile will also have to compete with other nations for market share. Likely entrants include Australia, given its extensive renewable resources and access to Asian markets, while Middle Eastern producers have the industrial capability and know-how to adapt to green and blue hydrogen production.

Already, early mover Saudi Arabia has greenlit what could become the world’s largest green hydrogen plant, near the planned city of Neom. The kingdom realises it needs to radically diversify its economy away from oil and gas dependency if action matches rhetoric and the world finally breaks with fossil fuels.

Testing the waters

The Chilean government maintains that proactive public-private co-ordination will be key to lowering barriers to entry. Several asset managers and public operators have already taken strides in that direction.

In January, Copenhagen Infrastructure Partners announced it was teaming up with renewables providers AustriaEnergy and Oekowind to develop a 1.7GW green hydrogen project in southern Chile. The $3 billion project will produce ammonia from green hydrogen, powered by onshore wind power.

Fundación Chile also aims to raise $300 million for its hydrogen fund and ultimately plans to invest in 12 to 15 ventures. Over the next decade, the firm expects Chile to capture around 5 percent of global green hydrogen investment, roughly $23.5 billion, and reach at least $10 billion annually in exports.

“Given that these are relatively new technologies, and a market is in the process of formation, traditional financial institutions are cautious about the businesses that they finance,” says Labbe.

“In this sense, public-private cooperation through blended finance structures will facilitate the reduction of certain risks and enable the entry of long-term private capital.”

In late December, the Chilean government also sanctioned six new green hydrogen projects, valued at more than $1 billion in investment. This takes the country’s total to more than 40.

“We ought to be colour-neutral on low carbon hydrogen and
try to kick-start the hydrogen economy as much as possible”
Anne-Sophie Corbeau
Center on Global Energy Policy

The largest development is the H2 Magallanes project in southern Chile, led by a subsidiary of French energy giant Total. The venture is projected to add 10GW in installed wind capacity once it launches in 2027.

The increase in green hydrogen should also ease the expansion of renewables capacity. The government anticipates 200GW of renewable capacity by 2040, up from a power base of just 25.5GW in 2021.

“Without hydrogen as a long-term storage solution for renewable energy, we will have to either continue to rely on natural gas to meet peak demand or waste renewable power during periods of low demand,” cautions Jo Bamford, founder of UK hydrogen distributor Ryze Hydrogen.

Anne-Sophie Corbeau, global research scholar at the Center on Global Energy Policy, highlights that the ‘colour’ of hydrogen hardly matters at this early stage. “I think we ought to be colour-neutral on low carbon hydrogen and try to kick-start the hydrogen economy as much as possible,” she says.

Mirco Hilgers, a partner at law firm Baker McKenzie, agrees that cost could be one of the main barriers. “The biggest challenge in developing a green hydrogen project nowadays is that it’s still too expensive to be as beneficial as desired,” he says. “Other challenges include the current lack of engineers and other human capital specialised in green hydrogen production.”

“We also need to reduce the cost of hydrogen. Remember $1/kg is about $8 per million British thermal units, so cheap hydrogen is actually not so cheap in million British thermal unit terms.”

But the Chilean government is at least conscious of some of these factors and plans to make things more transparent for the private sector. Measures being discussed include a public and private roundtable to decide the tax regime, regulations to protect the hydrogen value chain and a task force to accompany project developers.

Opportunity knocks

Last December, a bill was introduced in the lower chamber of the National Congress to establish a blending mandate for hydrogen into the gas network. The mandate is still under review.

While Chile may be a frontrunner in Latin America, several other nations have also started to make baby steps into green hydrogen. Last year, Colombia published its green hydrogen roadmap and expects 1-3GW of electrolysis installed capacity by 2030. Hydropower already generates 75 percent of the country’s electricity supply, while wind and solar potential in the north could prove an abundant supply of green hydrogen.

The government estimates that by 2030 green hydrogen will be cost-comparable with both Chile and Australia. Before then, blue hydrogen is seen as the most favourable low-carbon hydrogen blend considering Colombia’s industrial infrastructure and rich hydrocarbon resources.

“The biggest challenge in developing a green hydrogen project nowadays is that it’s still too expensive”
Mirco Hilgers
Baker McKenzie

From 2030, the government expects green hydrogen in the north to reach cost parity with blue hydrogen. The green variety should become the most competitive blend in the country from 2040.

The government is also projecting at least 1,500-2,000 light-duty fuel cell vehicles, 1,000-1,500 heavy-duty fuel cell vehicles and the industrial sector taking 40 percent consumption of low-carbon hydrogen feedstock by 2030.

Like Chile, Colombia hopes to eventually become a global exporter of green hydrogen. The government puts Asian hydrogen demand at 190Mt by 2050, with 60Mt from the EU and 60Mt from the US. Strategically close to North America, Colombia has direct access to Europe through the Caribbean and to Asia via the Panama Canal or its Pacific coastline.

Last year, Latin American neighbour Uruguay also released its green hydrogen strategy plan. The country is offering between 8 and 18 blocks off the coast to increase wind production for potential green hydrogen production. The World Bank estimates that the country has 275GW in offshore wind capacity, while the government estimates that project investment could eventually reach between $1 billion-$3 billion.

Brazil is another South American country starting to think about green hydrogen. “Even though a specific regulatory framework has not yet been established, foreign investors and partners have shown a special interest in developing green hydrogen in the country, while local governments have been fostering the creation of hydrogen hubs,” says Ligia Schlittler, partner at Brazilian law firm Felsberg Advogados.

As a case in point, renewables provider Enegix is developing the $5.4 billion Base One project in the northeast state of Ceará. The project is expected to produce over 600 million kg of green hydrogen, tapping into 3.4GW of baseload capacity generated by wind and solar power.

What’s in a colour

While there are various definitions and labels for hydrogen products based on their carbon footprint and origin, ‘green hydrogen’ is generally taken as the variety produced via electrolysis of water from variable renewable sources.

The ‘colour’ of hydrogen is important because it has implications for the pace of the energy transition. Today, the most common form is grey hydrogen, produced from natural gas, while coal yields the more carbon intensive black hydrogen.

“The same infrastructure we are using for natural gas now can be adapted for blending hydrogen into methane pipelines, CCS [carbon capture and storage] and the transport and storage of future fuels like hydrogen and ammonia,” adds Dave Noakes, co-founder and senior manager at private equity firm Prostar Capital.

Another form, blue hydrogen, is essentially the same as grey hydrogen but the emissions are captured and stored underground via CSS. There are other more experimental forms, including turquoise hydrogen, which is produced from thermal cracking of methane, and pink hydrogen, which is generated by nuclear power.