Glenfarne on Chile green hydrogen: ‘We’re project developers, so we’re happy to take the risk’

Chile’s portfolio of publicly announced green hydrogen projects is growing. Among the latest added to the list is Green Pegasus, proposed by US energy player Glenfarne Energy Transition under a partnership with South Korean industrial giant Samsung.

Targeting the green ammonia segment, Green Pegasus is planned for northern Chile, which has world-class solar resources as well as attractive wind power zones.

Officials are considering a complex powered by up to 2GW of renewables capacity and production facilities that could produce an estimated 459,000t of green ammonia a year from hydrogen. 

The Glenfarne-Samsung collaboration agreement was announced this quarter, with a central initial objective of completing feasibility studies for multiple projects. 

Green Pegasus, the first project being developed as part of the agreement, would primarily focus on exports to Asia.

To find out more, BNamericas spoke to Glenfarne Energy Transition CEO and founder Brendan Duval.

Glenfarne Energy Transition – which operates in the LNG, renewables and grid stability spheres and has offices and power plants in Chile – is a wholly owned subsidiary of Glenfarne Group, a privately held energy and infrastructure development and management firm.

Multiple export-scale green hydrogen projects target Chile’s northern and southern regions, home to abundant energy resources and vacant land as well as some existing logistics infrastructure.  

BNamericas: What can you tell us at this stage about Green Pegasus, such as where it would be built? 

Duval: It’ll be in the north in the Atacama Desert. We haven’t given away the specific location. We do expect to install, for that particular project, in the range of 2,000MW of renewables.

We’re working with Samsung to optimize how much of that will be solar versus non-solar.

Samsung and ourselves, we’re doing business in other parts of the world, and so we decided to collaborate to pursue projects in Chile. Not just our own but also reviewing other developers’ projects that we may want to help with, step into, or buy.

BNamericas: What are your respective roles regarding Green Pegasus?

Duval: Samsung Engineering will provide its vast technical expertise regarding engineering and design as well as help identify potential offtake opportunities in Korea. Korea has done an excellent job of bringing together industry and government to ensure a big push for green ammonia offtake and we expect that to continue in the future to help incentivize the transition to hydrogen-based fuels. 

BNamericas: And Glenfarne’s role?

Duval: We would be owner-operator, boots on the ground developer. We have an affiliate, our subsidiary in Chile, Prime Energía, which is part of our EnfraGen power company, and that entity will provide boots on the ground.

We’ve developed 25 solar projects in Chile, five thermal plants, so we have extensive engineering, permitting, and community and government relations capabilities.  

BNamericas: What’s the state of play with the project, can you give us timelines?

Duval: We have already completed a prefeasibility study with Samsung Engineering and will now complete a more detailed feasibility study, including optimizing the renewable generation profile, and completing initial FEED engineering. That’ll take us through the end of 2023, early 2024. From there, we’ll assess the pace at which we move forward in Chile and which projects, of the ones we’ve screened, including our own, will move forward early 2024.  

BNamericas: Maybe a tricky one to answer, but what would need to happen for a final investment decision to be reached?

Duval: We would issue a notice to proceed if we had agreed a construction price and an offtake that is financeable against that. It would depend on the traditional project finance structure, where the revenues and the contracts for those revenues are financeable and the construction and total development costs have an investable, acceptable rate of return.  

BNamericas: So Samsung wouldn’t be an investor in the project per se?

Duval: Like all of the above, that’s up to us to determine with them, the ultimate ownership structure. That hasn’t been ruled out or put on or put off the table, the final equity ownership. 

BNamericas: In these pioneering days of green hydrogen, we often hear that offtake “is king.” What’s your view?

Duval: Absolutely. We’re project developers, so we’re happy to take the risk to find the land, do the engineering studies, do the permitting. But ultimately, to move from development to construction we would need to see long-term contracted revenues that meet our rate of return hurdles. So absolutely, offtake is king. But that’s a not a question for development, that’s a question for construction. 

One of the key things globally, now, is where is the global price of green ammonia going to settle. It seems to be that the price-setting mechanism is very heavily linked to incentives under the [US clean energy-focused inflation reduction act] IRA. And so that will ultimately create a market clearing price and then I think everything will be referenced to Gulf Coast green and blue ammonia.

It doesn’t have to be Gulf Coast, but it’s a natural place given all the marine and gas pipelines, particularly for blue ammonia. I do think Gulf Coast will be the global center of green and blue ammonia in the near term.

BNamericas: Just to wrap up, could you give us a brief overview of your strategy for Chile?

Duval: Coming into 1Q24, we would probably have decided where to move forward, including, but not limited to, Green Pegasus but also possibly other projects. From there, we’d have to make sure the offtake is available to be exported. The question is, can the logistics benefits of Chile outweigh some of the IRA benefits of the United States?   

BNamericas: Would you consider green methanol?

Duval: No. We’ve looked at it a little around our [US LNG project] Magnolia, considering some alternative fuels under IRA, but for Chile, we’re not considering methanol.