Guiding investors, authorities along Latin America’s green hydrogen highway

Latin America holds a wealth of opportunities in the sphere of green hydrogen. Countries best placed to ride the wave are those with roadmaps and strategies, favorable investment environments and, chiefly, abundant clean energy potential. 

Among companies helping authorities and investors tap this nascent market is international strategy consulting firm HINICIO.  

To dig deeper into what HINICIO does and explore the state of play in Latin America, BNamericas spoke with the firm’s regional business development and strategy consulting manager, Nuria Hartmann.

BNamericas: Could you talk a little about HINICIO and what kind of services your company offers in the region?

Hartmann: HINICIO is a strategy consulting firm specialized in renewable energy, sustainable transport, decarbonization strategies and the energy transition. 

Since 2006, HINICIO has developed and consolidated first-of-its-kind skills and expertise focused on hydrogen and fuel cells, and is thus globally recognized as a leading consulting service provider especially in Europe and the Americas. According to our vision, renewable hydrogen plays a crucial role in future energy systems in order to meet emission-reduction targets. Thus, we have assumed the mission of advising and supporting our clients as a trustful ally in the creation of successful strategies, projects and policies, in order to accelerate the transformation of energy systems incorporating clean technologies. Our success is reflected in the recognition of our work with the Best Hydrogen Industry Service Provider Award obtained at the H2LAC 2022 event.

Our headquarter is located in Brussels, Belgium, and we have offices in France, the Netherlands, Chile, Colombia and the US, as well as having commercial representation in Mexico and China. For more than 15 years, our multidisciplinary team has been advising clients from both the public and private sector on their decarbonization strategies and supporting Power-to-X project developers in optimizing their projects with a holistic perspective, incorporating into the technological aspects also economic, social and environmental dimensions with a sustainable approach.

To respond to the market dynamics, we have four business lines: business and strategy consulting, project development assistance, M&A and investment support, as well as policy and regulation support.

We have extensive experience in the preparation of decarbonization strategies and roadmaps with a focus on renewable hydrogen (H2) and electromobility, market studies, corporate hydrogen trainings, identification of business opportunities, support in the development of projects through prefeasibility studies, sizing and optimization of plant configurations, due diligences of Power-to-X-projects, as well as regulatory analyses and advice on aspects of hydrogen certification. In addition, we have a recognized track record in advising public entities on hydrogen policies and regulation, and in identifying business models and M&A advice relevant to the hydrogen economy.

BNamericas: Regarding the nascent green hydrogen industry in Latin America, it seems that Chile, Brazil, Uruguay and Colombia are the most advanced countries in the region. Why? And do you foresee any changes in the next 2-3 years?

Hartmann: During the last three years, there has been a very dynamic hydrogen market development in various countries in the LAC [Latin America and Caribbean] region. This is based, above all, on two aspects: first, on a strong drive by the public sector through the publication of national roadmaps; and second, on a progressive development of hydrogen and derivatives’ projects; and together with this, the creation of the first hydrogen hubs in the region: in Chile, the hubs of Antofagasta, Biobío and Magallanes regions; the H2 hub of the Ceará region in the northeast of Brazil; as well as La Guajira in Colombia.

Indeed, Chile, Uruguay and Colombia stand out for the existence of roadmaps with ambitious market development targets, which are accompanied by various public promotion policies. Brazil does not yet have a national roadmap but it is not far behind if we look at the panorama of project development: multiple Power-to-X projects have been announced and there is a very interesting local demand opportunity for renewable hydrogen and its derivatives driven by a relatively large market.

Chile can still be considered a leader in terms of these developments, but Brazil is making great strides – it is the first country of LAC to have recently submitted a concrete proposal for a national hydrogen certification.

Our annual H2LAC Index, which HINICIO develops with New Energy Events, provides specific details about the current market developments, compares LAC countries’ performances and their status quo across the region and from one year to the other.

BNamericas: Regarding the Haru Oni project in Magallanes region in Chile, which has just started operations, what signals does this bring to the market in Chile, that is, how significant is the launch?

Hartmann: Although the Haru Oni project is a demonstration project (with a future-planned very large upscale), we believe that it will give positive signals in the ecosystem, since the project meets very interesting conditions for the energy transition such as technological innovation in production processes and CO2 extraction, operating off-grid, and a 100% renewable product from wind generation. 

In addition, it involves the export of e-fuels and already has the offtaker for the first production amount. Another interesting factor is the private-private collaboration between different actors in the H2 and derivatives value chain, which generates valuable synergies for the development and operation of the project.

Haru Oni is not an isolated case, in LAC there are around 90 projects in different stages of development, with Chile, Brazil and Colombia being the countries with the greatest number of developments. These projects are quite diverse in both their scale and configuration, and in terms of the target markets for their products. There is a lot of expectation regarding the production and export of renewable H2 and its derivatives – the LAC region is not lagging behind other regions globally!

BNamericas: Today, regarding green hydrogen, what are the most important barriers or challenges in the region?

Hartmann: The challenges or opportunities – to give it a positive connotation – are diverse, but the most important according to our perception are: the creation of demand, that is, that there are offtakers that today have a willingness to consume renewable H2 and its derivatives despite the fact that their price in several cases is still higher compared to BaU [business as usual] solutions. 

This aspect is closely related to access to financing – it is still a challenge for project developers to obtain financing [from commercial banks] due to the risks that these new projects entail. Here it is also worth mentioning that the public financing provided in countries of the LAC region, in comparison with the funds that exist in other geographical regions such as Asia, Australia, Europe and the US to promote the development of this type of projects, is relatively low.

A big current question is also the logistics of transporting large equipment and plant components, especially for remote regions such as Patagonia, as well as its availability – the acquisition of electrolyzers, for example, must occur several months in advance, since production capacities are still limited.

The LAC region also presents the challenge of developing projects under sustainable environmental criteria and social skepticism – projects need to shift the connotation of extractivism, by complying with early integration of communities and ensure benefits from these projects for the region itself to support local decarbonization and create local economic value.

Another challenging aspect is the issue of the certification of ‘green’ molecules. Looking at the global stage, there are already various certification systems under development or already operating. The European CertifHy System is one of them and HINICIO has been the coordinator of this system since 2014, which has provided us with in-depth expertise on the design and implementation of certification systems and the challenges that it entails, especially when we think of global harmonization of certification schemes or between countries in a region.

BNamericas: It seems to us that, in the region, the first operational projects will be aimed at local offtakers, not at the export market. How do you see the market developing?

Hartmann: In recent years we have seen announcements of large-scale projects with a focus on the export market in the LAC region. However, if the barriers and challenges that arise when deploying the renewable hydrogen and/or derivatives market in LAC are taken into account, the inclusion of local offtakers can de-risk the project and accelerate its deployment.

Projects with local offtakers are usually on a smaller scale than those for export, and therefore development and construction times are shorter. The key factor of this type of project with local offtakers is that it would allow faster and earlier action to close regulatory, bankability and financing gaps, among other challenges, and in this way obtain lessons learned and help guide the creation of pending regulation.

BNamericas: When comparing the development of green hydrogen projects in Europe with LAC, what difference do you see in terms of infrastructure and land?

Hartmann: Renewable hydrogen and/or derivatives projects, by requiring a renewable energy source such as solar PV or wind, require large areas of available land for the generation of electricity for commercial-scale operations. Considering this, we see that, unlike Europe, in LAC there is a greater amount of land and areas available for development of this infrastructure. From the above, we see that a key aspect in the development of the projects is the selection of the best site for each project, but that it is not only focused on choosing the area with the best renewable resource, but also incorporates other criteria such as availability of sustainable sources of water; required infrastructure and electricity; availability of easements for hydrogen pipelines; type of land use that allows the development of this kind of projects and that those do not affect protected areas or reserves; topological characteristics of the terrain, nor provoke land-use conflicts, among others.

In recent years we have seen that this evaluation of the best land and its ‘eligibility’ is very relevant and critical in the development of renewable hydrogen and/or derivative projects, reflected by great interest from different clients. Therefore, at HINICIO we have already helped several of our clients in different LAC countries with our service called Land Eligibility Assessment which, through geospatial analysis software, allows us to define areas with a greater specific advantage for each renewable hydrogen and/or derivative project, depending on its final product and use as well as scale, among other aspects.

BNamericas: Are you observing any trends regarding projects in the region? For example, is there more interest in certain types of derivatives or projects, for example projects that leverage existing infrastructure and already have offtakers, such as the mining industry?

Hartmann: There is no clear trend and it depends a lot on the type of product that the final offtaker needs. Now if we focus on export projects, we have seen an increase in renewable ammonia projects because it allows the reuse of all existing “gray” ammonia infrastructure for transportation, storage, and distribution. In addition, there is tremendous potential to replace the gray ammonia used in industries such as fertilizers for agriculture and explosives for mining, with renewable ammonia produced using renewable hydrogen, thereby decarbonizing scope 1 (hydrogen as a fuel for transporting minerals, in the case of mining) and scope 3 emissions (indirect emissions from explosives, among others) from these industries. In addition, there are new premium markets that are being developed, for example to apply ammonia as a fuel in the shipping industry, so-called bunkering.

Given the important role that renewable ammonia is taking today for the decarbonization of industries and transport systems, we have identified the need for the existence of certification schemes that enable global trade leveraged in the existing supply chain for ammonia. The certification will ensure compliance with decarbonization goals imposed by local and international regulations and allow consumers to verify the origin and emissions footprint of the molecule.