Chile unveils green hydrogen strategy to become world-class exporter

Chile’s energy ministry has unveiled a national green hydrogen strategy that aims to turn the country into a world-class producer and exporter by 2040.

The government will provide financing, update regulations, spur research and development and encourage both public and private sector players to integrate green hydrogen into existing frameworks to spur local adoption and later an export market.

During the strategy’s launch on Tuesday, President Sebastián Piñera and energy ministry representatives said the country had the capacity to compete with others aiming to become green energy hubs such as Germany, Australia, Canada and Japan due to its unique characteristics.

These include ample access to cheap renewable energy, a lack of domestic hydrocarbons production – which makes hydrogen more competitive locally – and a dynamic, open market, according to a presentation.

“For us, the economic aspect is very important. Not only directly in green hydrogen, but also because several of our most important industries, including mining and agriculture, need to reduce their carbon footprint,” said energy minister Juan Carlos Jobet.

Green hydrogen can help industries by cutting emissions, such as replacing diesel vehicles used in mining and machinery, and by developing cleaner fertilizers for agriculture.

“Financial investors who buy our copper are increasingly aware of its carbon footprint. If we want to remain competitive, mining has to reduce its footprint to be profitable,” Jobet added. Hydrogen would also allow Chile to clean up its international and local shipping services.

Green hydrogen is made by splitting the water molecule through electrolysis using renewable energy, ensuring the entire process is emissions-free.

Chile has potential for over 1,800GW of renewable capacity, or 70 times the country’s current demand, meaning it could expand its generation assets into uses beyond conventional power, including hydrogen production.

The government expects the cost of clean energy generation to continue dropping over the coming decades. For example, solar energy produced in northern Antofagasta region is expected to fall from a current average of US$25/MWh to about US$10/MWh in 2050. Wind energy costs are projected to drop from around US$23/MWh to US$20/MWh by mid-century.

The government expects Chile will be able to produce some of the cheapest green hydrogen on earth over the next 30 years, starting from a price of between US$1.7/kg and US$2.6/kg depending on the technology and region in 2025 and going as low as US$0.8/kg in 2050. By 2030, the country could generate hydrogen with the lowest production costs in the world in Atacama and Magallanes regions, according to the presentation. Compression, transportation and distribution costs must also be factored in to calculate the final price.

According to the strategy, Chile could produce up to 160 megatons per year of green hydrogen. In its growth plans, the government projects the local industry would start with a US$1bn market for domestic applications in 2025, growing by 15% every year to US$9bn in 2050, plus US$24bn in exports. This would in turn require the construction of 300GW of new renewable capacity.

The development of the technology would come in three waves, with the first comprising large-scale domestic consumption through existing demand, for example in refineries, the presentation states. The second wave would spread hydrogen use to the transport sector and exports. The third wave would involve large-scale deployment of export infrastructure.

Concrete measures

The government announced a series of measures and a long-term roadmap for the development of the sector.

The short-term measures include the creation of a US$50mn financing round to encourage the development of pilot projects that will lead to lower costs over time. The financing is accessible to both local and international players.

Additionally, the government will open discussions on a carbon tax, which would make hydrogen more attractive by increasing the cost of its main competitors, especially diesel.

At the same time, the government will develop the necessary regulation to give certainty to investors and ensure the security of hydrogen operations. The energy ministry will also create a taskforce to accelerate the permitting process for new projects. Additionally, it will make adjustments to natural gas regulations to allow for green hydrogen quotas to be introduced in transport infrastructure.

The ministry is also pushing research and development related to hydrogen, including providing assistance to research centers and universities and encouraging the adoption of hydrogen by state-owned companies in order to develop local expertise and familiarity with the product.

The strategy will be overseen by a new green hydrogen council, which will update the plan every three years depending on the progress made.