Germany’s GIZ working to spur flow of hydrogen finance in Chile

To help Chile’s renewable hydrogen industry take flight, the local office of German sustainable development cooperation agency GIZ is launching a financial service to connect developers with potential financial backers, BNamericas was told.

This initiative, which will be operational in the near future, is one of three associated financing schemes GIZ officials are working on and involves provision of a free financial brokering service for hydrogen projects with a ticket size of more than US$10mn.

Branded Financial Service Assistance (FSA), the scheme is open to local and international players. To provide transparency and visibility, an associated online dashboard for developer registration and project tracking is due to be launched in March-April.

GIZ officials are in the process of procuring a specialist external consultancy. Around two consultants could work out of Chile.

Demand for financing exists particularly among developers of medium-sized hydrogen projects, to support early-stage work in the areas of engineering and permitting as well as to help get projects built.

“Our priority is to support and build a bridge between development companies and investors,” Álvaro Castro, GIZ Chile renewable hydrogen financial advisor, said. “Our focus is on assisting, helping prepare business models and plans, due diligence, holding technical discussions ahead of project presentation.”

A focus will be on innovative financial solutions, potentially combining multiple sources of capital. 

“We’re not just talking about traditional commercial banks in Chile; it could be family funds, international banks, sources of sustainable finance, for example – to get the necessary financing to start projects,” Castro said.

This service is part of the project Team Europe for the Development of Renewable Hydrogen in Chile, which is co-financed by the EU and the German Ministry of Economics and Climate Protection (BMWK).

Along with FSA, GIZ is working on two linked initiatives. One involves opening the door for the introduction of a smart financing instrument for the sector – to help provide price stability – and the other emulating Germany’s non-profit foundation H2Global, designed to overcome the chicken-egg conundrum by providing long-term purchase agreements and solvent buyers.

On the three-pronged approach, Castro said: “It’s about giving a push, getting the hydrogen market started.”

GIZ is also engaged in other decarbonization projects in the country. 

Around 60 green hydrogen projects have been publicly announced in Chile, a country well positioned to export the energy carrier and its derivatives as well as use them to replace imported fossil fuels and associated industrial feedstocks in the domestic market.  

Pilot projects are operating and several large-scale initiatives have entered the environmental review process. The focus is shifting on to offtake, getting buyers and lining up financing.    

BNamericas will publish the full Q&A with Castro in the coming days.