Uruguay’s green hydrogen push: The state of play

Uruguay could potentially generate revenue of US$2.1bn a year by 2040 from the sale and export of green hydrogen and derivative products.

That’s according to the country’s draft 2040 green hydrogen roadmap, officially unveiled this week and out to public consultation until August 15.

Key future domestic demand drivers identified in the document are heavy transport, marine transport and fertilizers, while exports will be chiefly geared to meeting demand for e-jet fuel, ammonia and e-methanol.

On the global stage, decarbonization drives and geopolitical factors are spurring development of a green hydrogen and green hydrogen derivatives industry. 

The roadmap initiative, meanwhile, is the latest major development on the green hydrogen front in Uruguay, which is seen as a clean energy champion and stable investment destination with much untapped renewables potential, particularly wind.

Officials aim to adhere to the roadmap through hydrogen development program H2U, which will be formalized and converted into “national policy,” said energy minister Omar Paganini, who urged the country to ride the "green hydrogen wave." 

Bringing the public and private sectors, academia and civil society together, H2U will have six central focus areas: investment, innovation, infrastructure, regulation, offshore and human resources.  

Officials project green hydrogen sector revenue could gradually climb from US$100mn a year in 2025 to US$300mn in 2030 and, depending on what export opportunities are embraced, reach US$1.3bn in 2035 and US$2.1bn in 2040.

By 2030, Uruguay could achieve hydrogen production costs of US$1.2-1.4/kgH2 in its western region, putting it roughly on par with other net exporters Spain, Australia and Algeria. Neighbor Chile could see costs of US$1.0/kgH2, according to the roadmap, produced by an IDB-supported group of ministry and state company and agency officials.

By the same year, the levelized cost of electricity from onshore wind plants is projected to be US$17-19/MWh, with solar registering at US$16-19/MWh and offshore wind US$26-28/MWh. Prices for all three technologies are forecast to trend down through 2050. Uruguay obtains the bulk of its electricity from hydroelectric power and wind and solar plants.

Risks are also identified in the roadmap. These encompass technology, market, political/social, and project execution/local competitiveness risk.  

THREE PHASES 

The document outlines three phases of development. 

The first (2022-25) envisages a flurry of work in the spheres of regulations, port infrastructure planning, incentives, coordination and bilateral agreements. 

The focus is on creating and supplying demand in the local heavy transport sector and attracting the first export-focused synthetic fuels project. Officials estimate 200-500MW of installed renewables capacity will be under development, coupled to some 50MW of green hydrogen production capacity with 100-300MW more in the pipeline.

In the second phase (2026-30), work is due to continue in the spheres of infrastructure planning and incentives and on the first export-focused projects getting underway. Officials envisage installed renewables capacity of 2-4GW along with hydrogen production capacity of 1-2GW, across 3-4 medium-scale plants and 1-2 export-scale plants.

In the third phase (2030 and beyond), a large domestic market is envisaged, with export growth accelerating. Various projects geared to meeting domestic demand would be underway along with several synthetic fuels initiatives. Officials forecast installed renewables capacity of around 20GW and some 10GW of hydrogen and hydrogen derivatives capacity. 

OTHER DEVELOPMENTS

German renewables company Enertrag recently announced a project – Tambor Green Hydrogen Hub – to produce about 15,000t/y of green hydrogen and convert it into e-methanol. Enertrag has partnered with local engineering consultancy SEG Ingeniería to develop the plant. Output would be used in Germany to substitute around 10% of methanol conventionally produced from Russian crude oil at Germany’s largest refinery. 

Uruguayan officials have previously said bidding processes would also be launched for onshore and offshore green hydrogen production projects, designed to woo private investment. 

Elsewhere on the green hydrogen map, state hydrocarbons company Ancap recently signed a green hydrogen MOU with World Bank Group member IFC. The deal could provide a source of financing. Ancap will be authorized to enter the green hydrogen market, Paganini said. 

Meanwhie, Uruguay’s national research and innovation agency ANII published rules corresponding to a call for production-focused green hydrogen R&D projects. Proposals were due by June 8. The government has established a US$10mn project funding pot, which would be delivered as a grant and disbursed over 10 years. Projects must involve electrolyzers of over 1.5MW in capacity and be in operation before 2025. Uruguayan companies, as well as consortiums formed by local firms and units of foreign players, were invited to participate.