A study by the Central Bank determined that it has become an attractive investment for zero-emission projects, but it also allows for the clean generation of its derivatives: ammonia, methanol and the so-called e-fuels.
The centennial Antofagasta railway (FCAB) is preparing to receive the first hydrogen locomotive in Latin America
The locomotive, which will be added to the company's fleet in the coming months, was developed by CRRC Qishuyan Company, a renowned locomotive factory in the Chinese province of Jiangsu. It has a total power of 1,000 kilowatts and is equipped with a high-capacity battery and an on-board hydrogen storage system.
The locomotive is powered by hydrogen derived from local renewable energy sources, which will completely eliminate carbon, nitrogen and sulphur emissions generated during operation, thus achieving "zero emissions" and is expected to mark a milestone in the railway history of the Southern Cone when it is put into operation.
“We are proud to be pioneers in the incorporation of clean technologies that not only improve our operational efficiency, but also contribute significantly to reducing our carbon footprint,” said Katharina Jenny, General Manager of FCAB.
This experience is far from being the only one in that Latin American country.
According to a recent study by the Central Bank of Chile, called 'Green hydrogen in Chile: demand and investment perspectives', green hydrogen - or H2V - is inserted as a fundamental piece in the fight against a global climate crisis, and although its use as industrial gas is not something new, using renewable energies in its production makes it a "green" or "clean" source of energy, since it does not produce greenhouse gases, the study says.
Chile has an advantageous position in renewable energy, with an energy potential of more than 1,800 gigawatts, which far exceeds domestic demand, according to data from the Ministry of Energy in 2020.
Chile's competitiveness is also relevant in this industry, with production cost estimates of around US$ 1 per kilo of H2 by 2030, lower than estimates for other competing countries due to its comparative advantages.
“For this reason, it has become an investment attraction for H2V projects or their derivatives: ammonia, methanol and e-fuels,” highlights the study carried out by researchers Jorge Arenas, Sofía Bauduco, Gabriela Contreras, Juan Guerra-Salas and Vice President Stephany Griffith-Jones.
PROJECTS AND INVESTMENTS
Currently, there are five green hydrogen projects in the Chilean Environmental Impact Assessment System (SEIA), which are driving investments of around US$15 billion that will see the light of day between 2025 and 2026. In terms of production, these projects would exceed 300 kilotons of H2V per year once in operation.
Two of these projects would be located in the Magallanes and Antarctica region in the extreme south of the country, another two in the Antofagasta region with a mining vocation, and the remaining one in the Valparaíso region, where the two most important ports in Chile are concentrated.
There are other announced projects, mainly in Magallanes, since they require the special characteristics of the wind in that region, in order to provide the projects with low-cost wind energy. Also, proximity to the sea is necessary for those projects that are accompanied by desalination plants in their production processes, along with lowering transportation costs.
“Within the decarbonization process that both the Chilean and global economies are facing, H2V is a fundamental element, being able to replace fossil fuels to produce heat, electricity and other energy sources. This positions it advantageously over other types of renewable energy, some of which also require modifications to the infrastructure of the equipment that requires energy in order to be used,” the report highlights.
In this way, internal and external demand are estimated to increase over time, in line with the objectives to achieve carbon neutrality by 2050 at the latest, according to the Climate Change Framework Law of 2022.
On the domestic demand side, the transport sector is the one that would need H2V the most, although mining and industry are also projected to begin demanding H2V and its derivatives from 2030.
HUNTING FOR OPPORTUNITIES
Recent weeks have been generous in announcements about green hydrogen for Chile
Just last Friday, the state oil company Enap and the French firm HIF Global signed an agreement that will speed up the implementation of synthetic fuels in Chile.
This commercial agreement, signed in Paris, will allow the state-owned company to participate as a shareholder in HIF projects, develop a business model for the state-owned company to market carbon-neutral fuels and advance the modernization of existing infrastructure in Magallanes.
This document updates previous agreements between both companies and opens the possibility for Enap to join as a shareholder in HIF's e-Fuel production projects in the far south, where it will reuse Enap's own infrastructure for the Cabo Negro docks.
It will also allow the development of a project to facilitate everything from the unloading of equipment to the export of final products and to define a business model for the state-owned company to market carbon-neutral fuels. The agreement establishes a modernization plan.
"This demand is a window of opportunity for our country that will not automatically translate into investments, but we must generate complementarity or support between the public and private sectors to take advantage of these opportunities in a timely manner (…) We are already getting into the subject and the projects are already beginning to take shape," said Chilean Finance Minister Mario Marcel, regarding the agreement.
Last week, Hyvolution Chile 2024, an international hydrogen fair, also took place in the Chilean capital.
Among other events, a delegation of Taiwanese experts highlighted the potential for cooperation in the local hydrogen industry.
Taiwan Hydrogen and Fuel Cell Partnership (THFCP) executives highlighted that Chile represents a region of great interest, given that the South American country currently stands out as one of the global leaders in the development of green hydrogen, one of the country's 12 key strategies to achieve the goal of zero emissions by 2050.
With a Memorandum of Understanding (MoU) on the matter already signed, all that remains is to move forward and get things done.
“We need to establish a complete supply chain, an ecosystem to advance in renewable energy. If Chile is focused on a sustainable future, Taiwan is the way to go,” said Ricardo Ming-Sung Hsu, trade assistant at the Trade Negotiations Office, member and representative of the delegation.
Also during the inauguration of Hyvolution 2024, the first green hydrogen truck was presented that will operate in the logistics sector for land transport of a retail company that was awarded Corfo funds for the use and adoption of these technologies in the Chilean industry.
“The advancement of Green Hydrogen is a State policy. We are continuing something that began in the second government of President Bachelet, which was institutionalized by the government of President Piñera and which today, in our Government, we are consolidating,” said the current Chilean president, Gabriel Boric, at the opening of the fair, recalling that lithium, copper and hydrogen are key elements for the global energy transition and for achieving carbon neutrality.
The state-owned Corfo is the government agency that is promoting private green hydrogen initiatives with $35 billion pesos (about US$37 million) for projects such as green fertilizers, reconverting trucks and buses, green copper production, as well as the signing of agreements with the Government of Magallanes for the harmonious development of this industry in the area.
“In Chile, a portfolio of innovative experiences around Green Hydrogen is beginning to develop. One of these cases is this green hydrogen truck that will be incorporated into Walmart Chile's logistics operations and that joins the project to adapt forklifts to this clean energy technology that they carried out last year. These initiatives generate knowledge and experience for Chile, strengthening our green hydrogen ecosystem,” said Minister Pardow.
LONG TERM GROWTH
"As these projects materialize and this implies greater investment, the impact on long-term economic growth will be positive," continues the Central Bank's report published on Monday.
Such is the confidence that the estimate of non-mining trend GDP growth in the September 2024 IPoM includes some of these projects in the capital evolution of the central scenario and the optimistic sensitivity scenario.
Along with beneficial internal use, it is also considered that the world's major economies are in transition to meeting ambitious but necessary goals to achieve sustainable objectives.
In this context, public policies and initiatives have been developed to support H2V, particularly in the European Union – which was in Chile just over a year ago, shedding light on its interest – which presents excellent opportunities for Chile, a country that, due to its potential and competitiveness in renewable energies, could position itself advantageously in the industry.
Although there is consensus that the H2V industry in Chile is just beginning and the uncertainty associated with its future prospects is high, it could play a relevant role in facing the world's climate challenges.
“If all the investment projects mentioned in the previous section were to materialize, and estimating the start of their operations between 2035 and 2040, their production would cover a relevant fraction of the estimated demand for that period. Thus, in the scenario proposed for H2V demand, there are great incentives for these or new projects to materialize,” concludes the Central Bank study.
