Ships await their turn to cross the Panama Canal from the Pacific to the Atlantic Ocean. Credit: Emilio Godoy / IPS

By Emilio Godoy
PANAMA, Aug 9 2024 (IPS)

In 2021, the Panama Canal welcomed a French experimental ship on a world tour, the Energy Observer, the first electric vessel powered by a combination of renewable energies and a hydrogen production system based on seawater.

The vessel exemplifies Panama’s aspiration to become a regional hub for hydrogen, the most abundant gas on the planet, but faces the existential decision of whether to generate it from renewable energy or fossil gas.

This Central American nation of just over four million people is developing, albeit belatedly, the first phase of its roadmap to materialise the National Green Hydrogen and Derivatives Strategy, approved in 2023.

For Juan Lucero, coordinator of the Ministry of the Environment’s National Climate Transparency Platform, green hydrogen would be the best option, given its renewable energy, strategic position and the influence of international policies to reduce greenhouse gas (GHG) emissions in sea transport.

“Panama has natural gas, and companies are interested in taking part in this business, in this case blue hydrogen. If Panama wants to be a hub, then blue is a good option,” he told IPS."For Panama, it has always been a priority to provide services, to be an energy hub. We have tradition, experience, history, as a hub for supplying bunker ships. The idea is to achieve that transition”: Juan Lucero.

He stressed that “for Panama, it has always been a priority to provide services, to be an energy hub. We have tradition, experience, history, as a hub for supplying bunker (a petroleum distillate) ships. The idea is to achieve that transition.”

The production of hydrogen, which the fossil fuel industry has been using for decades, has now been transformed into a coloured palette, depending on its origin.

Thus, “grey” comes from gas and depends on adapting pipelines to transport it.

By comparison, “blue” has the same origin, but the carbon dioxide (CO2) emanating from it is captured by plants. Production is based on steam methane reforming, which involves mixing the first gas with the second and heating it to obtain a synthesis gas. However, this releases CO2, the main GHG responsible for global warming.

Meanwhile, “green” hydrogen is obtained through electrolysis, separating it from the oxygen in water by means of an electric current.

The latter type joins the range of clean sources to drive energy transition away from fossil fuels and thus develop a low-carbon economy. Today, however, hydrogen is still largely derived from fossil fuels.

In its different colours, Panama joins Argentina, Brazil, Chile, Colombia, Costa Rica, Ecuador, Paraguay, Peru and Uruguay in having national hydrogen policies.

Penonomé wind farm, located in the central Panamanian province of Coclé. Credit: Emilio Godoy / IPS

Ambition

In 2022, the Panamanian government created the High Level Green Hydrogen and Green Hydrogen Technical committees to drive the roadmap in that direction.

But it has not made progress in the creation of free zones for trade and storage of green hydrogen and derivatives; updating regulations; and encouraging port activities to use electric vehicles, install decentralised solar systems, introduce energy efficiency and generate heat through solar thermal energy.

The green hydrogen strategy approved in 2023 includes eight targets and 30 lines of action, foreseeing the annual production of 500,000 tonnes of this energy and derivatives, to cover 5% of the shipping fuel supply by 2030.

In 20 years, the estimate rises to the supply of 40% of shipping fuels.

But this potential would require 67 gigawatts (Gw) of installed renewable capacity, which is a substantial deployment in a country whose economy is highly dependent on the activity of the inter-oceanic canal between the Pacific and the Atlantic, inaugurated in 1914 and expanded a century later, in a project that doubled its capacity and came into operation in 2016.

In 2023, the Panamanian energy mix relied on hydropower, gas, wind, bunker, solar and diesel, with an installed capacity of 3.47 Gw at the start of 2024. Panama currently has at least 31 photovoltaic plants and three wind farms.

Electricity generation accounted for some 24 million tonnes of CO2 emissions in 2021, with the largest contributors being energy (70%) and agriculture (20%).

But in 2023, the country declared itself carbon neutral, i.e. its forests capture the pollution released into the atmosphere, having a negative balance in GHG emissions.

The national strategy includes the construction of a 160 megawatt (MW) solar plant and an 18 MW wind power farm in the centre-south of the country, as well as a second 290 MW photovoltaic plant in the northern province of Colón.

In this province, a green ammonia production plant is planned to supply the future demand for shipping fuel, with an annual production of 65,000 tonnes and an investment of US$ 500 million.

The global shipping sector considers hydrogen, ammonia and its derivative, methanol, to be viable. The latter, which is also used to make fertilisers, explosives and other commodities, can be obtained from green hydrogen.

A demand of up to 280,000 tonnes of green ammonia per year is projected by 2040, which would require the installation of 4.2 Gw of electrolysis.

Leonardo Beltrán, a non-resident researcher at the non-governmental Institute of the Americas, told IPS about the process of building strategies, institutional vision, and short, medium and long-term goals.

“They have taken giant steps in a relatively short period of time. They already have the infrastructure, the canal. If that demand is met, it could be a game changer. If you can connect the canal to other ports, to the United States or Europe, they could very well have that (green) corridor that would anchor a relevant demand. That would boost on-site and also regional generation,” he said from Mexico City.

With support from the Inter-American Development Bank (IDB) and the United Nations Environment Programme (UNEP), Panama is developing pre-feasibility projects on the production of green hydrogen, its conversion to ammonia and the installation of an ammonia dispatch station as a clean shipping fuel, and on the production of green aviation paraffin.

The roadmap found to be more feasible the production of hydrogen in Panama, the import of green ammonia and the processing of green shipping fuel.

Panama aspires to become a regional hub for green hydrogen, obtained from water and renewable energy sources, including gas and ammonia production plants. Infographic: National Energy Board

Also, the country is considering manufacturing green paraffin for aviation, given that it hosts an air transport hub in the region, although testing is in its infancy and involves a much longer process than in the case of shipping.

Harmonisation

The hydrogen strategy is a function of Panama’s logistical, energy and climate change needs.

Panama currently has 10 tax-free fossil fuel areas, with storage capacity of more than 30 million barrels (159 litre) equivalent and one liquefied fossil gas area, which are tax exempt and could be the model for future hydrogen generation areas.

In 2021, the country shipped 42.79 million tonnes of fuel to more than 44,000 vessels, a figure that will grow by 2030. By comparison, hydrogen passing through the canal would total 81.84 million tonnes in 2030 and 190.96 million in 2050.

In its voluntary climate contributions under the Paris Agreement, Panama pledged to reduce total emissions from the energy sector by at least 11.5% in 2030, from its 2019 level, and by 24% in 2050.

In parallel, as of 2021, the Panama Canal, through which 6% of world trade passes, is implementing its own Sustainable Development and Decarbonisation Strategy.

The autonomous Panama Canal Authority’s plan includes the introduction of electric vehicles, tugboats and boats using alternative fuels; the replacement of fossil electricity with photovoltaics and the use of hydropower, to become carbon neutral by 2030, with an investment of some US$8.5 billion over the next five years.

The canal reduces some 16 million tonnes of CO2 each year.

Tolls and shipping services are its biggest sources of revenue, and thus the importance of developing shipping fuels based on clean hydrogen.

In the first nine months of 2023, 210.73 million long tons (1,016 kilograms) went through the interoceanic infrastructure, down from 218.44 million in the same period in 2022.

Of the total cargoes, one third are fossil fuels. Container, chemical, gas and bulk carriers are the main transports.

Lucero said the country is looking for investments in renewable energy, particularly green hydrogen.

“This market has to be developed in an orderly way. Demand has to be driven; otherwise, the investment will not be profitable. There are uncertainties, but the line that has been taken is that hydrogen is the future and we want to break away from being followers to become leaders, to seize the moment to develop and be prepared when the boom arrives,” he stressed.

For expert Beltrán, if the government that took office on 1 July follows this route, it would send a strong signal to the sector and thus pull the shipping sector toward energy transition.

“Replacing imports with local product is more convenient, and the way would be with the available, renewable resource. That would impact local development and contribute to the energy transition agenda,” he said.

Hydrogen (H2) is an essential component of today’s energy and industrial systems. Credit: Shutterstock.

By Adalberto Castañeda Vidal
NEW YORK, Feb 8 2023 (IPS)

Latin America has the potential to become the world’s dominant exporter of hydrocarbon. According to the IEA, Latin America could produce 25 percent of the 12 Million tons (Mt) of low-carbon hydrogen exports expected by 2030.

The region is definitely taking this opportunity seriously. Over the past years, 11 countries in the region have published national hydrogen strategies. While this is an excellent policy signal, it might not be enough to win the race against other regions.

For the region to realize its hydrogen exporting potential, I would argue that governments should move from broad national roadmaps to a more tailored and assertive hub development strategy.

This is because the first movers are going to be the ones securing the offtake contracts and attracting investments. Following are some considerations and proposals to promote low-hydrogen hubs across the region to turn Latin America into a hydrogen success story.

Hydrogen’s potential in Latin America

Hydrogen (H2) is an essential component of today’s energy and industrial systems. Around 90 million tons (Mt) of H2 are produced and used yearly from natural gas and coal, emitting 9-23 kg CO2/kg H2.

Chemicals, refineries, and steel production dominate today’s demand. Recent technological developments that allow the production of low-carbon hydrogen, position it as an alternative to decarbonize hard-to-abate sectors. In optimistic scenarios, hydrogen’s global demand can reach 115 Mt by 2030 and 528 Mt by 2050.

The two most prominent low-carbon hydrogen types are:

1. Green hydrogen, produced through water electrolysis paired with 100% renewable electricity, emits (0 CO2/kg H2).
2. Blue hydrogen, produced from fossil fuels combined with carbon capture and sequestration technologies (CCS), emits 1-3 kg CO2/ kg H2.

The global hydrogen generation market was valued at USD 129.85 billion in 2021 and is expected to expand at a compound annual growth rate of 6.4% from 2022 to 2030. New value chains will be needed to support this upscaling, including installing electrolyzer manufacturing plants in the region, which could create thousands of high-quality jobs.

Latin America has a competitive advantage in the global hydrogen race as it has one of the most abundant endowments of solar and wind resources which are key for the production of green hydrogen.

From 2014 to 2023, it was the most competitive region in terms of cost of production for both solar and wind. Furthermore, fossil fuel producers in the region can build on their existing knowledge and infrastructure to develop the value chains to capture and store CO2 from existing hydrogen production facilities.

Reasons for a hydrogen-hub strategy for Latin America

Some examples of planned hydrogen hubs already exist in Chile and Brazil. However, most hydrogen strategies in the region present broad national targets that lack demarcation and definition of particular incentives directed at the most strategic locations.

Latin America has a competitive advantage in the global hydrogen race as it has one of the most abundant endowments of solar and wind resources which are key for the production of green hydrogen

A hub is a specific geographic location with resources that provide a competitive advantage for developing the hydrogen supply chain. This pathway could facilitate cooperation between public and private stakeholders and community engagement. It also may provide increased visibility to attract first movers.

In this regard, hydrogen hubs are industrial areas with a competitive advantage in developing multiple projects for hydrogen production, distribution, utilization, and export. These hubs also have the presence of potential off-takers and existing infrastructure, which could be repurposed as the base for the hydrogen supply chain.

Hydrogen hubs can also be defined in opposition to its alternative, which is developing stand-alone individual projects. The lack of success of CCS projects over the past decade provide a good example of how stand-alone models face significant technical and commercial risks that can lead to inconsistent policy support and investments.

According to a study by the University of California, 80 percent of CCS projects ended in failure in the US. The projects failed due to a lack of off-takers, poor plant siting, and little support from local coalitions. These conditions impacted the project’s credibility of revenues and continued incentives support, which weakened their financial footing.

It is crucial to learn from these examples to mitigate such risks, considering particular vulnerabilities in Latin America that are hard to control, such as higher capital costs and exchange rate risks.

A hydrogen hub approach as a way to mitigate investments risks

While hydrogen’s potential is huge in the energy transition, as of the end of 2021, investments were still $863 billion short. This is when competition with other regions comes into play. Latin American economies must show more ambitious strategies to generate new opportunities and attract that capital. The key to facilitating the allocation of capital is to mitigate risks with strong market signals and the development of key infrastructure.

The benefits of a more focused hydrogen hubs promotion strategy can be divided into three parts: risk reductions, optimization of resource allocation, and securing policy and social support.

First, hubs can help mitigate market risks by building redundancy of supply and demand. This prevents risks associated with allocating production and demand to individual projects. Furthermore, it can help distribute technical risks among more players for the construction of key infrastructure projects, such as transmission lines, pipelines, and geological storage.

Second, according to experiences obtained from other clean energy projects, hubs are more efficient for optimizing planning and operation. Sole point-to-point projects run the risk of tailoring the technical decisions to the specific needs of one producer and one off-taker. However, with a hub approach, big market players cooperate and can involve smaller players, hence providing more opportunities to take advantage of economies of scale.

Lastly, stakeholders need to generate community acceptance and ensure the support of local authorities. Research from the Inter-American Development Bank found that of 200 conflict-affected infrastructure projects, 36 were canceled, 162 faced delays, and 116 faced cost overruns.

Therefore, community engagement cannot be regarded as a secondary requirement. A transparent hub proposal regarding its benefits, costs, and transition plans for communities and workers could help garner local support and, therefore, ensure consistent policy and social backing.

While clean hydrogen hubs can help reduce risks, optimize resource allocation, and garner local support, key decisions must be made by several actors with different goals. This creates a risk of delaying the projects or failing to reach agreements to get to final investment decisions. In this regard, it is important to consider lessons learned from failures and successes in other regions.

For instance, Europe is at the forefront of clean hydrogen development with a top-down and stakeholder-based approach. Lessons on the role of both national and local authorities in the pioneer hubs in Teesside and Rotterdam need to be taken into consideration.

On the other hand, while the US started following the source-to-sink model for CCUS, in 2021, it experienced a shift towards developing hydrogen hubs, which were revitalized with the recently approved Inflation Reduction Act.

Lessons from Chile’s hydrogen hub experience

In Latin America, Chile provides an excellent example of how to map and market hydrogen hubs at a global scale. In 2020, the Ministry of Energy published its National Green Hydrogen Strategy, outlining national priorities and targets. While the national strategy provided insights for three regions, in 2022, the government published a new report that identified two potential hydrogen hubs in Antofagasta (Atacama desert) and Magallanes. Both regions have well-defined projects and are working to attract investments and secure long-term offtake contracts with international partners.

To reproduce this strategy, the first hypothesis governments need to prove is the availability of natural resources, renewable resources for the development of green hydrogen or suitable geological storage, for blue hydrogen. The regions must ideally have the presence of relevant industries with experience in similar sectors, such as natural gas producers or renewable developers, as well as potential off-takers.

Then the government needs to devise a plan for incentives, such as tax deductions, accelerated depreciation, and customs exemptions, among others. On top of that, policy accelerators need to be implemented to allow faster deployment of technology, such as specialized land tenders and fast-track licensing and permitting.

Companies with international experience can work closely with local governments and federal agencies to ensure regulations do not hinder projects’ development.

Parallelly, hub participants need to engage with local communities. Plans must be outlined diligently to conduct consultations and provide attractive compensation when needed. A poor implementation of this requirement can create a bad reputation for key stakeholders and the industry as a whole.

These efforts can be conducted with international organizations and development banks, which could later provide initial investments to make projects bankable. Governments can also help further mitigate risks through grants, availability-based payments, and credit enhancement tools. Government support is also crucial to secure offtake contracts through signing Memorandums of Understanding or dedicating offices to deploy what some call “hydrogen diplomacy.”

While some international and regional examples show the benefits of following a hub-centered strategy, Latin American countries must face crucial challenges to make it work. First, the recent leftist turn in the region may pose some uncertainties about market-aligned policies.

With so much risk and lower margins, governments must prove they can attract and lay appropriate foundations for private investments.

On the other hand, with the broader land requirements for hydrogen projects, companies must show their commitment to building local support and respecting communities and regulations. A clean energy business cannot be developed with old dirty tactics. The potential for the region is evident. Will Latin America be able to work in teams and win this race?

Adalberto Castañeda Vidal is a second-year student of the Master of Public Administration at Columbia University – School of International and Public Affairs concentrating in Energy. He worked as a research assistant for the Center on Global and Energy Policy, where he participated in research projects about hydrogen and natural gas. He is originally from Tabasco, Mexico, and holds a bachelor’s in International Relations from the National Autonomous University of Mexico.

View of the port of Pecém, in the state of Ceará in northeastern Brazil, with its container yard and the bridge leading to the docks where the ships dock, in the background. Minerals, oil and gas, steel, cement and wind blades are some of the products imported or exported through what is the closest Brazilian port to Europe. CREDIT: Mario Osava/IPS

By Mario Osava
FORTALEZA, Brazil , Sep 15 2022 (IPS)

Brazil could become a world leader in the production of green hydrogen, and the northeastern state of Ceará has anticipated this future role by making the port of Pecém, with its export processing zone, a hub for this energy source.

The government of Ceará has already signed 22 memorandums of understanding with companies interested in participating in the so-called “green hydrogen hub,” which promises to attract a flood of investment to the Pecém Industrial and Port Complex.

“If 30 to 50 percent of these projects are effectively implemented, it will be a success and will transform the economy of Ceará,” predicted engineer and administrator Francisco Maia Júnior, secretary of Economic Development and Labor (Sedet) in the government of this state in Brazil’s Northeast region.

The lever will be demand from “countries lacking clean energy,” especially the European Union, pressured by its climate targets and now by reduced supplies of Russian oil and gas, in reaction to Western economic sanctions on Russia for its invasion of Ukraine.

Ceará has special advantages because of its huge wind energy potential, both onshore and offshore, in addition to abundant solar energy.

Hydrogen is produced as a fuel through the process of electrolysis, which consumes a large amount of electricity, and in order for it to be green, the electricity generation must be clean.

The state also has Pecém, a port built in 1995 with an industrial zone and an export zone, which is the closest to Europe of all of Brazil’s Atlantic ports.

Water, the key input from which the hydrogen in oxygen is broken down, will be reused treated wastewater from the metropolitan region of Fortaleza, capital of Ceará, 55 kilometers from the port. “It is cheaper than desalinating seawater,” Maia told IPS in his office at the regional government headquarters.

Fortaleza has the first large-scale desalination plant in Brazil, which is the source of 12 percent of the water consumed in this city of 2.7 million people.

Francisco Maia Júnior, Secretary of Economic Development and Labor of the Ceará state government, sits in his office in Fortaleza, the state capital. He believes that demand from the European Union will fuel the production of green hydrogen in Pecém, an industrial and port complex in this northeastern state of Brazil, which has great clean energy potential to produce it. CREDIT: Sedet Communication

Wind and solar potential

“Ceará is extremely privileged in renewable energies,” electrical engineer Jurandir Picanço Júnior, an experienced energy consultant for the Federation of Industries of Ceará (Fiec) and former president of the state-owned Ceará Energy Company, which was later privatized and acquired by Enel, the Italian electricity consortium, told IPS.

Wind and solar generation potential in the state was double the electricity supply in 2018, according to the Wind and Solar Atlas of Ceará, prepared in 2019 by Fiec together with the governmental Ceará Development Agency and the Brazilian Micro and Small Business Support Service.

Moreover, the two sources complement each other, with wind power growing at night and dropping in the hours around midday, exactly when solar power is most productive, said Picanço at Fiec headquarters, showing superimposed graphs of the daily generation of both sources.

The Northeast is the Brazilian region where wind power plants have multiplied the most, and their supply sometimes exceeds regional consumption. The local winds “are uniform, they do not blow in gusts” that affect other areas in the world where they can be stronger, said Maia. They are also “unidirectional,” said Picanço.

“The International Renewable Energy Agency (Irena) has recognized the Northeast as the most competitive region for green hydrogen,” said Picanço, forecasting Brazil’s leadership in production of the fuel by 2050. “Brazil is still hesitating in this area, but Ceará is not,” he said.

Duna Uribe is commercial director of the Industrial and Port Complex of Pecém, in northeastern Brazil. She studied in the Netherlands and negotiated the participation of the port of Rotterdam as a partner in Pecém, with 30 percent of the capital. CREDIT: Mario Osava/IPS

Having Pecém, a port through which 22 million tons a year pass, and its neighboring special economic zone (SEZ), with benefits such as tax reductions, enhances the competitiveness of Brazil’s hydrogen.

The port will have structures for storing hydrogen in the form of ammonia, which requires very low temperatures, with companies specialized in its transport and electrical installations with plugs for refrigerated containers, all factors that save investments, said Duna Uribe, commercial director of the Pecém Complex.

Link with Rotterdam

In addition, Rotterdam in the Netherlands, Europe’s largest port, has been a partner in Pecém, a state-owned company of Ceará, since 2018, with 30 percent of the shares. That brings credibility and attracts investments to the Brazilian port, Maia said.

This partnership is due in particular to Uribe, a young administrator with a master’s degree in Maritime Economics and Logistics from Erasmus University in the Netherlands, who worked at the Port of Rotterdam.

The complex currently generates about 55,000 direct and indirect jobs, 7,000 of which are in the port, where some 3,000 people work directly in port activities and in companies that operate there.

These wind blades were manufactured in the industrial zone of the Pecém Complex, in northeastern Brazil. Local production of green hydrogen will require a great deal of electricity to be generated by wind and solar plants. CREDIT: Mario Osava/IPS

Pecém was born in 1995 with an initial focus on maritime transportation and two basic projects: a private steel industry to be installed in the SEZ and a state-owned oil refinery, which did not work out.

But the complex has always had an energy vocation, with four thermoelectric power plants, two coal-fired and two natural gas-fired, as well as a wind blade factory and two cement plants.

Social effects

“The port was good because it gave jobs to many people here who used to grow beans, sugarcane, bananas, and today they no longer have land to farm,” Zefinha Bezerra de Souza, 76, who has lived in the town of Pecém since 1961, told IPS.

One of her sons is still fishing. The port did not affect fishing, which is done far out at sea, she said.

One of the first to start working at the port was Terezinha Ferreira da Silva, 54. She started working for the Andrade Gutierrez construction company in 1997, in charge of the port’s initial works, and was later hired by the Complex’s administrator, where she is in charge of receiving documents and is a telephone operator.

Zefinha Bezerra de Souza (right) recognizes the good jobs offered by the Pecém Industrial and Port Complex for the residents of the small town of Pecém. They have stopped growing beans and sugarcane because the land has become more expensive, but the fishermen continue to fish, like her son, married to Marcia da Silva, seated to her left. CREDIT: Mario Osava/IPS

“I was earning very well, I was able to build my house” in the town of Pecém, she said. The town, a few kilometers from the port, had 2,700 inhabitants according to the official 2010 census and twice as many people living in the surrounding rural area.

The “hydrogen hub” will start to become a reality in December, when the private company Energias de Portugal, from that European country, inaugurates a pilot hydrogen plant in the SEZ.

The wealth generated by the hub will initially be concentrated in Pecém, but will then radiate throughout the Northeast, because it will require numerous wind and solar energy plants to be installed in the region’s interior, Uribe told IPS in Fortaleza.

The installation of offshore wind farms is planned, but in the future. This activity has not yet been regulated and there will be a need for power transmission lines and training of technicians, she explained.

Brazil could lead in the production of green hydrogen in a few decades, due to the possibility of generating high volumes of wind and solar energy at low cost and because it has the port of Pecém, with the best conditions for exporting to Europe, according to Jurandir Picanço, energy consultant for the Federation of Industries of Ceará, the northeastern state of the country where it is located. CREDIT: Mario Osava/IPS

Hydrogen culture

Adaptations in local education, with changes at the university, are picking up speed. Since 2018, the state-owned Federal University of Ceará has had a Technological Park (Partec).

A hotel that was built on the university campus to host fans for the 2014 World Cup has been transformed from a white elephant into a green hydrogen research center, said Fernando Nunes, director-president of Partec.

Encouraging practical research and the emergence of new technology companies is one of its tasks, which are gaining new horizons with hydrogen.

It is necessary to train technicians even in the interior, because in the future hydrogen, initially intended for export, will be disseminated in the domestic market, “with mini-plants, when the cost comes down to reasonable levels,” Nunes told IPS.

“Energy will be the redemption of the Northeast, especially Ceará, where we already generate more electricity than we consume,” he said.

The promotion of hydrogen in Ceará is being carried out in a unique way, by a Working Group made up of the state government, represented by Sedet and the Secretariat of Environment, the Federation of Industries, the Federal University and the Pecém Complex.

At the Haru Oni demonstration plant where the ecological fuel based on green hydrogen will be produced, the wind turbine that will provide wind energy to the project promoted by the HIF Global group in the southern Chilean region of Magallanes has been installed. CREDIT: HIF Global

By Orlando Milesi
SANTIAGO, Jun 13 2022 (IPS)

Patagonia’s strong winds are driving projects that will place Magallanes, in the extreme south of Chile, in a privileged position to produce and export green hydrogen and help the country move towards carbon neutrality.

The projects underway aim to produce green fuel to replace gasoline in any vehicle, competing with the efficiency of electromobility. Another goal is to produce green ammonia to replace, for example, the 350,000 tons of gray ammonia that Chile imports for the large copper mines in the north of the country.

President Gabriel Boric said on Jul. 8 at the IV Business Summit of the Americas in Los Angeles, California, that Chile “is going to bet heavily on green hydrogen, both the State and the private sector.”

He encouraged U.S. businesspeople to invest in Chile while “linking production chains and raising environmental standards.”

“In the Patagonian region alone, if we do things right, the potential is enough to supply 13 percent of the world’s demand for green hydrogen,” said Boric, a native of Punta Arenas, the capital of the Magallanes region, popularly known as Chile’s Patagonia.

Julio Maturana, undersecretary of energy, told IPS that it is essential that green hydrogen be developed in harmony with Chile’s territories and ecosystems.

“We will push for hydrogen to be at the base of the creation of industry, and for Chile to participate in the entire value chain, including technological innovation,” he said.

Maturana said that the government is promoting studies to identify the greatest comparative advantages, “pushing for more sustainable mining, green fertilizers, green steel, zero-emission maritime and aviation fuels, or manufacturing processes so that Chile can add value not only with its winds in Magallanes and the desert sun, but also with its workers, universities and industry.”

According to the undersecretary, when the National Green Hydrogen Strategy was launched two years ago, there were 20 projects submitted – a number that has since risen threefold.

“There are more than 15 projects that have set their operational start date for green hydrogen production on an industrial scale before 2030,” he said, projecting “about 3.7 gigawatts (GW) of electrolysis operating by 2025 and 35 GW of electrolysis operating by 2030.”

In the extreme south of Chile, members of the Environmental Studies Group from the University of Magallanes carry out field work in Bahía Posesión to gather data for the environmental impact study for the H2 Magallanes project of the French group Total Eren. CREDIT: Erika Mutschke/University of Magallanes

Characteristics of the green hydrogen boom

Green hydrogen is obtained by electrolysis using only electrical energy from clean, renewable sources such as wind or sun.

Electrolysis involves using electricity to split the water molecule, consisting of two parts hydrogen and one part oxygen, H2O.

Of all the hydrogen produced in the world today, 95 percent is gray hydrogen obtained using natural gas, oil or coal, which causes the emission of large quantities of carbon dioxide (CO2), a major driver of global warming.

The use of electricity represents almost 70 percent of the cost of producing green hydrogen, which is why Chile is in a privileged location due to its enormous solar radiation potential in the northern Atacama Desert and the strong winds in the southern Patagonia region.

Magallanes is exceptionally windy because of the clash of high pressure systems caused by the Pacific anticyclone, which runs from Ecuador to Patagonia, and the low pressures and cold air masses originating from the polar front coming from Antarctica.

In 2019 Chile’s energy mix included 44 percent renewables. It is estimated that by 2030 renewables will make up 70 percent of the mix and that by 2050 the proportion will climb to 95 percent, as part of an energy transition that in addition to decarbonizing energy aims to free the country from costly hydrocarbon imports.

Producing a kilogram of green hydrogen today costs six dollars, but Undersecretary Maturana said that “Chile has the technical conditions to achieve production costs of less than a dollar per kilo.”

This would be important for bringing the cost of green hydrogen closer to that of fossil fuels, while now it is four times more expensive.

“To bring the price down, a series of measures will be required to provide certainty, access to financing and the promotion of a market or critical mass of local demand,” said the undersecretary.

Wind towers near Punta Arenas, capital of the Magallanes region, one of the best areas in the world for producing wind energy because a turbine can operate for more than 5,000 hours a year, according to Daniele Consoli of Enel Green Power, which is promoting the Haru Oni green hydrogen project in Chile’s southern Patagonia region. CREDIT: Ministry of Energy

Two flagship projects move ahead

A wind turbine has already been installed in Magallanes, part of an assembly platform built north of Punta Arenas at the Haru Oni demonstration plant.

The project, the first phase of which involves an investment of 51 million dollars, is being promoted by the international consortium HIF Global which, in parallel, will build a plant to produce green hydrogen that will then be treated to produce green gasoline.

“Little by little our project is taking shape and this turbine is a fundamental part of it,” said Clara Bowman, general manager of HIF Global, a company with 80 percent Chilean capital as well as the participation of German and U.S. firms.

“In parallel, in various places around the world, such as China, Germany and the United States, the equipment that will allow us to produce carbon-neutral eFuel is already being manufactured. We are working to start operations during the second half of this year,” explained the manager of the company, whose name is the abbreviation of Highly Innovative Fuels.

The French company Total Eren is developing the H2 Magallanes Project in the municipality of San Gregorio, near Punta Arenas, which will have up to 10 GW of installed wind power capacity and up to eight GW of electrolysis capacity, in addition to a desalination plant and an ammonia (NH3) production plant.

“The timeframe puts the start of the construction phase in 2025, and it is projected that by 2027 the first green hydrogen units could be operating,” said Macarena Toledo, environmental and social director of the H2 Magallanes Project.

The estimated investment is 20 billion dollars, she told IPS.

The Environmental Studies Group at the University of Magallanes is preparing the project’s environmental impact study, which includes variables of soil, water, fauna, flora, relief and strategies to inform the community about wind turbines and green hydrogen.

Claudio Gómez, dean of engineering at the university, told IPS that green hydrogen has unleashed “an explosive process that involves a revolution in the education of engineers, who must have a new kind of training to face new challenges.”

A sign reads “Welcome to the municipality of San Gregorio” in the extreme south of Chile, where the H2 Magallanes project is conducting environmental impact studies before starting construction of its project, the initial phase of which is scheduled for 2025. CREDIT: Total Eren

A cleaner future, not just on paper

The carbon-neutral fuel produced by Haru Oni will be tested in vehicles of the German brand Porsche, which is part of the consortium. The projection is that seven million cars will have green hydrogen cells by 2030 in China, Japan, the United States and South Korea.

The big goal is for green hydrogen to be incorporated into large trucks and machinery in mining, industrial sectors such as steel mills, refineries, fertilizer and ceramics factories, and ships and airplanes.

On Jun. 6, a group of companies launched a project to make Pudahuel International Airport, which serves the capital city of Santiago, the first in Latin America to use green hydrogen.

The group, which includes the company that manages the airport, will evaluate the development of a hydrogen ecosystem, including production and fueling infrastructure to serve the airport complex’s ground operations, as well as aircraft in the future.

An additional key advantage of green hydrogen is that its molecule has a high energy density per unit mass: it is three times higher than that of gasoline and 120 times higher than that of lithium batteries.

In Bahía Posesión in Patagonia, the Environmental Studies Group from the University of Magallanes carries out work for the environmental impact study for the H2 Magallanes project, one of the initiatives that aims to exploit the wind energy potential of Chile’s southern Patagonia region for the production of green hydrogen. CREDIT: Erika Mutschke/University of Magallanes

The key role of the State

Undersecretary Maturana stressed that the Boric administration, in office since March, wants the state-owned National Petroleum Company (Enap) and Copper Corporation (Codelco) to play an important role in the production of green hydrogen.

“We want Enap to play a role not only as an infrastructure facilitator, but also as a producer of green hydrogen to accelerate the development of our local and export industry. We expect it to take a leading role in projects given its experience in energy infrastructure,” he said.

And with regard to Codelco, he said it can play an important role in promoting the energy transition from the mining industry, testing and studying low-emission technologies in its operations.

“Public, private, academic and civil society collaboration will be key to expanding this industry,” he said.

Maturana ruled out problems with water use, indicating that the projects presented would include desalination and/or water reuse.

“The cost of water in the production of green hydrogen represents less than one percent, so raising the cost of water to meet sustainable standards would not have a high impact on the final price of energy,” he explained.