Chile has great expectations for its fledgling hydrogen industry, and it is moving in the right direction despite concerns by some over the recent election of a far-left candidate as president.

President-elect Gabriel Boric, who will take office on 11 March, promised to “bury” Chile’s market-oriented economic system while campaigning for the first round of the presidential election in November, but his rhetoric shifted to the centre-left to win the runoff election on 19 December.

This shift appears genuine based on Boric’s recently announced cabinet, says Etienne Gabel, senior director with the Latin America gas, power, and renewables team at information provider IHS Markit

“Boric’s cabinet is more reasonable than most thought would be the case, with more of a social democratic flavour than a communist one,” says Gabel. “His appointments to finance and energy on 21 January were especially moderate, which bodes quite well for Chile’s economy in general and the future development of the country’s green hydrogen industry in particular.”

Boric appointed central bank president Mario Marcel as his finance minister and Claudio Huepe, another technocrat, as energy minister. Huepe coordinates the Centre on Energy and Sustainable Development at Diego Portales University in Santiago and holds a master’s degree in environmental and natural resource economics from University College London. “Both are very well respected,” says Gabel.

Seed funds

As a result, momentum should continue to build for Chile’s green hydrogen industry, a vision set out in its National Green Hydrogen Strategy in November 2020. State agency Corfo has awarded $50mn in seed money to six projects—led by the Chilean subsidiary of Italian renewables firm Enel Green Power, industrial gases firms Linde and Air Products, French utility Engie, Chilean LNG terminal operator GNL Quintero and local mining company CAP—near the end of December. They are spread across the country in the regions of Antofagasta, Valparaiso, Biobio and Magallenes.

“Boric’s cabinet is more reasonable than most thought would be the case” Gabel, IHS

The projects, which need to be completed by the end of 2025 to receive Corfo funding, represent about $1bn in investment and 388MW of electrolyser capacity—equivalent to current worldwide operable capacity—and are expected to produce more than 45,000t/yr of green hydrogen.

“This is viewed as a success and a great first step for developing green hydrogen production in Chile,” says Gabel. “But despite the country’s world-class solar and wind resources, it is going to be difficult to achieve the hydrogen strategy’s goal of 5GW of electrolysis capacity in the project pipeline by 2025.”

Chile may rank number one in the world for renewable energy investment based on research firm BloombergNEF’s 2021 Climatescope survey, but the economics of wind and solar power production are presently very different than the economics of green hydrogen production, with the former price-competitive and the latter not. As a result, substantial financial support is needed for the rapid development of a green hydrogen industry in a country, and this is lacking in Chile, according to Gabel.

“The funding from Corfo is helpful, but with $50mn spread across six projects it will make up a very small proportion of total investment for each,” says Gabel. “Richer countries like Australia will see far greater levels of government funding to total investment for green hydrogen projects in the early stages of development.”

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Author: Vincent Lauerman