Chile’s wind and solar resources mean it has significant potential as a producer and exporter of green hydrogen, but it faces significant planning challenges in getting up and running. Industry bodies remain confident the issues can be resolved but stress that action is needed quickly if the country is to meet its ambitious hydrogen goals.

In Chile’s 2022-26 energy agenda, released last month, the energy ministry said it aims to bring the first ten projects online by 2026 and made various pledges including boosting domestic consumption, creating two supply chains in the Magallanes and Antofagasta regions, speeding up planning, deploying shared infrastructure and training a workforce. Details are sparse, but the government also pledged to draw up a new action plan for green hydrogen.

Industry association H2 Chile has welcomed the plans but emphasised the need “to make decisive progress on issues that have been worked on for some time”, adding that “we must take action now”.

10 – Targeted number of projects online by 2026

Chile’s previous government set a hydrogen strategy in 2020 that contained aggressive targets—including production costs of less than $1.5/kg and 25GW of capacity by 2030, with an interim capacity target of 5GW by 2025. But the first projects face a challenging planning process, and the new commitment to bring just ten projects online by 2026 would suggest the 5GW by 2025 target has slipped.

The country last year awarded a combined $50mn of funding to the first six projects, which have a combined electrolysis capacity of 386MW and are obliged to come online by 2025. FIDs have yet to be taken.

Italian utility Enel’s Faro del Sur project in Patagonia is by far the largest successful project, and will consist of a 300MW windfarm and a 240MW electrolyser that will make hydrogen to be used by a third party in the production of carbon-neutral e-fuels. “The investment decision will come once the project is mature enough,” the firm tells Hydrogen Economist. “The government is currently working to create the ideal ecosystem for the development of green hydrogen projects in Chile. However, this is a long and complicated process, which might not be ready in time. Therefore, we are working closely with the government to comply with all the regulations and obligations currently in place.”

Investment decisions will need to be taken “earlier than we might think”, for Chile to be ready to meet European demand, says Marcelo Villagran, trade commissioner at Prochile, a government agency aimed at boosting exports.

“We need to start in two or three years. The world is not waiting for us,” he says. Companies will first build in Europe close to the point of demand, but European targets are so aggressive that they will quickly run into volume and price issues and need to import large amounts of hydrogen, he adds.

Planning issues and solutions

There are more than 60 projects in the development stage, Ricardo Rodriguez, head of research at H2 Chile, said at a recent industry webinar held by consultancy ATA Insights. “Most developers say planning takes a lot of time in comparison with other countries.” But processes will speed up once permitting bodies have gained experience with complex hydrogen projects, he says.

The government is working on two new measures to ease the planning process for developers, Ana Maria Ruz, green hydrogen specialist at the Chilean Economic Development Agency, said at the event.  An “early participation” scheme allowing developers to discuss projects with authorities before submitting planning applications has just been made available. And it aims to launch a sensitivity map for developers, colour coding areas based on biodiversity or cultural issues, by the end of the year, she says.

Chile is facing a “really tricky” dilemma where it needs to accelerate projects to give certainty but needs to be transparent with society and take care of environmental issues, says Villagran.

Some form of payments to local communities could be critical for ensuring local acceptance and inclusion, Villagran adds. As long as it brings certainty, companies do not mind the extra costs of paying some money to the local community. “It just goes on the capex,” he says.

---

Author: Killian Staines