The future of hydrogen in Latin America and the Caribbean

Items

• Introduction

  Patrick de Courcy 21 December 2022 Hits: 493

  As the world looks to contain global warming and help avoid a climate collapse, hydrogen has taken the spotlight as one of the key tools to cut back on greenhouse gas emissions. 

  Indeed, hydrogen has huge potential to help decarbonise the world economy, particularly in industry and transportation, which account for roughly half of the world’s carbon dioxide (C02) emissions. In other words, even if we replaced all power plants fired by gas, coal, or oil with solar and wind farms, which will of course take decades, we would still have massive C02 emissions from oil refineries, cement kilns, ships, planes, and iron smelters. .

  For obvious reasons you cannot connect a wind farm or solar panels to a jetliner or transatlantic cargo vessel. That’s where hydrogen comes in. It can store renewable energy and feed those activities that can’t be hooked up to a grid directly. In iron production it can replace fossil fuels and avoid the emission of C02.

  At first glance Latin America and the Caribbean (LAC) has enormous comparative advantages when it comes to producing hydrogen, particularly the environmentally friendly green hydrogen. The region already has high levels of renewable energy, lots of space, and in many places plenty of water, wind, and sun.

  Many countries in the region are committed to cutting greenhouse gas emissions targets under the Paris Agreement on climate change and therefore are interested in attracting investment in green technology, from renewable energy to low-carbon hydrogen.

  But there are also challenges and doubts regarding the development of hydrogen. Are the investment conditions adequate? Is the proper regulatory framework in place? Can financing be secured? Will local economies and societies benefit or just export markets?

  What is hydrogen and where is it found?

  The good news is hydrogen is everywhere. In fact, it’s the most abundant element on the planet Earth.

  The bad news is it almost never occurs in its pure state and instead is bound with other elements in water, hydrocarbons, and plant and animal tissues.

  When it is in its pure state, it is a colourless, odourless, highly flammable gas. It has sufficiently different characteristics from liquefied natural gas (LNG) or petrol so that you can’t simply use existing infrastructure and may require new terminals, pipelines, trucks, ships, and a whole set of regulations on how to handle hydrogen. Indeed, hydrogen can cause certain metals to become brittle, meaning that specifically designed and tested storage and transport vessels are required. 

  On the one-hand, hydrogen is not toxic and is lighter than air, which means in an open space it will disperse relatively quickly should it leak. On the other hand, it is more flammable than petrol or gas. Because it is odourless and burns almost without a flame, special leak and smoke detectors are required. Designing tanks for lorries, school buses, or any vehicle able to store a highly combustible gas under pressure of up to 700 bar and withstand traffic accidents is one of the biggest challenges to using hydrogen in transport.

  What do the different shades of hydrogen mean?

  There are several methods to isolate hydrogen and each has been given a colour-coded name. The distinction is important because each has a different impact on the environment.

  Grey hydrogen is made from methane, also called natural gas, through a process called ‘steam reforming’ in which methane from natural gas is heated with steam, usually with a catalyst, to produce a mixture of carbon monoxide and hydrogen. It is currently the most common way of making hydrogen in LAC.

  Black or brown hydrogen is derived from bituminous coal or lignite. This releases CO2 and carbon monoxide and is the most environmentally damaging process.

  Blue hydrogen is the same as black or brown, only that the C02 emitted during the process is captured and then stored underground in a process called ‘carbon capture, utilisation and storage’ (CCUS). As a result it is categorised as carbon neutral, though it does raise questions about long-term storage and possibility of leakage. 

  Pink, purple or red hydrogen use varying degrees of nuclear energy.

  Green hydrogen is hydrogen generated by renewable energy or from low-carbon power.

• The global hydrogen market

  Patrick de Courcy 21 December 2022 Hits: 208

  The green hydrogen market is very new. In fact, so new that it barely exists. There is a fair amount of demand but almost no supply yet.

  The world’s first shipment of liquefied hydrogen from Australia to Japan took place in February 2022, a key milestone in the development of an international hydrogen market. Currently only 1% of the 94 million ton (Mt) hydrogen market is produced with low-carbon emissions, the rest is made by burning fossil fuels and almost all of it goes to the chemical, oil, and iron and steel industries.

  There are several reasons why green hydrogen hasn’t taken off until recently. One was the above-mentioned safety concerns, another the shortage of renewable energy, and finally the cost of generating it. Converting electricity into hydrogen, even with more efficient, modern electrolysis, loses 20%-30% of energy. In order to produce 1kg of hydrogen, which can generate 40kWh, requires 50-55kWh electricity.

  Yet several things happened at once. The price of renewable energy has come down, as has that of electrolysers. More recently the price of natural gas went up, and in some parts of northern Europe and Africa, green hydrogen is now more than 25% cheaper than grey hydrogen. 

  As cost and technology improved and pressure grew to cut greenhouse gases more aggressively, more governments and industries bought into the idea of using hydrogen, generating enough projected demand to create economies of scale and make the invisible gas commercially viable.

  More than two-dozen countries have adopted national strategies to adopt hydrogen as part of their clean energy commitments.

  The EU, for example, says that green hydrogen “will be key in addressing critical challenges linked to the decarbonisation and competitiveness” of its industry. While the EU is a leader in several clean hydrogen technologies it depends on imports of raw materials for key components as well as the supply of renewable energy.

  Demand for hydrogen from renewable sources in the European Union and Britain is projected to reach 20m tonnes by 2030 and some 70m tonnes by 2050, according to various studies. The European steel industry alone estimates it will need up to 2m tonnes of green hydrogen by 2030 in addition to the 75 Terawatt hours (TWh) of renewable electricity it is planning to consume in order to meet its decarbonisation targets. 

  In August of 2022, the first fleet of hydrogen fuel cell trains started operating in northern Germany, a moment that could mark a watershed, just like the inauguration of the first electric streetcar 140 years before in Berlin. And it’s not an isolated case. In Spain Construcciones y Auxiliar de Ferrocarriles (CAF) has been testing a hydrogen-driven demonstrator train designed for the FCH2RAIL project, an international consortium that includes Toyota, Spain’s railroad operator Renfe, CAF, and others.

  With major commitments on the table, big investors were quick to follow and there are now a number of big hydrogen projects in the pipeline. If all projects currently underway were to be realised, by 2030 the production of low-emission hydrogen could reach 16-24 Mt per year, with 9-14 Mt based on electrolysis and 7-10 Mt on fossil fuels with CCUS, according to the IEA. Electrolysis capacity is to rise to 40 GW by the end of the decade from 1 GW at present.

  The biggest producers are emerging to be China, the United States, the Middle East, Australia, and Latin America. The biggest importers are set to be the European Union, Japan, and South Korea.

  Indicative of the race among net importers to secure hydrogen, Germany in 2022 embarked on a diplomatic offensive in Canada, Namibia, and the United Arab Emirates to secure supply contracts. A joint declaration of intent signed on 23 August, 2022 foresees part of the 250,000 tons of hydrogen produced by a windpark in Newfoundland from 2024 to be exported to Germany.

  “The new energies imply a geopolitical readjustment,” said Fernando Branger, senior executive of the regional development bank CAF. “Countries are beginning to pay attention to where they can find inputs they need in an economical and sustainable way.”

  The commitment to develop hydrogen and renewable energies more broadly gained additional impulse with the war in Ukraine and Europe’s determination to free itself from Russian natural gas.

  “The invasion of Ukraine put us faster on the path to the future we knew was coming,” said Canadian Prime Minister Justin Trudeau during the signing ceremony alongside German Chancellor Olaf Scholz. “A future where we are not just independent of Russian oil and gas, but reduce our dependence on oil and gas in general.”

  By 2050, 12% of the world’s energy demand will be met by hydrogen, most of which will be green. A quarter of this will be traded across borders, according to the International Renewable Energy Agency (Irena). Production of green hydrogen will grow from around 800,000 tonnes to 614m tonnes in 2050, Irena predicts.

• Latin America

  Patrick de Courcy 21 December 2022 Hits: 229

  Like the thinly-populated Atlantic coast of Newfoundland, large tracts of LAC are also well-placed to generate ample renewable energy. Those that are close to ports are then also ideal for producing hydrogen.

  LAC is one of three regions in the world considered to have the largest potential to produce and export hydrogen. The others are Australia and the Middle East. There are also good conditions heading further east but a hydrogen hub with all the required infrastructure in the Himalayas, for example, may not yet be economically feasible and is too distant from a port or major consumer.

  The combination of sunshine and wind, ample space, and proximity to ports makes much of the Atlantic coast from northeastern Brazil down to southern Patagonia apt for hydrogen production at costs between $2.75 to $1.75 per kg/H2. Similarly in parts of the central Andes, and in particular in the Atacama desert with its proximity to the port city of Antofagasta, those costs fall to $1.5 and less per kg/H2.

  “Countries are beginning to address diversification efforts in electricity systems, and are working to create more enabling policy and regulatory environments,” says Irena. “In this context, recent auctions in Argentina, Brazil, Mexico, Chile, and Peru have helped to accelerate the deployment of thousands of megawatts of wind and solar energy in the region.”

  Indeed, the lowest production costs are in southern Patagonia (Argentina and Chile) and the Atacama region (including parts of Argentina, Bolivia, Chile, and Peru), as well as north-western Mexico and north-eastern Brazil, among many others. In the long term, Latin America could have a land area of over 800,000 km² in which the LCOH via electrolysis is under USD 1/kg H2 using a hybrid energy supply.

  LAC also has the advantage that it already has a large percentage of renewables in its energy matrix. For example, renewables, including hydroenergy, account for 43% in Chile, 63% in Colombia, 80% in Brazil, 97% in Uruguay, 98% in Costa Rica and Uruguay, and 100% in Paraguay. That compares to 15% in the US, 17.5% in France, or 32.5% in Australia, or 0.3% in the United Arab Emirates. That may come in handy if customers prefer to buy from nations that are not only selling green energy abroad but also using it at home. 

  While there are several big projects under way in Brazil and Chile, and a few on the drawing board elsewhere, the extent to which the hydrogen wave will take off will depend on issues ranging from proper regulations to certifications of origin, infrastructure and in some cases opposition from indigenous groups and even environmental activists.

  Domestic v export markets

  Also, to what extent hydrogen will turn into another export item like coffee or copper, or bring broader benefits to local economies by decarbonising heavy industry and transport, for example, and creating spill-over effects will depend on national strategies, incentives, and distribution channels. These could help reduce emissions where direct electrification can’t be used, such as long-distance transport, or in processing sectors where hydrogen is used such as steel or high-temperature applications such as cement.

  In some cases, geography plays a role. In Brazil much of the country’s industry is concentrated along the eastern seaboard, relatively close to where hydrogen hubs are developing around seaports. There it makes sense and would be relatively easy to produce and deploy hydrogen. On the contrary, fuelling buses or trucks in the vast interior or north, thousands of kilometres from ports is probably less efficient.

  Similarly in Chile, a narrow coastal country, the generation of hydrogen in the centre and north will be relatively close not only to ports but also to the biggest potential consumers of hydrogen, a mining industry whose trucks and tractors currently consume much of the country’s diesel. Having said that, it wouldn’t be unthinkable to develop a system of hydrogen fuel pumps along the Amazonas, Paraná, La Plata, or other of the most trafficked rivers. In smaller, less industrialised countries it may be easier to introduce networks of refuelling stations for transport.

  The bottom line is that manufacturing areas, ideally close to sea ports, provide ideal locations for hydrogen hubs with diverse potential revenue streams that can reduce investment risk.

  “Successful cases of commercial-scale (several MW) green hydrogen project development have demonstrated the importance of developing complete ecosystems (such as ‘hydrogen valleys’) to have demand redundancy, while reducing technical and financial risks,” wrote Julián González Martínez and Fernando Cubillos, climate change and energy consultants, respectively, at IDB Invest. “Therefore, projects to be developed during the market maturity stage (2022-2030) should seek to integrate various buyers of the hydrogen produced in the planning and structuring phases.”

  Given current backlogs in procuring electrolysers and some other key components, there may be a good case to develop a regional industry. That would require coordination within regional fora such as the Mercosur customs union or the Andean community, for instance. Even within each country the successful deployment of hydrogen requires considerable coordination between policymakers, regulators, industry, and environmentalists. Deploying a fleet of urban buses or refurbishing an iron plant without a long-term supply of hydrogen and adequate regulations, for example, can be counterproductive.

  Finance

  Another big challenge is finance. From transmission lines linking renewable energy production to storage facilities and export terminals, putting the infrastructure in place is capital-intensive. Given the current budgetary constraints in much of LAC, financing large-scale public investments into hydrogen may be a tall order. Some state-owned companies such as Petrobras in Brazil, Pemex in Mexico, or Codelco in Chile may be able to co-finance part of the infrastructure or participate through technology-sharing agreements, especially when it comes to CCUS projects.

  Some regional and multinational financing opportunities are becoming available. In November 2022, the Inter-American Development Bank (IDB) announced a partnership with the Green Climate Fund (GCF) to create a US$450m fund to promote electric mobility and green hydrogen in Latin America and the Caribbean. More may follow.

  The IDB Invest and IFC in 2022 co-financed a 50 MW photovoltaic farm with green hydrogen and lithium-ion battery storage in Barbados that will feed electricity into the grid. The Renewstable Barbados project was developed by Hydrogène de France (HDF) and fuel distributor Rubis. With the IDB conditioning all new investments to be consistent with the Paris Agreement from 1 January, 2023, it expects green hydrogen projects to make up a larger share of its portfolio going forward.

  Brazil’s state development bank BNDES in July 2022 launched a R$300m (US$56m) line of credit to help develop pilot projects for hydrogen production and research. “Subsequently, the bank will expand its financing lines, including support for large plants capable of exporting hydrogen,” the BNDES said.

  Despite a number of multilateral and state financing mechanisms, most of the proposed hydrogen projects will be financed through private capital, which means creating a proper investment climate with clear rules of the game, macroeconomic stability, as well as competitive fiscal incentives.

  Certification and standards

  The bulk of the hydrogen projects currently underway are for the export market. But even that requires more than just the physical infrastructure, such as pipelines and ports. Customers will demand certifications that guarantee origin, low-carbon production, and perhaps safety standards.

  Europe as one of the biggest emerging hydrogen markets, and Germany in particular, have been at the forefront of the standards and certification process, accounting for nearly half of the dozen or so different international standards. CertifHy is one of the initiatives forging a continent-wide green and low carbon hydrogen certification process. It is financed by the Clean Hydrogen Partnership and undertaken by a consortium led by HINICIO that includes the Association of Issuing Bodies (AIB), GREXEL, Ludwig Bölkow System Technik (LBST), CEA, and TÜV SÜD. The initiative started in 2014 and, following a series of tests and pilot phases, led to one of the first non-governmental Guarantee of Origin schemes for Hydrogen in the world.

  Other efforts are under way to try and coordinate and harmonise global certification and standards, such as those by the International Partnership for Hydrogen and Fuel Cells in the Economy.

  Carbon pricing

  But perhaps the biggest determining factor in creating domestic demand for hydrogen and sustainable energy more broadly is the cost of continuing to use fossil fuels, and that often depends on political pressure at home or global market pressure from abroad. Only a handful of LAC countries have adopted carbon pricing initiatives, such as a carbon tax or an emissions trading system (ETS). Argentina, Colombia, and Chile have implemented a carbon tax, as has Mexico, which has also been experimenting with an ETS pilot project since 2020. New governments in Colombia and Brazil are studying ETS.

  The problem is that in all cases the carbon tax or the carbon emissions certificates have been too cheap to make any meaningful difference. The existing carbon pricing systems cover industries and oil refineries, so that an increase from current levels of no more than US$10 per tonne of C02 could have a real impact on investment in green hydrogen.

  In Europe there was a similar situation until massive climate protests in 2019 forced the European Union to increase the carbon price, apply to sectors such as transport and construction, and adopt more ambitious zero-emissions targets. Part of that may spill over on LAC countries as the EU is adopting a carbon tariff on imported goods that are out of line with zero-emissions targets.

  Chile is aiming to overhaul its carbon tax and proposing to implement in parallel an ETS or tradable performance standard which acts in a similar way as an incentive to reduce emissions.

  Hydrogen production

  Currently, LAC produces 4.1m tonnes of hydrogen per year, almost all of it made from natural gas, using the steam reform technology. Trinidad and Tobago produces approximately 1.8m tonnes, followed by Mexico, Brazil, and Argentina with between 350,000 and 700,000 tonnes each. Chile and Colombia account for approximately 7% of the market each.

  Of the 2.5m tonnes of pure hydrogen, 1.2m goes to ammonia production and 1.3m tonnes is used in oil refining. Ammonia, in turn, is often made into fertilisers or explosives. The remaining 1.6m tonnes demand is for mixed hydrogen in the production of methanol (1.2m) and in direct reduction of iron, DRI (0.4m).

  Except for three pilot projects in Chile, Argentina, and Costa Rica, LAC currently produces no green hydrogen.

  In Cusco, for nearly six decades a 25 MW electrolyser has been producing ammonium nitrate, which is used as an explosive in the mining industry and as a fertiliser in agriculture. To power the electrolyser it uses grid power, which is nearly 40% fossil.

  Blue hydrogen

  Existing grey hydrogen plants can be retrofitted with CCUS, the process in which carbon is captured and then stored in underground reservoirs or used as a feedstock in other industrial or chemical processes. Whether CCUS can be used depends to a large extent on transport and storage facilities and their related costs. Even where blue hydrogen can be produced at a competitive cost, the downside is that carbon is not really eliminated but simply stored, sometimes in products that have a limited lifecycle.

  Oil-giant Petrobras in Brazil currently operates the only commercial CCUS project in Latin America and one of the largest in the world. In 2011 Petrobras started separating carbon dioxide from associated natural gas and reinjecting it back into the wells in the offshore Tupi oil fields. By 2025 an estimated 40m tonnes of carbon dioxide will have been stored in rock formations several kilometres below the sea bed. That experience could go a long way to help decarbonise hydrogen production in Brazil and more importantly in countries such as Colombia and Trinidad and Tobago.

  According to a comparative study produced by Hinicio, a global hydrogen consultancy, Chile, Colombia, and Brazil lead efforts toward developing a hydrogen economy, with Argentina and Costa Rica dropping in the ranking. Yet all countries surveyed advanced in the index, which reflects “the willingness of governments to implement the first regulations and incentives for zero and low-emission hydrogen, and the interest shown by various private actors to develop projects at a national level”.

  Hydrogen demand

  Barring a few pilot projects here and there, such as such a green city bus fleet, the most likely scenario is that the biggest demand for hydrogen in LAC in the near-term will continue to come from existing, not new users. That has mostly to do with the before-mentioned challenges in rolling out appropriate regulations, infrastructure, and creating incentives to move aways from fossil fuels.

  The International Energy Agency (IEA) sees hydrogen demand jumping to 6.2m tonnes by the end of the decade, as existing ammonia plants that were temporarily not operating come back on line in Mexico and Brazil. In that baseline scenario, all the additional hydrogen demand comes from existing uses in oil refining and industry. In a more optimistic scenario, total demand would increase to 6.8m tonnes, driven mainly by new applications in industry and transport that seek to meet ambitious energy and climate targets. That case assumes the rapid deployment of necessary infrastructure, such as hydrogen refuelling stations.

  “Despite the significant potential for hydrogen to decarbonise several sectors in the long term, new uses of hydrogen in the region are likely to remain modest to 2030, and existing uses will continue to dominate regional hydrogen demand,” the IEA study says.

• Chile

  Patrick de Courcy 21 December 2022 Hits: 249

  Chile was the first country to publish a comprehensive national hydrogen strategy, and to this day it is somewhat of a model for the rest of the region. It also has very ambitious goals – to produce and export the cheapest hydrogen in the world from renewable sources. Between the sun-drenched deserts in the north and the wind-swept regions of Magallanes and Antártica Chilena in the far south, Chile has the potential to produce 75 times the energy it consumes, according to the German development agency GIZ.

  Noteworthy of the Chilean approach is that hydrogen from the outset was seen as part of a broader development plan, itself able to generate economic growth and create jobs. And one of the reasons Chile is considered part of the hydrogen vanguard of LAC governments is because of its strong policy incentives to attract key players.

  The Atacama desert has the highest natural radiation on the planet, meaning solar panels generate more electricity and at a lower cost. Unlike some land-locked countries, Chile has access to numerous ports on the Pacific. The Atacama desert, in particular, is close to the sea port at Antofagasta, making international shipping particularly convenient and cheap.

  By the same token, winds on Chile’s southern tip blow with such strength and consistency that they allow 120 metre-high wind turbines to operate with capacity factors of 60%. Those are capacity factors equivalent to many at off-shore wind farms, which are more expensive to install and maintain than those on land. By comparison UK offshore capacity factors are around 42%. Capacity factor is the average power generated by wind divided by its peak capacity. It indicates how often a turbine runs at maximum power.

  Chile by 2030 is projected to have production costs of around US$1.3-US$1.4 per kg/H02, produced in the far north with solar energy and in the far south with wind energy, respectively, according to McKinsey & Company. In Australia costs would be around $1.7, while the Middle East comes in at $1.8 per kg/H02 and the United States at $2.1 per kg/H02.

  Targets

  Chile’s hydrogen strategy establishes very clear targets. By 2025 it wants to have 5 GW electrolysis capacity; by 2030 it wants to have the lowest production costs, and by 2040 the aim is to be among the world’s three leading exporters.

  That will require a lot of renewable energy, but Chile is well under way. In the six years through 2020, Chile has quintupled its generation capacity of these sources and for part of that period its renewables as a share of the power sector grew faster than in any other country, and without any subsidies, according to the GIZ. By 2030 up to 70% of its electricity matrix is projected to be renewable and by 2050 it will have reached net zero.

  Chile expects to be generating $5bn worth of hydrogen in 2030, $16bn in 2035, and $23bn in 2040, just over half of which will come from exports. Total accumulated investments required to make it all happen will jump from $45bn in 2030 to a staggering $220bn a decade later.

  The GIZ estimated that by implementing the targets set out in the national hydrogen strategy, the sector could generate 20,000 new jobs by 2030, more than 80,000 by 2040, and more than 90,000 until 2050.

  Southern winds

  By far the biggest project in Chile and probably one of the biggest in the world is H2 Magallanes, a proposal by the French renewable energy firm Total Eren to build up to 10 gigawatt installed wind capacity in San Gregorio, a commune on the northern shores of the Strait of Magellan in the far south of the country. The region has some of the best onshore wind conditions and access to a sea port.

  Total Eren signed an agreement in November 2021 with the University of Magallanes to cooperate on research and development for the project, elaborate its environmental impact study, and propose a citizens’ participation plan. With an installed hydrolysis capacity of 8 gigawatts, the plant is to begin producing 800,000 tonnes of hydrogen and 4.4m tonnes of green ammonia per year for domestic and international clients in 2027.

  Across the strait, at Bahia Gente Grande on Tierra del Fuego, Transitional Energy Group (TEG) is proposing to invest $8bm to produce 1.3m-1.5m tonnes per year of green ammonium. The environmental impact study is to be presented by 2024 and production is to begin in 2028.

  The Magallanes region is becoming one of the hydrogen hotspots not only in Chile but the world. Austria Energy is developing a project that will produce 850,000 tonnes of hydrogen per year and 150,000 t/y of ammonium from 2025. Plans to make efuels from green hydrogen are under way at HIF’s Haru Oni, a site near Cabo Negro on the northern tip of Tierra del Fuego. Like the other projects in the region, wind energy will fuel electrolysers to make green hydrogen. Then CO2 is captured from the atmosphere and combined with the hydrogen in a process of synthesis to produce carbon neutral eFuels, such as eGasoline and eLG, or Liquefied Gas.

  Yet indicative of some of the challenges investors are facing even in relatively business-friendly countries such as Chile, HIF Chile and Enel Green Power Chile (EGP Chile) fell out with local authorities over environmental protection criteria to be applied. The two companies in October 2022 withdrew their application for an environmental permit for the Faro del Sur Wind Park saying that government agencies were making demands that exceeded usual standard and legal requirements.

  “Considering these exceptional requirements, it is necessary to understand which requirements can be incorporated and which make this kind of project unfeasible in the region,” the companies said. The Faro del Sur Wind Park project foresees the installation of 65 wind turbines with a capacity of 325 MW at a cost of US$ 500m.

  There is plenty of current domestic demand for hydrogen, primarily from the chemical industry. Enaex, a chemical company that produces Ammonium Nitrate for industrial explosives used in the mining industry and for exports, used ammonia grey hydrogen as its main raw material. That represents about 90% of its carbon footprint. As part of its HyEx project, Enaex wants to begin constructing a solar farm in the Atacama desert in 2023 to begin production in 2025. By 2030 a 2,800 MW hydrolysis plant should allow the company to produce 700,000 tonnes/year of green ammonia.

• Argentina

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  Argentina has been producing green hydrogen since 2008, but on a very small scale. The Hychico pilot project in the Argentine Patagonia has been producing around 52t H2/yr from wind power, using two alkaline water electrolysers with a joint capacity of 0.55 MW. The hydrogen is mixed with natural gas for power generation using a 1.4 MW generation unit that can operate over a wide range of gas/hydrogen blends, including pure hydrogen. The Hychico project also has Latin America’s only dedicated hydrogen pipeline system (2.3 km) and an underground storage facility.

  Yet several commercial hydrogen projects are beginning to come off the drawing board. On 28 April 2022, the Province of Tierra del Fuego and Texas-based energy company MMEX said they are developing a project to produce 55 tonnes per day of green hydrogen in the Río Grande, Tierra del Fuego area powered by 160 megawatts of wind energy. MMEX has agreements with Siemens Energy and Siemens Gamesa to deliver preliminary studies and technology for the wind energy, respectively. The idea is to produce and market ammonia in Europe or Asia. The location is ideal for ocean borne shipping east or west.

  Over 1,000 miles further north near the town of Sierra Grande in Rio Negro province, Australia’s Fortescue Future Industries intends to develop a massive green hydrogen project driven by a wind park. With a projected investment of $8.4bn and annual output of 2.2m tonnes of green hydrogen by 2030, it would be one of the biggest hydrogen endeavours in Latin America. During the pilot phase investments of US$1.2bn would allow the production of 35,000 tonnes of green hydrogen by the end of 2024. That’s sufficient to power roughly 250,000 households.

  Indicative of the types of problems that projects of this size often face, the proposal has run into stiff opposition from local activists who warn it could violate indigenous peoples’ land rights and endanger a conservation programme for the endangered Andean condor. The rhetoric being used by opponents also highlights to what extent export-oriented projects can be more prone to criticism.

  “It means using an important part of the area of the province to provide for countries in the Global North,” Leonardo Salgado, an environmental activist and palaeontology professor at the National University of Rio Negro, told Al Jazeera. It’s not only the 625,000 hectares of land but also the half-century concession, which is renewable for another 25 years, that has opponents concerned.

  But there are concerns on both sides of the equation. In a country with inflation of nearly 100% and foreign currency restrictions, it requires more than a leap of faith to put $8.5bn on the table. “They need to agree on a legal and economic framework that allows them to circumvent inflation and new rules of the game in case of political shifts,” says Agustín Jofre, a consultant with the Ministerio de Desarrollo Territorial y Hábitat, the rural development ministry.

  One example of a purely public and national approach to hydrogen production is an agreement signed between the Argentine federal government and the province of La Rioja to expand the Parque Eólico Arauco at a cost of $400m and produce hydrogen there from 2025.

  A big question in Argentina is how hydrogen would fit into an energy portfolio heavily dominated by natural gas. In recent years, Argentina’s use of compressed natural gas (CNG) and liquefied natural gas (LNG) as a fuel for heavy-duty transport along the country's principal motorways has expanded. CNG accounts for 12% of fuels used for road transport, and there are more than 1.7m vehicles using over 2,000 CNG refuelling stations. Low-carbon hydrogen could be blended into CNG up to a share of 20%, reducing C02 emissions but also increasing the cost of fuel unless a carbon tax or emissions trading system is established.

• Brazil

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  Brazil, often called the sleeping giant for its huge untapped potential, has been a relative latecomer to green hydrogen and renewable energies. Solar and wind energy made up only 1% and 8.6% of the country’s total energy matrix as late as 2019.

  That has changed dramatically in recent years. In 2022 the installed capacity of solar energy in Brazil is estimated to have grown 70%, according to the Monthly Energy Bulletin from the ministry of energy and mines. Together with wind, the two now account for nearly 16% of the country’s installed electricity generating capacity, and more projects are underway. If you add hydro energy, 85% of Brazil’s electricity demand is generated from renewables.

  The federal government only formalised a national hydrogen plan in June 2022 and never approved a hydrogen strategy per se. Several states, however, have launched their own hydrogen initiatives, creating large-scale hubs that have secured considerable investment pledges. There are three major hubs along the Atlantic coast that intend to produce, store, and transport green hydrogen. All three are at ports and are close to sources of renewable energy, industry clients, and shipping lanes. They are Porto de Suape in Pernambuco state, Complexo Industrial Portuário de Pecém (CIPP) in Ceará state, and Porto do Açu in Rio de Janeiro state. Alone at the CIPP in Ceara more than a dozen companies have lined up to invest several billion dollars to build massive wind and solar farms and hydrogen plants.

  The biggest project is that of Australia’s Enegix, which intends to produce 600,000 tonnes of hydrogen per year from 2025. The project dubbed Base One would be one of the largest green hydrogen plants in Latin America. Investments are to amount to US$5.4bn, and Kansas-based engineering and construction consulting firm Black & Veatch was hired to do the feasibility, design, and procurement. Brazil’s Enerwind is to provide 3.4 gigawatts of combined wind and solar power.

  Australia’s Fortescue, which also has big plans in Chile, is looking to invest $6bn into a hydrogen plant at CIPP. The company is reportedly negotiating a power purchase agreement from Omega Energia, which is building a 4.6 gigawatt solar park, potentially the biggest in the world to date with some 8m installed panels.

  Then there is AES Brasil, a unit of the Arlington Virginia-based power utility, which in September 2022 signed a preliminary contract with CIPP to build a 2 gigawatt sustainable power plant that will produce 800,000 tonnes of ammonia. Estimated costs are around US$2bn.

  Separately, Spain’s Ingenostrum will invest US$1.3bn to build close to 2 GW of solar projects in the state, while French independent power producer Total Eren signed a memorandum of understanding to explore possibilities.

  The hydrogen hub in the CIPP was launched only in 2021 as a partnership between the Universidade Federal do Ceará (UFC), the federal university in the state, and its industry lobby, the Federação das Indústrias do Ceará (Fiec). Much of the hydrogen to be produced in the CIPP will be exported to Europe. One of the partners in the CIPP is the Port of Rotterdam, which holds a 30% stake in the port of Pecém. The Dutch harbour expects to be handling 20m tonnes of hydrogen by 2050, only a fraction of what the EU is projected to need by then.

  Many of the big players intending to invest at CIPP are also looking at all the major hydrogen hubs arising up and down the Brazilian cost. Spain’s Iberdrola, through its Brazilian unit Neonergia, is working on feasibility studies for hydrogen projects in Rio de Janeiro, Rio Grande do Norte, Pernambuco, and Ceara. Several of them include off-shore wind parks, such as Porto do Açu just north of Rio de Janeiro city and the windpark Aguas Claras off the coast of Porto Rio Grande in Brazil’s southernmost state, Rio Grande do Sul.

  Brazil’s offshore wind potential is 700 GW in areas with depths of up to 50m according to the state-run Empresa de Pesquisa Energética, and up to 1.2 TW, according to a World Bank report.

  Groundbreaking in Bahia

  The country’s first industrial-scale green hydrogen project got under way in northeastern Bahia state in July. At its site in Camaçari, just north of Salvador, Brazilian chemical company Unigel is investing US$120m for a plant that is to pump out 10,000 tonnes of hydrogen and 40,000 tonnes of ammonia, which can be used to make fertilisers and acrylics and to store hydrogen. In a second stage, some time before 2025 output is to be quadrupled. 

  Unigel started producing ammonia last year, which it uses as a raw material for its two fertiliser plants that gave rise to Unigel Agro, a branch that caters to the agriculture sector. The company operates one of only two ammonia terminals in Brazil, located in the port of Aratu, in the state of Bahia. Unigel will feed the three 20 MW electrolyzers from Thyssenkrupp Nucera from the wind farm Babilônia Sul some 430km northwest of Camaçari, which is operated by Casa dos Ventos, one of the country’s biggest developers of renewable energy.

  The project also shows the fast-rising interest of Brazil’s chemical and petrochemical industry to decarbonise. In fact, many of the hydrogen hubs that are emerging are centred near industrial hubs with that in mind. 

  White hydrogen

  Brazil may also be one of the few countries on earth with sizable pure hydrogen deposits. “Preliminary exploratory campaigns carried out in several states of the federation showed significant potentials in hydrogen”, according to the government’s latest 10-year Energy Plan. Engie Brasil, a subsidiary of the French energy utility, has conducted studies for Brazil’s potential for white hydrogen. In partnership with consulting firm Georisk, the study of deep wells in the São Francisco basin showed “high concentrations of hydrogen”.

  Whether such deposits are commercially viable is not clear, but the Energy plan cites further studies that showed initial output estimates of 51,000 tonnes of hydrogen per year at three of the wells in the São Francisco basin. Beyond Minas Gerais in central Brazil, three other states are thought to have some potential for natural hydrogen deposits. Ceará, Roraima, and Tocantins.

  One of the few known places to exploit white hydrogen today is Mali, where it is used to run a generator that provides electricity for local residents in the village of Bourakébougou.

  Policy outlook

  Looking forward, industry players are hoping President-elect Luiz Inacio Lula da Silva’s administration, which takes office on 1 January 2023, will push for a set of nation-wide policies that would: 

  • harmonise the various hydrogen initiatives and policies adopted by states such as Ceará, Rio Grande do Norte, Bahia, Rio Grande do Sul, and Minas Gerais.
  • provide incentives for the development of the entire hydrogen supply chain, including production of electrolysers.
  • establish clear rules for offshore wind farms and take a strategic decision on the use of natural gas and CCUS technology to produce blue hydrogen. 
  • establish incentives for the decarbonisation of industries and transportation and develop international accords on the commercialisation of hydrogen.
  • provide a clear road map for the country on carbon pricing. Over the years there have been modest steps towards an emissions-trading system, most recently with a decree by outgoing President Jair Bolsonaro in May 2022 to create the Sistema Nacional de Redução de Emissões (Sinare), the national system to reduce greenhouse gas emissions.

• Trinidad and Tobago

  Patrick de Courcy 21 December 2022 Hits: 228

  Abundant natural gas has enabled Trinidad and Tobago to become not only a major liquefied natural gas (LNG) exporter, but also the largest hydrogen producer in Latin America, accounting for roughly 44% of the regional total, with production of 1.8m tonnes of H2 in 2019, and 50% of this being pure hydrogen.

  Hydrogen is mostly the feedstock for the production and export of large volumes of ammonia, methanol, and urea. The chemical industry uses 97% of the country’s hydrogen to make these products. All that generates in the order of 15m tonnes of CO2 per year from more than 10 plants, making Trinidad and Tobago one of the world’s largest carbon emitters on a per-capita basis. As a result, industry and politicians are looking at low carbon hydrogen technologies to help reduce emissions. Its target under the Paris Agreement is an emissions reduction of 15% by 2030.

  The process of getting there has started relatively late. Project Lara, the first utility-scale solar photovoltaic (PV) installation, was only launched in 2022. The 112-megawatt facility will be built by oil companies Shell and BP, two of the biggest oil companies operating in the country.

  Also in 2022 Hydrogène de France (HdF) in April acquired a 70% stake in a production facility at a cost of over US$200m that will meet 20% of the hydrogen requirements of an existing ammonia plant in the petrochemical hub of Point Lisas, Trinidad. A “combination of solar and energy efficiency-sourced power” is to generate carbon-free hydrogen, said HdF. Kenesjay Green Ltd, the project developer, will retain the remaining 30% of the share capital.

  Fisterra, a portfolio company of funds managed by Blackstone Energy Partners, also showed interest in the project that is to produce 27,200 tonnes per year by 2024. On 29 November 2022, the government presented a Roadmap for a Green Hydrogen Economy in Trinidad and Tobago, the result of a collaboration between the National Energy Corporation of Trinidad and Tobago Limited (National Energy), the Inter-American Development Bank (IDB), and Texas-based KBR Inc.

  The studies underlying the roadmap showed potential areas available for offshore wind parks with a potential of up to 25 GW in average energy output. If all that were to be used for electrolysers that would amount to around 4m tonnes per year of green hydrogen, more than double the 1.7m tonnes/year demand for grey hydrogen the country currently has. That not only allows Trinidad and Tobago to decarbonise the entire petrochemical industry but leaves room for significant growth through additional export potential.

  “The Government recognises the importance of creating the right enablers through regulations, policies, and incentives, that will support the development of this green hydrogen economy,” according to Energy Minister Stuart Young.

  While the ministry of energy is working on a draft policy proposal to implement the road map, National Energy intends to work with the IDB to secure funding for the development of green hydrogen demonstration pilot projects that are expected to commence in 2023. “We can transition our entire industrial sector, transportation sector, our power-generation sector into low-carbon clean fuels, using hydrogen,” said Vernon Paltoo, head of National Energy.

  Indeed, as a regional ammonia and methanol trading, storage, and production hub, Trinidad and Tobago has a comparative advantage over other nations in that it already has much of the necessary infrastructure and experience. That includes decades of experience injecting CO2 to enhance oil recovery (EOR), a practice that could equally be applied in the production of grey hydrogen to make it blue. Currently capture projects have been reduced to a small-scale project injecting between 10 and 20 tonnes per day into an onshore oil and gas field. But the government roadmap foresees blue hydrogen as a transition technology until sufficient renewable energy infrastructure is built up.

  With carbon capture technology retrofitted to existing ammonia and methanol plants, Trinidad and Tobago could position itself in the market for low carbon ammonia and methanol before fully transitioning to green products once renewable energy and green hydrogen developments are in place. In one scenario blue hydrogen production would peak in 2040 providing 80% of the hydrogen demand from industry, and gradually decline as green hydrogen production expands. 

  Flowing into the decision-making process will be geological structures and existing CO2 capture facilities, the country’s long  term  natural gas availability, as well as the investment required for additional CO2 infrastructure that will be required. 

  In February 2021, the government created a steering committee tasked with managing and implementing efforts to capture and sequester carbon in order to reduce overall emissions while increasing oil output. In January 2022, BP joined the CCS Storage Atlas project which is jointly led by the University of the West Indies and University of Trinidad and Tobago and seeks to map underground sites that can be used to store captured carbon dioxide. These include depleted hydrocarbon reservoirs both onshore and offshore.

• Colombia

  Patrick de Courcy 21 December 2022 Hits: 203

  According to the Hincio Study, Colombia is one of the three countries leading efforts in Latin America to develop a hydrogen economy. Since the country’s national hydrogen strategy was launched in 2021, the new government of Gustavo Petro has redoubled already aggressive carbon reduction targets by freezing new licences for oil exploration and increasing taxes on hydrocarbons, although oil and mining make up nearly half of the country’s export revenues.

  Even before that Colombia aimed for hydrogen to account for as much as 10% of the total energy demand by 2050. That’s the equivalent of an annual reduction of emissions of 38m tonnes of C02 compared to 2020. By 2030 the aim is to develop 1-3 GW of electrolysis capacity and 1.5-4 GW of renewable energy. The idea is to choose sites in regions with energy potential but close to consumers, so as to reduce the cost of transportation of the hydrogen.

  Production costs for green hydrogen are estimated at US$1.7/kg in the best regions. In addition, the strategy calls for the production of at least 50,000 tonnes of blue hydrogen using the steam methane reforming process and CCUS. The bulk of Colombia’s renewable energy potential is in the Guajira, the far north-eastern peninsula that borders on the Atlantic Ocean and Venezuela, with an energy potential of 42 GW. There, net capacity factors for wind farms exceed 60%, while solar pilot projects show capacity factors in excess of 20%.

  If the entire solar potential were to be tapped, production could reach 3.2m tonnes of green hydrogen, and 5.8m tonnes if offshore wind potential is taken into account. By comparison, the country’s estimated demand for hydrogen in 2050 is 1.6m-1.8m tonnes per year.

  Already Colombia has some 13 gigawatts of renewable energy projects in the making, the largest of which will be La Loma, with more than 400,000 solar panels stretching over ​​437 hectares in the department of Cesar, just south of La Guajira. With an installed capacity of 187 megawatts, it will generate 420 GWh of renewable energy per year.

  Blue hydrogen

  Experts are still weighing the potential role of blue hydrogen, especially in the near future. Given Colombia’s large oil and mining industry and its accumulated expertise, CCUS could be one option to decarbonize specific industrial applications through blue hydrogen. “In the short term, blue hydrogen is the most favourable low-emissions option, especially if existing industrial infrastructures are taken advantage of,” the national hydrogen strategy states.

  Hence, blue hydrogen could be the foundation to create and grow the hydrogen supply chain and market until green hydrogen is competitive and can take over. That could begin as early as 2030 as plants come on line in the most efficient production areas in the far north. Between 2030 and 2040 both types would coexist until green hydrogen will eventually become more competitive than blue, according to the white paper.

  Carbon pricing

  That assumes progressively rising carbon taxes or increasing costs of emissions certificates. If the cost of CO2 in Colombia were only USD 10/tonne in 2023 with annual growth of 5%, the competitiveness of blue hydrogen against grey would not occur until after 2045, part of the hydrogen strategy reads.

  Congress approved a new carbon tax as part of a broader tax reform in November 2022 but it will only be incrementally applied starting in 2024 and its implications as a disincentive to fossil fuel usage aren’t fully clear yet. Also, the cost and time to install necessary infrastructure for CCUS needs to be carefully calculated and weighed in comparison to green hydrogen. “It is essential to invest with caution in order to avoid potentially stranded assets,” reads an IADB blog on the strategy. “After all, carbon capture technology is expensive and still at its earliest stages.”

  As part of its strategy, Colombia also granted considerable financial incentives to attract investments in non-conventional sources of energy, in part through the Energy Transition Law, or Law 2099, from July 2021. Because green and blue hydrogen play a central role in that transition both will be granted the benefits of Law 1715 of 2014 for 30 years. Among the benefits are the exemption of import tariffs, a value-added tax break, accelerated depreciation, and the ability to deduct 50% of the investment from income taxes. 

  Noteworthy about the Colombia plan is that it foresees hydrogen advancing significantly in domestic industries such as oil refining, chemicals, and fertilisers, as well as in urban public transportation and cargo shipment by lorry. By 2030, taxis and delivery services are to operate a fleet of 1,500-2,000 hydrogen-fuelled light trucks and mini-buses with the help of public purchase incentives. By the end of the decade, at least 1,000-1,500 heavy vehicles are to transport people and goods. Hydrogen-filling stations will be established along motorways connecting the country’s major cities. As part of the national electric mobility plan, a large percentage of urban and inter-city buses is also expected to switch to hydrogen.

  Colombia’s northern neighbour, Panama, has been mulling its own hydrogen strategy. Hydrogen production and consumption in Panama is currently very limited, and the country does not have the large renewable resources of some of its larger neighbours. Panama’s strategic location at the crossroads of major shipping routes does make it a global hub for maritime transport and a centre for regional trade.

  As a result, the Panamanian government in January 2022 presented a roadmap that focuses primarily on creating a logistics and distribution centre for low-carbon hydrogen. The idea is to become a regional ‘fuel station’ for the maritime shipping industry. In other words, Panama may not produce green hydrogen, but it could refuel tankers criss-crossing the oceans as they pass through the canal.