Enablers of Low-Carbon Hydrogen in LAC

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On June 28, 2022, the Inter-American Dialogue hosted a webinar entitled "Low-Carbon Hydrogen in LAC - Prospects and Pathways". This online event sought to explore public and private sector plans to develop the hydrogen industry in the region, specifically focusing on barriers to the production, use, and commercialization of low-carbon hydrogen as well as international and cross-sectoral cooperation strategies to accelerate the implementation of this technology. The opening remarks were given by Dr. Daniela Stevens, director of the Energy, Climate Change & Extractive Industries Program of the Inter-American Dialogue, who later moderated the event.    

The event began with a keynote address given by Claudio Huepe Minoletti, Chile's minister of energy. Minister Huepe highlighted the four main objectives of Chilean energy policy: 1) to ensure a just and sustainable energy transition; 2) to reduce vulnerability and energy poverty; 3) to decentralize the energy system and diversify energy sources; and 4) to ensure the country's energy security. Hydrogen plays a crucial role in achieving these policy goals, and the state is seeking to develop the industry through its green hydrogen strategy. Published in 2020, the strategy aims to reduce production costs, develop the export market, and attract investment flows. The government is now drafting a hydrogen roadmap to outline the specific actions that must be taken to achieve the strategy’s goals.  

Under its green hydrogen roadmap, Chile aims to integrate green hydrogen production with industrial development throughout the country while encouraging private investment and environmental, social, and economic sustainability. In order to accomplish this, the State is taking a more active role in the hydrogen value chain through boosting domestic demand, exploring international trade routes, and improving the regulatory framework. Over the next few years, the State will be a key player in hydrogen development, collaborating closely with the private sector to achieve national decarbonization goals, mitigate investment risks, identify expansion opportunities, and prioritize areas of work to accelerate the introduction of green hydrogen.  

Following the keynote, three leaders in the regional hydrogen private sector participated in a panel discussion on the potential of low-carbon hydrogen in Latin America and how to take advantage of it. Hans Kulenkampff, director for Latin America at Hinicio, mentioned that most of the region has considerable potential to produce hydrogen due to vast primary energy sources like natural gas, renewables, and biomass. However, certain regions have higher potential for green (renewable) hydrogen. Specifically, he highlighted Magallanes and Antofagasta in Chile, La Guajira in Colombia, Pecém in Brazil, southern Argentina, and northern Mexico as areas with large amounts of renewable installed capacity that could leverage the production of green hydrogen. Having recognized this potential, in addition to the strategies published by Chile, Colombia, and Uruguay, countries including Costa Rica, Panama, Peru, Ecuador, and Argentina are developing their own green hydrogen plans. However, Kulenkampff also explained that hydrogen should not be seen as a silver bullet that will solve all the problems of decarbonizing a country’s energy system and will always be the best option. Rather, it should be understood first as an essential decarbonized feedstock for chemicals like ammonia, and second as an alternative for sectors such as heavy industry that are hard to decarbonize through more efficient means like electrification. 

Despite its specific uses, Luis Sarrás, general manager of green hydrogen at AES Corporation, explained that in stagnant or struggling economies, green hydrogen could increase the production of new knowledge, human capital, new industries, and economic growth in local communities. In this way, Sarrás stressed that everyone stands to benefit from green hydrogen development, making open collaboration and dialogue, rather than competition, key to industry development, particularly at this early stage. When facing challenges like creating new regulations, human capital formation, grid connection issues, land availability and management, or the approval of social and environmental licenses, collaboration between local communities, the State, and the private sector is essential. Finally, Sarrás emphasized that moving forward with early green hydrogen projects in the region is important in order to generate experience with this new technology and identify barriers like those mentioned.    

Mansur Zhakupov, vice president of hydrogen at TotalEnergies SE, agreed with Sarrás and explained that currently the firm is using hydrogen for a variety of applications along its production chain, but that in Latin America their interest lies in mass production and export of low-carbon hydrogen. Zhakupov noted that certain barriers must be overcome to promote a business model that facilitates both the export and domestic consumption of this energy source in Latin America. He emphasized that the region can learn from other places that are more advanced in hydrogen regulations (such as the European Union), especially to boost domestic demand (such as a materially high carbon tax or hydrogen consumption mandates for different sectors). Overall, governments play a key role in increasing incentives for both consumption and development of hydrogen projects as well as access to technology and equipment in order to connect production to international demand in the global hubs of hydrogen consumption.  

Two other key considerations that emerged in the discussion concerned the importance of national and international standards for hydrogen’s carbon footprint (as opposed to categorization by “color”) and the government’s role in reaching agreements with international demand sources and helping develop domestic demand hubs in key industries with a large state presence (like mining in Chile). Panelists also stressed ensuring access to essential technological inputs, sharing infrastructure such as existing gas pipelines to reduce risk, and filling regulatory gaps, including those related to transportation, storage, and commercialization, as important steps. Ultimately, all panelists agreed that hydrogen has great potential in Latin America, but for the industry to grow, it is essential to increase public-private partnerships, boost domestic demand, and improve regulations and shorten project timelines, and to do so with urgency given hydrogen’s critical role in reaching full decarbonization.    

Read coverage of this event in BNamericas

Watch the event recording here:

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