Hoping to create business opportunities that help decarbonize its economy, Chile is embracing “green hydrogen.”

The right-leaning government of President Sebastián Piñera is preparing a long-term national strategy to make Chile a world leader in the use of hydrogen as a renewable fuel for vehicles, heating and other uses, and eventually as a mainstay export product. In June Piñera formed a committee for the purpose, appointing former Chilean President Ricardo Lagos as one of its members.

Though most of the world’s hydrogen is produced from natural gas, methane and coal, Chile aims to take a fossil-fuel-free approach, making hydrogen from water through renewable-energy-powered electrolysis. In doing so, it joins a growing number of countries exploring so-called green hydrogen as a means of reducing their greenhouse-gas emissions, among them Australia, Britain, Germany, Japan, Portugal and the Netherlands.

“Green hydrogen presents an extraordinary opportunity for Chile, fundamentally because the country has the capacity with renewable sources to generate 70 times more energy than it consumes,” Energy Minister Juan Carlos Jobet said in June at the start of green-hydrogen technical discussions with academics and business executives.

“We should export the surplus, and the way to do it is to produce hydrogen. It is also a path toward diversification of our country’s economy, which today depends excessively on mining, which accounts for 10% of GDP and over half of our exports.”

Renewable energy has made strides in Chile in recent years, now meeting 20% of the country’s energy demand for electricity. Of the country’s 25,000 megawatts of total installed power-generating capacity, solar plants currently account for 3,238 megawatts and wind power for 2,242 megawatts, according to government figures.

The Energy Ministry anticipates the country by 2030 could expand its installed solar and wind capacity to 20,000 megawatts, and to 40,000 megawatts by 2050, the year Chile has pledged to achieve carbon neutrality under the Paris climate accord.

“Electricity accounts for more than half the cost of green-hydrogen production, and Chile’s potential is evident in the Atacama desert, in the north, for solar energy, and Patagonia, in the south, for wind,” says Marcelo Mena, environment minister during the second administration of President Michelle Bachelet and a member of the green-hydrogen committee. “The expansion has gotten to the point that today US$10 billion in renewable-energy projects are under construction, whereas over the entire last decade such investments amounted to US$14 billion.”

Adds Mena: “I have no doubt that Chile, whose economy has traditionally been extractivist, has the opportunity to generate a big green industry with hydrogen.”

Production costs falling
The international firm McKinsey & Company, hired by the Chilean Energy Ministry for consulting assistance in the initiative, has told the government that while green-hydrogen production costs are higher than those of fossil fuels, they are falling and could become competitive before 2030.

McKinsey estimates green hydrogen will generate investment of about US$475 billion worldwide through 2030 and will be responsible for a 15% reduction in greenhouse-gas emissions by 2050. Jobet says the fuel would allow Chile to reduce its own greenhouse-gas emissions further—by 25-27%, he says.

“Nature didn’t give Chile fossil fuels, and 95% of [the fossil fuel] we consume is imported,” says Max Correa of the Chilean energy ministry’s fuels division. “But our conditions [for producing renewable-energy], together with countries’ climate-change commitments, opens the door for us to provide clean fuel to the world by the end of this decade. We are very cognizant that the key will be to achieve adequate [production] costs, but we project that the international market for hydrogen by 2050 will be half the size of the current market for oil, and we want to secure ourselves a share of it.”

Correa and other experts calculate that production costs need to fall to US$2.00 per kilo in order for green hydrogen to become competitive with fossil fuels, adding that in Chile this level could be reached in just a few years. Meanwhile, Jobet insists that water use—a touchy subject in Chile, given the water shortages in many parts of the country—would not be an obstacle. He says that if a typical Chilean copper mine were to switch entirely to fuel-cell-powered heavy equipment, it only would need to earmark 1% of its total water use for hydrogen-fuel production.

Evidence of action
Essential groundwork, to be sure, is lacking. Chile has yet to develop a regulatory framework for the production, transport, sale and use of green hydrogen, for instance. But at least one project nevertheless appears to be getting underway. This month, a public-private consortium announced that by the end of the year it would begin building a 300-megawatt wind farm in the southern Magallanes region exclusively for the purpose of producing green hydrogen. The consortium includes Chile’s state-owned National Petroleum Enterprise, private-sector power producers ENEL and AME, and the German company Siemens.

Environmental advocates have welcomed news of the green-hydrogen initiative; but they are wary, pointing out that they have been largely excluded from the planning discussions thus far. “The government only invited us to a workshop in August, and what worries us is that the new technology will be seen solely as a business,” says Claudia Fuentes of Chile Sustentable, a leading environmental group.

Fuentes argues that a broader range of stakeholders must shape the initiative, with input needed in particular from the local level. “Hydrogen has been talked about in terms of exporting and using green hydrogen as a fuel in the mining sector … with a smaller carbon footprint in order to fetch better prices in international markets,” she says. “What has not been explained, however, is what benefits there will be for the communities where renewable-energy projects will be expanded.”