Chile’s Bet on Green Hydrogen

With the ambitious goal of becoming a world leader in green hydrogen and the renewable resources to achieve it, Chile's green hydrogen industry is poised for growth in the coming decade. Policies outlined in The National Green Hydrogen Strategy and the Green Hydrogen Action Plan demonstrate the country's commitment to reducing the cost of green hydrogen, aiming to make it the cheapest in the world.

The Green Hydrogen Action Plan has outlined two implementation windows to grow the green hydrogen market. The first phase, from 2023 to 2026, aims to establish the regulations and investment signals that the new market will require, as well as to enhance relationships with potential buyers. The second, from 2026 to 2030, aims to initiate development and decarbonization, with a focus on regional and local initiatives. The National Green Hydrogen Strategy outlined a similar timeframe, 2025-2030, stating that “offtake and investment commitments for ammonia and hydrogen exports will be secured.”

One of the primary reasons for Chile's interest in the hydrogen market is its access to strong renewable resources. Chile has the renewable potential to produce 70 times its current installed capacity. Cheap and significant renewable energy stores are a critical part of the equation for green hydrogen. For instance, the level of wind power in the Magallanes region alone could power more than 10% of the world’s green hydrogen .

These inexpensive sources of renewable power, coupled with the falling cost of electrolyzers, are poised to make the Chilean green hydrogen the most cost-competitive in the world. Estimates suggest that the potential size of the green hydrogen sector in Chile may be comparable to that of the mining sector. The green hydrogen sector likewise has the potential to create significant job growth across the country. A report from the Chilean government found that the industry could potentially create over 90,000 jobs by 2050.

During a conversation with Grace Keller, Director of H2 News, she outlined how the Green Hydrogen Action Plan will continue to develop the market. This plan outlines the five strategic pillars that will create concrete measures to encourage green hydrogen development. By creating actionable items, the country aims to address various aspects of the industry, including permitting, workforce training, infrastructure development, and other related areas. Keller then described the industries that were expected to be early adopters of Chile’s green hydrogen: mining, refineries, and transportation.

One of the most crucial aspects in establishing this new industry, particularly one as capital-intensive as green hydrogen, is ensuring early adoption. By replacing the traditional grey hydrogen used in oil refineries and imported ammonia with that created by green hydrogen, early markets can be made available. As Keller explained, international markets in Europe, Japan, and Korea have shown strong interest in green ammonia.

The Chilean government, understanding the importance that offtake guarantees have on the industry, has taken steps to create this market. To do this, a specific group will be formed to collaborate with companies to help public companies incorporate green hydrogen. State-owned companies, including Codelco and ENAP, are expected to play a significant role in this work group.

During a conversation with María Jesús Mancilla Cofré, a hydrogen project engineer, she also explained that the industries likely to be early adopters of green hydrogen are the international transport and shipping sectors, due to their high energy demand and the challenges of battery electrification. Additionally, the Chilean mining sector could be a significant early adopter of this technology to power heavy machinery in mining operations.

Erik Solheim, Chair of the Development Roundtable at the Green Hydrogen Organization- GH2, emphasized the role of government when asked what policies need to be put in place to encourage development. Solheim pointed to the role that governments must play in bringing together suppliers and users to create a clear market for developers, allowing production to scale up and costs to scale down.

Barbara Jinks, Director of Ready4H2, explained the importance of the European hydrogen market to Chilean development. Jinks explained the importance of reusing or expanding distribution networks, especially for consumers located in remote areas or more than 3 km from a transmission pipe, as such delivery may not be economically feasible. The movements of European markets to prepare for green hydrogen represent both an interest in the emerging market and an example for others to follow. By watching and learning from these first movers, other countries can optimise their own distribution networks and be ready for hydrogen.

A variety of both domestic and international companies have staked a claim to the developing green hydrogen industry in Chile. These include TotalEnergies , a French company that is currently developing a $ 16 billion project in southern Chile. In addition to green hydrogen production, this project will also incorporate ammonia production, wind energy, and desalination. Colbun, a Chilean Utility company, has likewise been developing its green hydrogen capabilities.

With 75 projects proposed in the country and seven commercially scaled plants, it is clear that Chile is investing heavily in becoming a major exporter. During my conversation with Jinks, we discussed how European markets may be an ideal location for Chilean exports. Countries in Europe with large energy demands and ready capital, such as Germany, could provide the guarantee of off-takers to facilitate green hydrogen production.

With an ample supply of both wind and solar power available, and the Chilean government making its interest in the industry clear, the country is well-positioned to become a global leader. Whether that means achieving the stated goal of the cheapest green hydrogen in the world remains to be seen.