Chile seeks to turn solar boom into green hydrogen bonanza
Less than a decade ago energy companies scoffed at Chile’s drive to develop its renewables sector, rejecting it as too expensive even though the Andean country boasts some of the world’s best sunlight.
Since then, a green technology revolution has pushed the cost of producing solar power down 80 per cent, and renewables now make up 44 per cent of the mix in a nation no longer dependent on imported energy.
Chile is now hoping this will allow it to achieve a similar feat with green hydrogen, a clean alternative to fossil fuels that — unlike solar and wind energy — can be used at any time of day or night and in any weather conditions.
Green hydrogen is made using electricity from renewable energy to electrolyse water, separating the hydrogen and oxygen atoms. As a fuel, hydrogen produces no emissions, and can be used in fuel cells or internal combustion engines in cars, buses, ships and even spacecraft.
“Chile could be exporting $30bn of green hydrogen by 2050,” said Juan Carlos Jobet, the country’s energy minister. “That’s how much copper we export today.”
Copper is the current linchpin of the mining nation’s economy, accounting for about half its exports, with huge demand from China.
Mr Jobet said green hydrogen had the potential to be “transformational” for Chile’s economy, with a huge impact on job creation and local economic development, emphasising the need to diversify his nation’s economy and reduce carbon emissions in its mining sector to comply with the Paris climate goals.
McKinsey calculates that global investment in green hydrogen — both the electrolysers required to produce it and the renewable power plants to run the electrolysers — should reach roughly $500bn by 2030 and $2.5tn by 2050.
“These are very, very big numbers, and Chile has to find a way of capturing a part of that investment,” Mr Jobet said. “But even if it was half that, it would be gigantic.”
For this to happen, advances will be required in countries developing the technology such as the US, Germany, Japan and the UK to bring the cost of production to economic levels.
The government’s aim is to produce green hydrogen for less than $1.50 per kilogramme by 2030, a price that would be highly competitive in international markets and allow the country to replace other fuels.
Hans Kulenkampff, president of H2Chile, the country’s green hydrogen association, said an inflection point could be reached as soon as 2027. However, he cautioned that this would require raised awareness and understanding of the country’s potential, especially in the mining sector where the government hopes the technology will be rolled out first, with a focus on the massive diesel-powered trucks used to transport rocks.
“In principle everything is possible but it needs to be scaled up and that is an issue of capital expenditure,” Mr Kulenkampff said, adding that this required “an active state to resolve the chicken and egg problem” between supply and demand.
“The question is who pays for the investment, who pays for the energy transition . . . we have to solve that and it is not easy,” he said, pointing out that while Germany, for example, had already earmarked $9bn to promote green hydrogen, developing economies such as Chile also had to attend to urgent social problems. The country endured a wave of protests against inequality last year.
So far, mining groups in Chile have proved “timid” in their response to green hydrogen, according to Eduardo Bitran, former president of Chile’s development agency Corfo.
However, he said more than 65 companies across all sectors — including big power sector players such as Siemens, Enel and AES — were involved in discussions aimed at promoting the technology. He added that there were already about 20 green hydrogen pilot projects in the country, including powering forklift trucks for Walmart and a joint venture between the state explosives agency Enaex and French utility Engie to make green ammonia for miners.
Sebastián Carmona, manager for corporate innovation at Chile’s dominant state mining group Codelco, said the company had high hopes for the technology, having made “pioneering steps with the introduction of e-mobility in our subterranean mines and transport”.
But while the group was looking into the use of hydrogen combustion cells in truck engines, he said a “careful” assessment of energy and water requirements, as well as generation and storage costs, would be needed.
Roberto Muñoz, energy manager at Antofagasta Minerals, Chile’s largest private miner, said the company was “permanently” monitoring the development of clean technologies, with one of its largest mines, Los Pelambres, the most advanced in studying the use of green hydrogen.
But he said more work was needed to establish economic viability and safety, adding that it could still take “several years” before the technology was commercially available.
Mr Bitran insisted it was a “no brainer” for miners and others to adopt green hydrogen given the potential to improve public acceptance of mining and also the trend towards greater taxes on polluting companies — especially cross-border carbon taxes that penalise “environmental dumping”.
Nevertheless, he emphasised the importance of the state playing a catalysing role and correcting market failures, with a push needed on the supply side.
“There is much to do, there is a huge opportunity, there is a lot of political will and also a lot of interest from private players,” Mr Jobet said. “I am convinced that governments can create the conditions and provide regulatory signals, but in the end this is going to be done by the private sector . . . which has realised that their carbon footprint is getting bigger every day.”