CLIMATE ECONOMY NATIONAL

Chile receives US$1 billion in funds for development of green hydrogen

With its abundance of renewable energy sources, Chile could play an important role in the global energy transition. The country is the most competitive producer of green hydrogen, and could become an important exporter of clean energy. A US$ 1 billion fund is supposed to catalyze the domestic development of a green hydrogen market.

The Chilean Ministers of Finance, Energy, and Economy, together with the executive vice-president of the governmental organization for economic growth, Corfo, presented a US$ 1 billion fund for green hydrogen development.

The fund is financed by loans and contributions from the Inter-American Development Bank, the World Bank, the German Development Bank, the European Investment Bank, the European Union, and by state-enterprise Corfo.

José Miguel Benavente, the executive vice-president of Corfo, stresses the importance of the fund for Chile. He explains that in order to catalyze the production of green hydrogen in Chile, local companies require a financial boost. The new fund would provide the sector with the financial stimulus it needs to get the production, distribution and demand of the energy source  off the ground.

The energy source of the future

Hydrogen (H) is a chemical element. Is it the most abundant chemical substance in the universe, and the basic chemical component of the water molecule (H2O).

When hydrogen is burned, it produces heat, and therefore energy. Currently, almost all hydrogen is won from fossil fuels, by exposing natural gas, oil or coal to high-temperature steam. Producing hydrogen this way is effective and cheap, but very polluting.

An alternative way to create energy from hydrogen is through electrolysis: the process of splitting water molecules with electricity. Provided that the electricity was generated sustainably, this method yields emission free hydrogen.

The hydrogen that is won with sustainable electricity, from renewable sources such as solar, wind, hydro and geothermal energy, is called green hydrogen.

Green hydrogen is regarded as one of the key elements in the energy transition that is needed to meet the target set by the 2015 Paris Agreement (to limit global warming to 1.5 °C, or 2.7 °F). In order to reach this target, the worldwide emission of greenhouse gasses has to be reduced by 50 percent by 2030.

Green hydrogen can play an important role in this reduction. It has several obvious benefits. As a clean source of energy, one that can be produced without emitting greenhouse gasses or other pollutants, it has the potential to turn the energy sector away from fossil fuels. In addition, it can be produced as long as renewable sources like solar, wind and geothermal energy are available.

There are, however, side notes. An important one is the price. Generating green hydrogen is expensive: hydrogen produced through fossil fuels costs around US$2 per kilogram, whereas green hydrogen produced through electrolysis costs around US$10-15 per kilogram.

Another hurdle is our current grid electricity. This electricity is not ideal for electrolysis, because most of it is generated with technologies that produce greenhouse gasses. Therefore, it does not generate emission free hydrogen. The solution would be to use green electricity from renewable sources. However, the inherent invariability of energy sources like wind and sun make it less reliable than fossil fuels, especially from a cost-perspective.

More about green hydrogen: 

Green history: Chile produced its first green hydrogen molecule

Chile: the future’s energy producer

Chile could form an important link in the chain towards (cost-)effective green hydrogen production.

Due to its unique geographic features, with an abundance in sun, wind and water, Chile has a great renewable energy potential. Were all its renewable energy sources harnessed, the country could produce and store up to 1.800 gigawatts of green energy, equal to the yield of over five million large +solar panels.  

With this abundance of renewable energy, Chile could be the world’s most competitive producer of green hydrogen, at a price of less than US$1.5 per kilogram.

Realizing its potential, Chile’s government devised a National Green Hydrogen Strategy. Together with the private sector, the government wants to roll out a competitive green hydrogen industry.

The US$ 1 billion fund helps with the development. It seeks to stimulate investments in the development of green hydrogen through the mitigation of risks and the reduction of costs on both the production and demand side. In that way, the fund will help to contribute to the “111 Earthshot” goal of reducing the price of green hydrogen by 80 percent, to US$1 dollar per 1 kilogram in 1 decade  

To that end, the fund serves two purposes. First, it is meant to boost the local demand of green hydrogen in Chile, with the aim to create a domestic consumer market. Secondly, it serves to increase Chile’s production capacities, in order to turn the country into an exporter of the sustainable energy source. 

The hydrogen generated will aid Chile in its energy transition. A benefit is it can be directly used as fuel on the domestic market. This is in contrast to the country’s raw materials, like copper, which only serve for export, because they require complex chemical processes to be used as a final product. Green hydrogen can therefore be primarily produced for the internal consumer market, thereby benefiting the people of Chile first and foremost. A hydrogen surplus will be exported.

Also read: 

Chile’s “Green” Future Grows Little By Little

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