“Exports in the form of liquid fuels are the best way to take advantage of the wind energy readily available in Magallanes,” Siemens said on its website.
Martyn Briggs, a thematic investing strategist for BofA Securities, said Chile’s hydrogen plan includes a “well thought-out global supply chain of who they want to export to,” such as Asian markets.
The current challenge for the country — and the global economy — is waiting for innovation in transport, heavy industry and power to create customer demand for green hydrogen.
“Investors are not always convinced that that’s going to happen,” Briggs said. Policy clarity from governments will help free investment of risk.
Chile is “one of the most advanced hydrogen markets, not only because of its potential low cost for energy production, but also because of its regulatory stability, open market approach, advanced financing market and regulatory support by the Government of Chile,” Luis Sarrás, green hydrogen and fuels director for AES South America, said in an email.
Chile’s hydrogen strategy envisions prices by 2030 of between $1.30 and $1.80 per kilogram, which would make it competitive with fossil fuels such as natural gas. Sarrás said such prices are possible, but only if electrolyzer prices fall, similar to what happened with solar panels.
In the short term, hydrogen prices will be higher, which is why it “is crucial for the full value chain engagement” in AES’ initial hydrogen projects, Sarrás said.
An electric shovel in a copper mine in Chile. The nation is a top exporter of copper.
Mining industries of the future
Tim Buckley, director of finance studies for Australia and South Asia for the Institute for Energy Economics and Financial Analysis, said miners, with their well-established shipping operations, are in a good position to solve a key issue with hydrogen: transporting it across oceans at cost.
Mining companies operating in Chile could leverage that industry knowledge to enable the export of green hydrogen to countries in the Asia-Pacific region, such as Japan and South Korea, that have already expressed interest, Buckley said.
It is a “huge opportunity for Latin America to develop the mining industries of the future,” Buckley said.
It used to be that “nobody thought that it was viable to export LNG,” said Benigna Cortés Leiss, a nonresident fellow at Rice University’s Baker Institute for Public Policy and former general director at Chevron Corp.’s Mexican operations. But “terminals were built. So it’s a process; it takes money and it takes commitment.”
“To get a green hydrogen economy moving, the domestic market is likely to be key,” Leiss wrote in a paper published in April. “This strategy can further decarbonize Chile’s economy, in particular its mining industry. This translates into decarbonization of the global economy, given the importance of lithium for batteries and energy storage and copper for electric vehicles.”
The copper mining sector in Chile has committed to quadrupling the share of renewable sources in its electricity consumption by 2023, according to government calculations. Government estimates show the sector will face a rising need for electricity, resulting in a demand of 26.7 TWh in the next two years. Of that, roughly 13.13 TWh, or almost 50%, will come from carbon-free power.
Jobet, Chile’s energy minister, said there are 40 green hydrogen projects in Chile. Among them is a collaboration between Resource Group TRG AS subsidiary Mainstream Renewable Power Ltd. and Aker Horizons ASA subsidiary Aker Clean Hydrogen AS to build 1 GW of renewable energy to generate green hydrogen for ammonia production. Retail giant Walmart Inc. is working on a project to replace lead-acid batteries in forklifts with green hydrogen fuel cells.
French utility Engie is partnering with Chilean mining explosives manufacturer Enaex SA, a subsidiary of Sigdo Koppers SA, on a feasibility study to produce green ammonia with green hydrogen in a project that will require 2 GW of renewables. Engie is also working on a project to use hydrogen in mining trucks.
U.K.-based Anglo American PLC is developing a zero-emissions hydrogen truck. Its fleet of heavy-duty trucks accounts for up to 80% of on-site diesel consumption.
“Whilst this program is still in the proof of concept stage, when we look to expand it we will likely prioritize those sites which already have access to renewable power, such as our Latin American operations, given that to power the truck we need to generate hydrogen from electrolysis on or near site,” an Anglo American spokesperson said.
Official records show that mining haul trucks account for 45% of the industry’s energy consumption, generating 7,000 Mt of CO2 each year. Total annual energy consumption for the industry, according to government statistics, stands around 22.3 TWh as of 2020. In all, the industry emitted 16,366 Mt of CO2 in 2019.
“Mining plays a central role in promoting the green hydrogen industry in Chile and taking advantage of opportunities that this new market will offer to clean its productive capacity and lower its carbon footprint,” Jobet said.
But, rich as it already is in renewable energy, Chile needs more of it to realize its ambitious green hydrogen goals.
Sarrás of AES said Chile will have to more than double its current renewable installed capacity to reach its hydrogen production target of 1 million tonnes in 2030.
“In other words, only with renewable energy can the country achieve the approximately 42 additional GW needed by 2030 for the hydrogen strategy,” Sarrás said. “We hope to be able to lead this growth.”