Analysis: Why Brazil should watch closely Chile’s start in the “green hydrogen” race

RIO DE JANEIRO, BRAZIL – With a national policy announced over a year ago and ambitious goals to produce H2V at competitive prices, Chile has started the race for one of the world’s most promising low-carbon energy sources.

Brazil, which also has tremendous potential to take up a share of this emerging market, is at an earlier stage of development and must hurry if it intends to secure its place.

In Chile, some 100 companies are involved in 60 projects, said Chilean Minister of Mines and Energy Juan Carlos Jobet during COP26. The plan is to have a 5 GW electrolysis capacity as early as 2025 – 20 times more than the park installed in the world today.

The model takes into account the reduction of emissions within the country (coal generates 40% of the electricity used by Chileans), the decarbonization of mining companies, and, in a next step, export to the international market.

A map comparing the potential cost of H2V worldwide drawn by the International Energy Agency (IEA) shows Chileans’ enthusiasm for green hydrogen.

Today, with small-scale production and the development of new technologies, a kilogram of hydrogen produced through water electrolysis costs approximately US$5. Things get interesting when the price drops to the US$2 per kilo range. This is the range that Northeastern Brazil takes up on the IEA map.

Chile is in an even more privileged position. In the north of the country, because of the Atacama Desert, and in the south, thanks to the winds that blow across the Strait of Magellan, the country is theoretically capable of producing H2 at less than US$2 as early as 2025. By mid-century, again according to IEA projections, Chile’s production cost would drop by half, with increased scale and efficiency gains.

Chile imports 98% of the hydrocarbons it consumes. “We are poor in the energy of the past, but rich in that of the future,” says Chilean Energy Ministry fuel and new energy division head Max Correa Achura. “Atacama has the world’s highest capacity factor in terms of solar energy, and in Magellan our onshore wind production is comparable to offshore installations in other countries.”

Capacity factor is the indicator that determines the generation of a solar plant in relation to the theoretical maximum it could produce.

EXPORTING WIND AND SUN

The Chilean project can be perceived as a way to export the country’s abundant sun and wind. The country’s installed capacity for electricity generation stands at 25 gigawatts. Together, the two renewables could generate 2 terawatts.

In other words, the country may produce 80 times more electricity than it consumes. Since a way to store wind has not yet been invented (and it is not practical to fill freighters to cross the Pacific with charged batteries), green hydrogen is the logical solution.

The “green” in the name refers to the production process. The separation of hydrogen and oxygen molecules from water with the aid of an electric current is known as electrolysis.

When renewable energy sources are used, the product is “green” hydrogen. (Other processes use raw materials such as natural gas and coal and result in gray, brown, or blue hydrogen.)

Hydrogen then works as an energy carrier, as do batteries, rather than as an energy source itself. In order to use it, fuel cells do the reverse process: hydrogen is mixed with oxygen, producing electricity and water vapor as the only waste product.

Realizing the full Chilean potential will primarily depend on the installation of this renewable generation capacity. This year, the country will inaugurate 6 GW. “Everything we have of new generation is renewable,” Correa says. “Today, it represents about 25% of our consumption. By 2030, the share will reach 70%.”

FIRST, THE END OF DIESEL

Correa says the plan is to invest now to have volumes as early as mid-decade. Initially, the market will be domestic. One of the alternatives is to sell it in the form of ammonia for the chemical industry. This input is now imported, and the price fluctuates with that of natural gas (the source of hydrogen in the compound).

But it is in mining that Chilean H2V may have its first major impact, notably on the huge trucks used in the mines – “the size of a three-story building,” Correa says. These giant machines can consume over 200 liters of fuel per hour. The plan is to replace the trucks with “flex” or hydrogen cell-powered models.

Eliminating diesel is a key part of the goal to extract copper emission-free by 2050 – trucks account for a considerable part of the CO2 from mining.

PACIFIC ROUTE

The next step is to target the international market.

One of the main applications envisioned for green hydrogen is in heavy industry. Steel mills and cement plants can now use this energy carrier to replace fossil fuels in their existing plants (but 100% green steel depends on entirely new technology).

Taken as a bloc, the European Union is the second largest steel producer in the world, behind only China. The EU has an aggressive policy of producing green hydrogen within its borders and is also eyeing overseas production.

Chilean government officials announced during COP26 memoranda of understanding to study H2V production facilities in partnership with two Belgian ports. Similar agreements had been signed with the ports of Rotterdam and Singapore.

Chile is a potential competitor for Brazil when it comes to H2V exports. During his visit to Glasgow, Minister of Mines and Energy Bento Albuquerque said that Brazil should present a national hydrogen policy early next year.

Foreign port operators, in addition to Australia’s Fortescue Future Industries (a subsidiary of Australian mining company Fortescue Metals that has ambitions to lead this nascent market), have already shown interest in producing H2V in Brazil.

Even if these definitions come later than those of neighboring Chile, Brazil has ample renewable energy generation, particularly in the Northeast. It is there that the first H2V production units are being studied – closer to the European buyers.

The proximity cannot be underestimated. Storage and transportation are two technical obstacles to export. In large quantities, it is necessary to liquefy H2. This consumes about 30% of the energy contained in the gas – the process occurs at -253° C – and it is expensive.

“Of course the cost of production matters, but ultimately it’s about the price you will be able to offer the market,” says E+ Energy Transition study center chairman Emilio Matsumura.

Another “detail” of H2V production, especially in the Atacama Desert, is the source of water, since the element is the other essential input of green hydrogen. The plan is to use desalinated seawater. Correa says that each project will have its own design, but that should not be an obstacle. “Today we have 20 water desalination plants. Spain has 800. And the quantities needed for production are not very large,” Correa says.

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