How
Chile looks at Green Hydrogen, Green Ammonia. The new era.
Is green hydrogen a 'game changer' in clean energy
transition?
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Synopsis
Despite Chile's abundant supplies of wind and solar energy, Caceres is
candid about the challenges ahead for the nascent project - not least
its $4 billion-$5 billion estimated price tag.
By Reuters
Jun 22, 2022, 01:53 PM IST
High in Chile's sun-drenched Atacama desert, Gaston Caceres and five
other engineers are working on plans for a huge solar-powered hydrogen
project that reflects their country's ambitions to become a leading
exporter of the fuel. "Green" hydrogen, which is extracted from water
using electrolysis in a process powered by renewable energy, is touted
as a potential game changer in the race for net-zero emissions by
cutting fossil fuel dependence to fight climate change.
But despite Chile's abundant supplies of wind and solar energy,
Caceres is candid about the challenges ahead for the nascent project -
not least its $4 billion-$5 billion estimated price tag.
"There aren't tax breaks or other governmental benefits for these type
of big project developments," he said.
Global efforts to reduce dependency on oil and natural gas have gained
urgency as the Ukraine war disrupts Europe's energy supplies, and
nations from Chile to Brazil and India are vying to become major green
hydrogen producers.
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Hydrogen and its derivatives could cover up to 12% of global energy
demand and account for 10% of reductions in carbon emissions by 2050,
according to the International Renewable Energy Agency (IRENA),
although other estimates are lower.
"Green hydrogen can be a game changer for the energy transition," said
Francesco La Camera, IRENA's director-general, noting the fuel's
particular advantage in hard-to-electrify sectors such as
transportation and heavy industry.
But not all countries are well-placed to lead production and export of
the fuel.
"You obviously need to have renewable energy and loads of it," said
Jonas Moberg, chief executive of The Green Hydrogen Organization.
HIGHER COST
For countries that do, like Chile - which is bidding to become a green
hydrogen hub in Latin America along with Brazil and Argentina, other
hurdles remain. "One of the main challenges that green hydrogen faces
today is its higher cost compared with fossil fuels and other
alternative low-carbon technologies," said La Camera, though he noted
that costs could plunge as the industry and its infrastructure become
established.
Kickstarting large-scale production will require huge upfront
investments, ramping up the large-scale production of electrolyzers
needed to produce green hydrogen, hefty tax breaks to mitigate high
initial costs and the development of local expertise, analysts say.
"We produce virtually no green hydrogen today, so there's an awful lot
of laws and things that need to come. We are breaking new territory
here," Moberg said.
According to a June report by global energy consultancy DNV, renewable
and low-carbon hydrogen will only account for 5% of the global final
energy mix by 2050 and raising that will require stronger policies,
incentives and higher carbon prices.
TAX BREAKS
Chile launched its national green hydrogen strategy in 2020, aiming to
become the world's cheapest producer of the fuel and a leading export
hub from 2030. About 100,000 jobs, could be created, according to the
plan.
The Atacama desert project involves the construction of a huge
electrolysis plant to produce ammonia - which can subsequently be
converted into green hydrogen and is easier to transport, with
construction due to start in 2027.
Besides the large initial investment, Caceres said the plant will need
an affordable lease on state-owned land and a favorable regulatory
framework to make ammonia production competitive.
In May, Chile's state development office Corfo signed agreements with
three companies as part of six other projects it selected last year to
fund industrial green hydrogen production, which it says could double
current production worldwide.
Corfo expects $1 billion in investments and production of 45,000
tonnes of hydrogen a year.
Thousands of kilometers from the Atacama in southern Chile, at the
Haru Oni wind power demonstration plant, several international
companies are aiming to combine captured carbon dioxide (CO2) with
green hydrogen powered by wind turbines.
Markus Speith, Siemens
Energy project lead for the $50-million pilot project,
said Chile was chosen for its stable investment environment and "high
and very constant" wind speed.
"We want to show it's possible, and this gives us the confidence of
investors and politicians," Speith told the Thomson Reuters
Foundation.
Power from the plant, which is expected to start operating by the end
of 2022, will be used to produce green hydrogen via electrolysis,
which will in turn be used to generate synthetic methanol/gasoline, a
low-carbon alternative fuel for transport.
Carmaker Porsche plans to buy the green methanol produced, Speith
said, reflecting strong interest in the sector from companies seeking
to decarbonize.
JOB HOPES
The Brazilian state of Ceara, which lies in the country's poorer
northeast, has signed preliminary investment deals with 18 companies
that want to build green hydrogen plants to tap into corporate demand
for clean energy.
Nearly half of Brazil's electricity currently comes from renewables,
such as wind and hydro - making it a prime destination for green
hydrogen investment, said Maia Junior, Ceara's secretary of economic
development and labor. "If there's a green hydrogen OPEC (Organization
of the Petroleum Exporting Countries), Brazil will be at the table,"
he said.
It could prove a boon for the state, potentially creating thousands of
jobs, including about 3,000 jobs per plant during the construction
phase and when operational, up to 200 direct jobs and 2,000 indirect
jobs, Maia said.
Speith said green hydrogen had "potentially huge" job creation
possibilities, particularly in the engineering and construction
sectors, highlighting its appeal in a region where the COVID-19
pandemic has led to widespread job losses.
As India - the world's No. 3 greenhouse gas emitter after China and
the United States - eyes green hydrogen development as a way to wean
itself off labor-intensive and highly polluting coal, industry
analysts say the sector could ease the transition by creating new
jobs.
"It will be a generational transition as there is a huge requirement
of skilled manpower," said Samrat Sengupta, vice-president of EKI
Energy Services Ltd, which helps businesses with
climate change and sustainability solutions.
In its drive to become a leading production and export hub, India's
government is incentivising green hydrogen projects by waiving
inter-state transmission charges and offering grid connectivity on
priority.
Federal officials are also looking to create demand for the fuel by
mandating the use of green hydrogen in the production of fertilizers,
steel and petrochemicals, and providing financial support to
manufacture electrolyzers.
The government hopes such incentives will help India produce enough
hydrogen to reduce spending on imports of liquefied natural gas and
fertilizer, while also bringing the nation closer to its 2070 target
for net-zero emissions.
Billionaire business leaders Mukesh Ambani and Gautam Adani have
announced plans to produce the fuel, and state-run oil, natural gas
and thermal companies are inviting bids to set up projects.
While the green hydrogen sector is still in its infancy, with experts
comparing it to solar energy in India 15 years ago, future jobs are
expected, said Sumant Sinha, chairman and chief executive of ReNew
Power, India's leading clean energy company.
ReNew power is in a joint venture with India's top refiner Indian
Oil Corp and engineering conglomerate Larsen & Toubro
to build green hydrogen projects.
"Given the likely overall global demand, and the large investment
requirement for green hydrogen and its derivatives, it's unlikely that
one country (e.g. Brazil, Chile) will be able to provide enough
product to meet this demand," Sinha said.
"There will be several hubs, including India, which will have to be
developed to meet this demand."
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