With countries and energy companies around the world looking to accelerate their transitions towards cleaner energy resources, Latin American nations are developing plans to scale up the production, consumption and export of so-called green hydrogen, which is generated from clean energy resources.
One of the most recent, high-profile developments came in June, when the Argentine province of Tierra del Fuego – located at the southernmost tip of South America – outlined plans to develop a hydrogen and ammonium industry.
The province is attempting to utilise the region’s ample wind resources to attract $6bn in investment in technologies to produce the fuel. This includes investment in wind farms to generate electricity that can be used to power electrolysers, which remove oxygen atoms from water to produce hydrogen.
Once established, some of the project’s hydrogen will be used to make ammonium, which in addition to being used to create fertiliser, can also serve as a carrier fuel for transporting hydrogen through pipelines to downstream markets.
Along with renewable sources like solar and wind, hydrogen is seen as a potential low-carbon or zero-carbon fuel that is key to the transition away from fossil fuels.
While countries across Latin America and the Caribbean are focused on green hydrogen, hydrocarbons-producing countries like Argentina, Colombia, and Trinidad and Tobago can use carbon-capture utilisation and storage technologies to remove carbon emissions from their production process and generate so-called blue hydrogen.
The Tierra del Fuego announcement comes as appetite for hydrogen – and its economic and environmental benefits – continues to grow.
While there were just three hydrogen pilot projects in Latin America in 2019 – in Argentina, Chile and Costa Rica – by 2021 the region had a pipeline of more than 25 projects, according to the International Energy Agency, with many of them GW-scale mega-projects that intend to export hydrogen to Europe and Asia.
Economic benefits
Hydrogen has significant potential as a clean energy substitute for fossil fuels in power generation, most notably in the energy-intensive industrial sector, but also as a transport fuel across numerous sectors.
Argentina and Brazil have the most expansive hydrogen plans on the continent and are also looking to become major export hubs to feed markets in Europe, the centre of the world’s hydrogen demand, and Asia.
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As the world’s second-largest producer of hydroelectric power and home to substantial wind and solar resources, Brazil has significant potential to produce hydrogen. Some estimates suggest the country could earn $4bn-6bn by 2040 through the export of hydrogen to the EU and the US alone.
In the country’s north-east, the $5.4bn Base One green hydrogen project will be the world’s largest when completed, capable of producing 600,000 tonnes per year from 3.4 GW of combined solar and wind power generation capacity.
Beyond energy, hydrogen has important applications for the food sector, among others, highlighting the positive effects that developing hydrogen can have in addressing global challenges.
“Hydrogen has multiple applications, not only for the energy sector but in the manufacturing of fertilisers, which is of an increasingly critical concern for countries around the world,” Rodrigo Rodriguez Tornquist, Secretary of Climate Change, Sustainable Development and Innovation at Argentina’s Ministry of Environment and Sustainable Development, told OBG.
“Globally, three major crises are being discussed: the energy, food and environmental crises. Hydrogen is a key component in all three, as it generates a more sustainable energy solution, enables food production and accelerates the decarbonisation of the economy.”
Reaching export markets
To fulfil their hydrogen ambitions, Latin American countries need to consider the most challenging and expensive part of the energy industry: transport.
This will likely involve both internal pipelines for intracontinental markets and seaborne export terminals to reach Europe and Asia.
One of hydrogen’s most appealing aspects is that hydrocarbon pipelines can be repurposed to transport it. Latin America and the Caribbean already has strong pipeline networks in both the north, starting from Venezuela and T&T, and the south, from Bolivia, which feed into Argentina and Brazil and could serve these export ambitions.
In Tierra del Fuego’s case, the province’s location at the tip of South America means that it is also eyeing potential exports to Asia.
Aside from supplying export markets, the production of hydrogen could also result in the use of more cost-effective and environmentally friendly fuels domestically.
“Latin America not only has the potential to supply high-demand international markets like Europe, which has been more aggressive in its clean energy adoption, but also to displace imported fuels,” Alfonso Blanco, executive director of the Latin American Energy Organization, told OBG. “The large natural advantages of countries like Argentina and Chile to produce renewable energy enables the low-cost and large-scale production of green hydrogen.”
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Development timelines
Hydrogen’s uptake in the global energy system will be decades-long, with most mega-projects in Latin America looking to 2030 as a target date for completion. This timeline gives governments more time to establish the regulatory, institutional, legal and commercial frameworks that will allow hydrogen to penetrate the global energy system in a meaningful way.
For instance, one of the largest projects in Latin America is the $8.4bn Pampas facility in Argentina’s Río Negro province, which seeks to generate 15 GW in power that will produce 2.2m tonnes of green hydrogen by 2030.
Similarly, Uruguay has crafted a roadmap for hydrogen that aims to build 10 GW of renewable energy to power electrolysers as part of plans to become a net-exporter in the 2030s.
Ultimately, the key to developing such capital-intensive, low-carbon hydrogen projects will be cooperation between government and business, which industry figures say must continue to include incentives for renewable energy.
“On a global level, hydrogen will allow for the decarbonisation of many sectors – in terms of not only electricity generation, but also energy consumption, especially in the industrial and transport sectors,” Rodriguez Tornquist told OBG. “However, this transition requires a long-term roadmap and significant resources, which will require all stakeholders in the public and private sector to align their needs and expectations.”
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As the world’s second-largest producer of hydroelectric power and home to substantial wind and solar resources, Brazil can derive all its energy needs from the substantial energy resources it already has. It doesn’t need hydrogen.
Moreover, at a time the world is heading slowly but surely towards a global food crisis, Brazil should stop the destruction of huge areas of the rainforests for ethanol production. This will have far bigger and meaningful benefits for the environment than ethanol use. If however, it still insists on the destruction of the Amazon forests, then it better uses them for food production.
Whether green, blue or grey, hydrogen is a non-starter. It is more expensive to produce than natural gas. Furthermore, it needs far more energy to produce than it will eventually provide.
The green hydrogen hype isn’t warranted. Two major obstacles face hydrogen: hype and cost.
The cost is still a major obstacle. Producing green hydrogen from water by electrolysis using solar or nuclear energy is extremely expensive, at least twice that of fossil-based hydrogen and the quantity produced is minute. Also producing blue hydrogen from natural and grey hydrogen from fossil fuels is far more expensive than producing natural gas.
If this is the case, wouldn’t be far more economical to skip the production of hydrogen altogether and use natural gas directly to generate electricity while employing carbon capture technologies to prevent CO2 being released?
Why not use the solar electricity or nuclear energy used in producing green hydrogen by electrolysis to enhance current electricity generation and make it cheaper to customers rather than using a convoluted process of electrolyzing it and then use it to generate electricity thus adding to customers’ costs.
Furthermore, the heat generated from high temperatures produced by nuclear reactors could be used to generate more electricity in a combined cycle for use in industrial plants instead of hydrogen.
The only country in the world where a hydrogen economy could possibly succeed is Iceland. The reason is that it has plentiful geothermal power and water. Geothermal power already generates virtually all Iceland’s electricity. Yet, Iceland hasn’t achieved this goal despite huge investments and more than 30 years of efforts and despite its resources and small population.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert