By Oliver Griffin,
October 4, 2024
Source: Rueters
Photo Source: Unsplash,
Clean hydrogen backers cite global rush to decarbonize
Holdups include lack of customers signing up to buy
Gray hydrogen remains much cheaper alternative
BOGOTA/MONTEVIDEO/RIO DE JANEIRO Oct 4, (Reuters) - Latin America's wealth of hydroelectricity and other renewable energy resources could make the region a major producer of clean hydrogen as the world seeks alternatives to fossil fuels to fight the climate crisis, but some big hurdles lie in the way.
For example Colombia's government, led by leftist President Gustavo Petro, has made weaning the nation off oil and coal in favor of renewable energy a major policy goal. And billions of dollars in funding are on offer from multilateral lenders.
Yet industry groups and analysts said still more investment is needed. Other major hurdles they cited included a lack of customers as local businesses shy away from signing deals that producers need to secure financing. This has exacerbated a dearth of local production.
Advocates promote clean hydrogen as fuel for everything from trucks to steel blast furnaces and as input for green fertilizers. Yet critics say its production still requires excessive energy inputs.
Latin American countries are poised to benefit as European and Asian countries need to bite the bullet and start signing contracts for "substantial quantities" of hydrogen, Monica Gasca, executive director of the Colombian Hydrogen Association, told Reuters. Yet she and other industry experts said production will probably not ramp up much without deals in place.
"We are very much in a chicken and egg scenario when it comes to green hydrogen," said Fernando Schaich, head of green hydrogen at Uruguay-based energy service company SEG Ingenieria.
Latin American industries themselves could be important hydrogen clients, Schaich said. "All projects will really start when the shipping, airline and heavy industries sign deals and make commitments."
Pricing the fuel economically enough to attract customers depends on cheap, plentiful and reliable supplies of renewable energy.
But in Colombia, dozens of onshore wind projects planned for the La Guajira peninsula have been canceled or long-delayed because Indigenous groups have not approved construction.
"If Colombia doesn't really make an effort to facilitate the dialogues between the communities and the developers, mainly in La Guajira, then Colombia will be at least 33% less competitive than the rest of Latin America," said Inter-American Development Bank (IDB) lead energy specialist, Christiaan Gischler.
Clean hydrogen is currently much more expensive - north of $10 per kilogram in some places - than more contaminating hydrogen, said Luisa Palacios, a senior research scholar at Columbia University's Center on Global Energy Policy.
Gray hydrogen generated from fossil fuels currently costs as little as $1 to $3 per kilogram, Palacios added.
But Gischler said re-purposing existing assets such as pipelines or building shared infrastructure could push clean hydrogen costs in Latin America down to $1.50 to $2.50 per kilogram.
BUYERS AND REGULATORS
A World Economic Forum report published in August recorded some $6.1 billion as earmarked for renewable investments - including clean hydrogen - across the region by multilateral lenders and funds, as well as foreign and regional governments, in addition to a feasibility study for a $4 billion clean hydrogen plant in Uruguay.
That is a tiny fraction of the $100 billion to $300 billion investment the IDB's Maria Florencia Attademo-Hirt told a roundtable discussion that the industry would need in the region by 2030.
There are about 65 clean hydrogen projects in Latin America, mostly in the early development stages, according to the Wilson Center think tank that hosted the roundtable.
As of the end of 2023 Colombia had some 28 projects, according to Gasca, including an industrial-scale project at state-run energy company Ecopetrol's refinery in the city of Cartagena, set to come online in 2026.
Brazil's Petrobras is also eyeing clean hydrogen to replace gray hydrogen in its own operations, according to the company's energy transition chief, Mauricio Tolmasquim.
State-controlled Petrobras plans to build two green hydrogen plants, and is holding talks with potential customers, Tolmasquim has said, adding it is still establishing prices.
Chile has identified 12 regulations relevant to green hydrogen development that must be updated, said Marcos Kulka, chief executive of H2 Chile, the South American country's eponymous hydrogen association. Five other rules must be created for development to advance.
Like Colombia's La Guajira, Chile's Strait of Magellan could become a major clean hydrogen production hub thanks to strong winds, Gischler said.
Producers have to be bolder in finding customers, said Diego Arboleda, chief executive of
Colombian developer Hevolucion.
"The client is not going to come through the door and say, 'who wants to sell me 100 tonnes of hydrogen right now?'" said Arboleda.
Hevolucion's plant, located near Colombia's second-city Medellin, will start producing one tonne of clean hydrogen daily in November, and the company plans a pilot project to export green ammonia - produced by combining clean hydrogen with nitrogen - to the Port of Rotterdam for use as energy storage.
Colombia's government should provide incentives domestically, Arboleda said, including rules about vehicles mixing diesel with hydrogen to reduce emissions.
Clara Bowman, chief operating officer of HIF Global, whose Haru Oni plant in southern Chile produces clean hydrogen to make methanol for use in e-fuels, said mandates on blending clean hydrogen-based fuels with existing gasoline would help.
Potential customers "need the regulatory support to make sure that they are not going to be uncompetitive in their industry as a result of making those sorts of decisions," Bowman said.
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