On April 23rd SPCIS interviewed Sebastian Álvarez on the current state of green hydrogen in Latin America and China’s impact on the region. Sebastián Álvarez, a founding partner of ECIT Ltda., is a Mechanical Engineer specializing in the generation and applications of hydrogen and its derivatives (ammonia, methanol, and others). He is also an expert in national and international regulations of H2V and their derivatives. Álvarez teaches a diploma course in at the Catholic University and has previously served on the regulatory committee of H2Chile. Additionally, he has been involved as a speaker, panelist, teacher, or consultant in various public and private initiatives of institutions such as the Chilean Ministry of Energy, Energy Sustainability Agency, GIZ, and AHK, among others.
This article summarizes the key messages from the interview, and the content has been reviewed and authorized for publication by Mr. Álvarez
State and trends of technology adoption of Green Hydrogen in Chile
SPCIS: As you see it, what is the current state of technology adoption of Green Hydrogen in Chile, and what specific technological trends are currently impacting the industry the most?
S.A.: To understand the current state let me start with Chile’s goal: Chile aims to be a pioneer and leader in the production of cheap green hydrogen. For at least the past 4 years, Chile has actively pursued this goal, leading to two main approaches: one is integrating and developing projects, another one is buying technology abroad to produce it as cheaply as possible. However, there are doubts about the long-term availability of these technologies. While one option is off-the-shelf technology, which has been more commonly used in Chile and has been sourced from Europe and Asia, the other option is to develop it on its own and innovate.
Be aware that lately, the hydrogen industry has had a supply problem. In the global race to be the leading producer, other more restrictive markets, such as the US and Europe, are investing in manufacturing and production development, prioritizing their own markets, which could eventually lead to supply problems for Chile and the region in general. Consequently, the possibilities of local development and production are being considered. Whether through public initiatives, such as CORFO's Request for Information (RFI), or through less well-known private ones. Chile is more of an integrator and buyer than a manufacturer, but the possibility of manufacturing is being explored, always in collaboration with foreign manufacturers who have the know-how and can implement it locally.
Also let me add something that might be useful to know: the main industrial systems for the core value chain in the hydrogen industry are electrolyzers, tanks, transportation means, and dispensers.
Electrolysis is the predominant technology for producing green hydrogen, although H2 can generated by other cheaper means, they are associated with carbon emissions. Currently, there are two main options. Chile is investing in PEM(Proton Exchange Membrane) technology, but there is also alkaline production. The competition between these two alternatives has not been resolved. Alkaline is much cheaper, influenced by Asian markets, which offer the most cost-effective option. PEM is considered more efficient with medium-range efficiency, but it incurs higher costs, especially due to rare materials. AM electrolyzers represented a third alternative, a mix of PEM with solid membrane but in an alkaline medium; theoretically, it would be the intermediate option, but in practice, few industries are implementing them, although they have been gaining ground (from 1 MW it is expected that in Europe they will be able to eventually get to 1 GW). However, they don't exist in Latin America.
International and Regional Influence and Participation in the Green Hydrogen
SPCIS: How is China's impact on this industry perceived, and what is the general sentiment towards it? Regionally (LAC), who are the main actors?
S.A.: For Chile and Latin America the main barrier is the prices of the main equipment such as electrolyzers. At the Giga scale, there is a significant price difference between European and Chinese equipment, with a trend towards purchasing Chinese equipment for larger projects (over 100 MW). Chinese factories provide much more competitive delivery times, with estimates in the US and EU ranging from 2 to 3 years. While the Chinese offer is seen as a possible solution, some challenges must be overcome. The main challenges are the language barrier and distance. Not only in electrolyzers or hardware but also in applications. From China, the first hydrogen railway in LATAM is being brought, which should be installed in Chile in the coming months. Many of these companies work with local support but not all of them and for the whole service. The way to overcome the barrier is to train local representatives to provide faster responses and services, ensuring that the language and distance do not hinder the adoption of these technologies and enabling continuous improvement.
In the field of Hydrogen, Chile is a pioneer and aims to be a leader. The actors can be judged according to their road maps. Chile was the first one to have a roadmap, which already has undergone 2 updates. Following Chile is Colombia, which released its roadmap a few months ago. Peru comes next, which was the last one to release its own road map. These three countries are the main actors, but they all still have very small production volumes. Additionally, Brazil must be mentioned due to its much larger potential market and the possibility of extensive self-production and consumption. Brazil has the actor with the highest production volume but with little impact outside.
Challenges, Opportunities, and Concerns for the Green Hydrogen Industry
SPCIS: What are the main challenges and opportunities that the industry is facing in terms of technology adoption and implementation? What government or policy initiatives are influencing technology or industry adoption and what are the main concerns in the industry?
S.A.: In Latin America, the challenges vary by country. Chile has problems with permits and investment barriers due to environmental regulations, being the most complicated in Latin America. The lack of certainty has deterred many investors, which is a single across-the-board problem. The major issue is the price of energy. Chile is considered a possible pioneer due to its abundant and globally competitive solar and wind energy resources. Other countries offer fewer energy opportunities but better regulatory speeds. The limited experience with green hydrogen remains a limitation. The market is trying to address training and equipment supply, which has led to seeking more unstable markets but with better water availability. The local political landscape can also be a challenge in some countries or an advantage in others. In short, there is no main challenge for all countries; some struggle with the regulatory framework, others with a lack of experience, or the availability of cheap energy.
In general, Latin America wants to focus on exports, with the exception of Brazil. Opportunity depends on the country, whether it's agility, economic stability, domestic consumption, or capabilities. Chile aims to be the most stable option with the highest level of renewable energy production. Colombia continues to bet on having greater agility and good levels of energy production. Smaller local markets tend to focus on premium products, with SAF being the most premium. In each case, the opportunity is local consumption or the possibility of export.
Roadmaps are crucial as they define possibilities for allocating human and monetary resources. There are specific efforts for final products like SAF(Sustainable Aviation Fuels), as well as associated products with ammonia and ethanol. While there are some private efforts, they remain marginal.
The greatest fear at the Latin American level, especially in Chile, is that the regulatory framework will arrive too late to seize the window of opportunity. There is a concern that regulations and support will arrive later than in other markets, such as Australia, Oman, or Morocco, which also aim to export.
Additionally, there is a lack of development in collaboration with Asian markets. Some Chileans visit Asia to consider purchasing and importing products, but collaboration with manufacturing companies is necessary to establish a local presence. It's also the best way to address several of the risks associated with green hydrogen initiatives and would enable the development of large-scale and robust projects.