Latin America: Emerging giant in clean hydrogen exports

In the current wave of global energy transformation, Latin America is quietly rising as an important force in the field of clean hydrogen export with its unique advantages, and is expected to become a clean hydrogen export giant in the future.

Latin America is uniquely positioned to develop a clean hydrogen industry. The region is rich in renewable energy resources. For example, northern Chile has strong sunlight and abundant onshore wind resources. Brazil has vast tropical rain forests and abundant hydropower resources. According to data released by the International Energy Agency, Latin America leads the world in generating about 60% of its electricity from renewable sources. This provides a stable and low-cost source of electricity for the production of clean hydrogen, making it a solid basis for the production of green hydrogen through the electrolysis of water from renewable sources.

From a policy perspective, Latin American governments are actively promoting the development of the clean hydrogen industry. Chile developed a national green hydrogen strategy as early as 2020, proposing to have 5GW of electrolytic cell capacity by 2025 and 25GW by 2030, and pledged to provide financial support. Colombia also developed a hydrogen energy roadmap in 2021, with plans to install 1-3 GW of electrolytic capacity and 50 kilotons/year of blue hydrogen by 2030, while funding the industry by setting up an "unconventional and efficient Energy Management fund" and developing relevant regulations. The National Hydrogen Strategy announced by the Panamanian government plans to increase the country's green hydrogen production to 2 million tons by 2040, taking advantage of its location as a transportation and logistics center. These clear strategic goals and strong policy support have created a good policy environment for the development of clean hydrogen industry.

In recent years, investment in clean hydrogen projects in Latin America has been increasing, and the industry has grown rapidly. The Inter-American Development Bank said in a report that Latin American countries have a huge potential for green hydrogen production, which can meet domestic use and export needs. Brazil has attracted many green hydrogen industry investment in recent years, in July 2022, Brazil's first green hydrogen plant in the city of Camasari, Bahia state laid the foundation, the initial investment of the project is 120 million US dollars, is expected to be able to produce 10,000 tons of green hydrogen and 60,000 tons of green ammonia per year after production. In March 2023, Germany's Norman Eisel Group announced an investment of $13 million to build a green hydrogen electrolyser plant in Belo Horizonte, the capital of Minas Gerais state in Brazil. In June of the same year, the European Union also announced that it would invest 2 billion euros in the development of green hydrogen industry in Brazil. Chile according to the national green hydrogen energy strategy, as of April this year, the public announced a total of 67 green hydrogen projects, of which 8 projects have been put into operation, in Antofagasta region and Magellan region and other pilot areas, more than 2,000 families and units have used green hydrogen energy, effectively reducing carbon dioxide emissions. According to the Mexican Hydrogen Trade agency, there are at least 15 green hydrogen projects under development in Mexico, with a total investment of $20 billion, and companies in Spain, Germany, France and other countries have also announced plans to invest in hydrogen energy projects in Mexico. The Peruvian government recently announced that it will partner with a South African company to build a green hydrogen production facility in Arequipa, a project that will cost more than $2.5 billion.

With the growing global demand for clean energy, the market for clean hydrogen is promising. The "Global Hydrogen Energy Flow - 2023 Update" jointly released by the International Hydrogen Energy Council and McKinsey & Company pointed out that Japan, South Korea and parts of Europe have strong energy demand, but renewable energy resources are limited, and clean hydrogen capacity is insufficient, while Latin America's abundant renewable energy resources lead to clean hydrogen capacity far greater than its own demand. And clean hydrogen costs are relatively low. By 2030, in a scenario that takes into account incentives for producers in some regions, the gap between regions with the highest and lowest costs of clean hydrogen production will be about 15 times, creating a huge opportunity for clean hydrogen exports in Latin America. Global annual hydrogen energy consumption is expected to reach 528 million tonnes by 2050, six times that of 2020, and Latin America will account for a significant share of this.

However, to become a clean hydrogen export giant, Latin America also faces some challenges. The development of a clean hydrogen industry requires the establishment and improvement of electrolytic cell technology, storage capacity, supply transportation and other highly specialized infrastructure, with high initial investment costs. According to the International Renewable Energy Agency, Latin America and the Caribbean will account for only about 4% of the global total in 2022, highlighting the urgent need for capital investment in the region. In addition, it is necessary to address the shortage of technical personnel, and the imperfect standards and regulations. However, with the strengthening of efforts and international cooperation, these challenges are gradually being addressed.

At present, regional and international cooperation around green hydrogen and related industries in Latin America is becoming increasingly frequent. In September 2019, the Latin America and Caribbean Renewable Energy Initiative was officially launched with the goal of generating at least 70 percent of electricity from renewable sources by 2030, which will provide technical assistance and financing to member states to meet their energy transition needs. In November 2021, the Latin American and Caribbean Green Hydrogen Development Platform was established to promote cooperation and exchange among different stakeholders and accelerate the development of green hydrogen energy. Multilateral institutions such as the World Bank, the International Finance Corporation and the Inter-American Development Bank have provided financial and technical assistance to many Latin American countries to support the development of local green hydrogen industries.

Latin America, with its abundant renewable energy resources, active policy support, fast-growing industry, and broad market prospects, has great potential in the field of clean hydrogen exports. Despite some challenges, by continuously strengthening its own capacity building and deepening international cooperation, Latin America is expected to become a global clean hydrogen export giant in the future, make important contributions to global energy transformation and sustainable development, and shine a bright light on the world energy stage.