Chilean green hydrogen could undercut European blue by 2025

LONDON (ICIS)–Chilean green hydrogen could cost less than $1.3/kg (€1.06/kg) by 2025, the country’s energy and mining minister Juan Carlos Jobet said at Reuters Events: Hydrogen 2021 on 20 May.

The projected decline in hydrogen cost puts green hydrogen from Chile below blue hydrogen produced in Europe.

Chile set an ambitious target of installing 25GW of electrolyser capacity by 2030 in its hydrogen strategy that was released in November 2020.

If installed, Chile’s total electrolyser capacity would be equivalent to 63% of the European Commission’s entire 40GW target by the same year.

FALLING HYDROGEN COST

Cost potential for green hydrogen in the country showed that by the end of the decade the low-carbon commodity could be just $1.30-1.40/kg (€1.06-1.14/kg).

“We are updating those numbers and we think we are going to be below those numbers by 2025,” Jobet said, attributing the fall to projections of lower technology costs rather than improved renewable potential.

Jobet said assessments made of potential wind generation installations showed capacity load factors could be as high as 70%, while solar PV capacity factors could reach 35-37%.

According to data from IRINA, onshore wind load factor in Chile in 2019 was around 25%, while for solar generation it was 23%.

Average load factor for North Sea wind is around 45%.

CHILEAN GREEN OR EUROPEAN BLUE

Current cost projections for blue hydrogen via autothermal reforming (ATR) and steam methane reforming (SMR) both with carbon capture and storage (CCS) put blue hydrogen at €1.93/kg and €2.02/kg respectively according to ICIS data, based off the ICIS benchmark Dutch gas TTF year+1 contract and the ICIS Dutch power front year contract.

This means that if the cost projections outlined by Jobet are achieved, then the green hydrogen in Chile will cost less than blue hydrogen produced in Europe.

However, it is likely that transportation costs need to be taken into account. The McKinsey & Company Hydrogen Insights Report 2021 forecasts that transporting hydrogen in ammonia to the west coast of the US, an 8,200km route, could add between $1.90-2.40/kg (€1.55-1.96/kg) hydrogen, based on projections for 2030.

EXPORT

Jobet stated that Chile’s development with hydrogen will come in three waves. The first will be via exporting green ammonia, due to its well-developed export routes around the world, second could via be synthetic fuels, and third would be exporting liquid green hydrogen.

Chile could export to Asia, the US and Europe, according to Jobet.

In Asia the market would likely be Japan and South Korea, he said. While Singapore could act as a distribution hub.

He noted that although China was an interesting market, it was likely that they would produce enough hydrogen to supply their own demand.

From the south, in Patagonia, he said that they could export to Europe. Noting that Chile had signed an agreement with the Port of Rotterdam in the Netherlands.

The number of hydrogen projects being developed in Chile had doubled since the release of its strategy in November 2020, rising from 20 to 40.

Jobet also stated that a $50m subsidy had been launched to help develop hydrogen projects in Chile, particularly ones at earlier stages.