Chile mulls financial aid for green hydrogen projects

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Chile’s government is considering ways to boost the attractiveness of green-hydrogen projects as the biggest copper-producing nation strives to become carbon neutral.

“We will announce the details early November,” Energy Minister Juan Carlos Jobet said in an interview in Santiago. “It will come in the form of some financial assistance to allow investors to have returns during the early stages of the projects.”

Green hydrogen – produced by stripping the gas from water using electrolyzers powered by wind and solar – is seen as key to eliminating carbon emissions from the industrial sector, which now relies on natural gas as both a fuel source and a feedstock. Ramping up Chilean production would help the country meet its target of becoming carbon neutral by 2050 and help mining companies make the switch to cleaner fuel at a time of rising scrutiny by investors. Copper producer Antofagasta plc said this week that it’s considering changing to hydrogen-powered trucks.

The minister has been in talks with international investors to show the benefits of producing the fuel in Chile, which boasts considerable solar capacity in the northern Atacama desert and wind in the south. Construction of a first hydrogen production facility powered by wind in the Magallanes region, at the southernmost tip of Chile, should begin before the end of the year, Jobet said.

Initially, the cost would be between $5 and $6 per kilogram, but the government expects that the cost would drop to below $1.50 per kilogram before the end of the decade, Jobet said.

Other countries have found ways to make the fuel more cheaply. Portugal has announced it could start producing green hydrogen at $4 per kilogram using wind power. To compete with hydrogen produced from fossil fuels, the cost would have to drop to below $1 per kilogram, according to BloombergNEF.

Jobet said that investors he has spoken with haven’t shown concern about Chileans voting on a new constitution in October, even as the issue weighs on the value of the peso.

“Chile has signed international treaties with countries that represent 86 per cent of global GDP, with clauses that protect foreign investment,” Jobet said. “The new constitution won’t erase any of that.”

© 2020 Bloomberg L.P.