Foreign investors have backed Chile’s claims that it can become a world leader in green hydrogen, thanks to its low electricity prices and strong wind and solar resources.

The country is aiming to become one of the world’s top three exporters of the clean fuel by 2030 — an ambition underpinned by its cost advantages. 

“Chile can be the cheapest green hydrogen producer on the planet,” said minister of energy and mining, Juan Carlos Jobet, at the Chile Day event in London in December. “That will allow us to develop an industry that will generate a lot of investment, a lot of job opportunities [and] it will also open an enormous export market.”

He cited McKinsey research that shows Chile can produce green hydrogen at $1.05 per kilogram by 2030 — less than the Middle East and Australia, which are widely tipped to become key players in the emerging industry.

That forecast is driven by the country’s rock-bottom clean energy prices. Chile’s renewable energy auctions in September yielded the world’s lowest ever bid for a solar photovoltaic project ($13/megawatt hour [MWh]) and Latin America’s lowest bid for a concentrated solar power ($34/MWh). 

“Around 80% of the cost of producing hydrogen from renewables is driven by the energy cost,” said Daryl Wilson, executive director of industry group Hydrogen Council, speaking at Chile Day. “[Chile has] the most advantageous situation in the world to produce energy at a low cost from renewables. So hydrogen is a natural next step.” 

The reliability of the country’s renewable resources is another driver. In the northern Atacama desert, solar capacity factors — the average output relative to capacity — are up to 37%, which is on par with the Middle East. In the south, Patagonia’s wind capacity factors up to 75%, exceeding that of the Nordics. 

Alicia Eastman, president of InterContinental Energy whose mega-projects in Australia and Oman make it the world’s largest renewable hydrogen developer, said the price of clean electricity and capacity factors “are the biggest drivers to a very low price of the final product.”

InterContinental Energy focuses on areas with a lot of sun in the day and wind at night to hit an overall capacity factor of 70–75%. “Chile can reach a capacity factor of that high just for wind, so it can be competitive,” she said at Chile Day. “We’ve always considered Chile as one of the areas of the world that has this incredibly competitive resource [alongside] the Middle East, North Africa and Australia.”

There are more than 60 green hydrogen projects being developed across Chile, the most recent being an eight-gigawatt project in the Magallanes region announced by France’s Total Eren in early December. 

The government is offering up to $50m in subsidies to help private developers. Mr Jobet said the first grants will be awarded in the coming weeks and that ten companies — including Enel, Engie and Copenhagen Infrastructure Partners — have applied. 

A new government will take office in 2022 and the president will be chosen on December 19 in run-off elections between far-right candidate José Antonio Kast and leftist Gabriel Boric. However the national green hydrogen strategy is based on input from across the political spectrum. “We have built a very broad consensus on this strategy and we think whoever is elected for the next political cycle will keep pushing this agenda forward,” said Mr Jobet.