Chile reaches green hydrogen production milestone

Danish actors are key players

The Chilean market has long been on the list of potential global producers of green hydrogen. In the past year, the sector has seen important developments, demonstrated that the market is maturing and that the government’s ambitions for the industry cannot be mistaken.

In November 2020 the previous government published a new strategy for green hydrogen. Subsequently in April 2024, the current government introduced an action plan for the green hydrogen strategy.

The strategy and action plan demonstrates a focus on risk minimization and stability, as well as a political consensus on securing Chile’s role in the global green hydrogen market.

The government aims to achieve 5 GW of electrolysis capacity by 2025 – increasing to 25 GW by 2030 – with a concrete goal of producing 200k/ton of hydrogen annually at less than 1.5 USD/kg.

In operational projects Chile has mainly boasted a number of pilot and demonstration projects. Recently, however, six new major projects have been submitted for environmental assessment. The largest of these is a Danish-driven investment project- at USD 11 billion - from Copenhagen Infrastructure Partners (CIP).

The project named HNH is located in the Strait of Magellan in southern Chile and has an expected wind capacity of 1.4 GW, as well as an expected export of 10 million tons of ammonia annually. It is the largest Power-To-X (PtX) project to reach this stage to date and the largest investment project in investment value submitted for environmental assessment since 1995.

Accordingly the submission of the HNH project has received a lot of attention in Chile – furthermore because of the 4000 jobs the project is expected to create and the importance for suppliers in the values chain.

Current projects and value chain

In total, over 64 PtX projects are in the feasibility phase in Chile, most of which (around 70%) target the northern regions, with the local mining industry, amongst others, as expected buyers of primarily ammonia.

Projects in the south (30% of projects), such as the HNH project, are primarily focused on ammonia production for global export. In addition, one of the larger projects is also expected to produce green fuel.

The 64 projects currently announced have a total planned capacity of just over 40 GW. The conservative estimate, which assumes that not all projects will reach a final investment decision, points to at least 10 GW of electrolysis capacity.

The development of green hydrogen production in Chile creates important opportunities for Danish companies across the value chain, including consulting engineering and -technical competences, desalination plants, installation and maintenance of onshore wind turbines, storage, shipping and ports, etc.

The needs of the industry are many and an intensification of commercial activity among suppliers has followed in the wake of the ever-increasing number of projects.

CIP's HNH project includes a desalination plant, a 194-turbine wind farm including their installation, an electrolysis plant for ammonia production, and a harbour to be used both for the import of materials and the export of the ammonia.

Kimberly Sanchez, Vestas' Sales and Country Manager in Chile and Vice President of the Chilean Hydrogen Association (H2Chile), believes that the HNH project's milestone of submission for environmental assessment is the most important signal of the maturity level that the projects have reached. She encourages Danish suppliers to prepare for what is to come:

“The wind capacity of the HNH project itself is approximately 25% of the total wind capacity installed in all of Chile to date - since 2001. As suppliers, we have been encouraged to strengthen our supply chains and production in order to deliver on the projects now underway. In this context, the Strategic Energy Alliance, led by the Danish Embassy in Santiago, is also an important coordination space to utilise the capacity of the different actors and create synergies.”

Kimberly Sanchez, Vestas’ Country Manager in Chile and Vice President of H2Chile.

In southern Chile the PtX-production is based on solar energy, where the projects will particularly dependent on desalination plants and water transport. Finally, it’s worth mentioning that Chile is one of the world’s largest copper exporters, so any solution that can contribute to greener mining production is highly valued.

Public and financial incentives

Where there are no subsidies to the basic electricity price in Chile, the Chilean government has followed up the action plan with a wide range of supportive economic initiatives and financial instruments designed to promote the industry across the value chain.

The action plan has been followed by institutional adjustments including streamlining environmental assessment regulations, strengthening the supporting infrastructure and a series of government tenders.

For example, the Ministry of Economy has published tenders for local production or installation of machines for electrolysis to meet part of the demand from the tendered projects locally. Up to USD 10 million will be allocated per project, corresponding to 60% of the project costs.

Similarly, the government has published a tender for the establishment of a green hydrogen research centre, calling for national and international partnerships to support the PtX industry. The beneficiary must be a Chilean entity - where foreign entities can be partners.

Denmark and PtX in Chile

CIP, Vestas, Danfoss, Maersk and FLSmidth, amongst other companies, have major offices and presence in Chile. They all play a central role in Chile's decarbonisation efforts - with Vestas and CIP sitting on the board of the Chilean equivalent of the Hydrogen industry, they are key players in Chile's PtX ambitions. FLSmidth in Chile has taken a leading role in the country's attempts at decarbonizing the mining industry, where green hydrogen is crucial.

For this reason, the TC (Embassy in Santiago), in close collaboration with five danish companies, has built a strategic alliance that through networking, joint events and coordination is used as a platform to promote Danish commercial interests in Chile.

In June, the alliance organised a successful visit to Denmark with 12 Chilean experts from a wide range of public institutions. During the visit, they had the opportunity to talk to Danish authorities, hear about Danish experiences with public-private partnerships and see concrete, Danish, green technology and solutions.

Chile's position as a producer of the world's potentially cheapest green hydrogen and the country's geographical position means that the Maersk McKinney Moller Centre for Zero Carbon Shipping has Chile in its sights as a green shipping corridor. The centre is working closely with the Chilean Ministry of Energy and a feasibility study project in Chile is expected to be the first of the centre's projects.