Hydrogen in the Americas: the United States and the Republic of Chile
The United States and the Republic of Chile present significant opportunities for the development and successful implementation of a hydrogen economy in the coming years, not just in the Americas, but globally.
This note covers the current state of play and key challenges to developing a hydrogen economy in the United States and the Republic of Chile.
Despite the challenges that the United States and Chile each face in developing a hydrogen economy, there has already been significant interest and mobilization of resources in the private sector to actively pursue projects in both countries.
In particular, green hydrogen presents an opportunity to build upon the rapidly expanding renewable sector and allow hydrogen to play a significant role in decarbonizing the global economy.
For further information on other jurisdictions or on hydrogen generally, please refer to our report “Getting Hy? Ambition and the art of the possible in the search for a hydrogen economy”.
Current state of play
The United States does not currently have an official national hydrogen strategy or a single comprehensive regulatory regime for the development and use of hydrogen. Instead, multiple federal agencies and each state have the authority to regulate and/or develop the resources that produce and utilize hydrogen.
The Biden administration has placed considerable policy emphasis on decarbonization through the use of different technologies, which may also favor the development of hydrogen as a viable solution in the coming years. On his first day in office, President Biden formally resubmitted the United States to the Paris Climate Agreement and since has signed several executive orders aimed at combatting climate change. In addition, several ambitious bills have been put forth in Congress since the beginning of the year that have the potential to promote clean energy technologies, including hydrogen energy.
However, even prior to President Biden taking office, federal agencies had begun evaluating the potential of hydrogen and its implementation. For example, in November 2020, the Department of Energy (the “DOE”) released an updated “Hydrogen Program Plan” (the “Plan”), which sets out the DOE’s strategic framework for hydrogen research, development, and deployment activities in the United States.
The Plan states that its mission is to “research, develop, and validate transformational hydrogen and related technologies including fuel cells and turbines, and to address institutional and market barriers, to ultimately enable adoption across multiple applications and sectors”. To facilitate this, the Plan coordinates efforts both internally across DOE offices, portfolios, programs and laboratories and externally through an interagency working group in order to deliver on the Plan’s stated mission.
Some of the key aspects of the Plan include:
- establishing key DOE program targets to guide the research and development community;
- reducing costs and improving performance of and durability of production, delivery, storage and conversion systems;
- addressing technological and market barriers;
- exploring opportunities for large-scale adoption;
- developing and validating integrated energy systems that utilize hydrogen; and
- demonstrating the value proposition for new uses of hydrogen.
Even with the current administration’s carbon reduction goals and the DOE’s Hydrogen Program Plan, the United States will still have to address key challenges to further foster the successful development of a hydrogen economy. Some of these key challenges include:
- policy support: federal and state policy support required to harmonize a regulatory regime specific to hydrogen;
- funding mechanisms: public incentives and public private cost sharing structures specific to hydrogen development needed to facilitate technology development and hydrogen production scale-up;
- codes and safety standards: other federal agencies, state authorities and local governments that regulate or may have authority to regulate hydrogen in some capacity will need to revisit existing regulations and/or consider hydrogen specific codes and standards;
- labor development: coordination between the public and private sectors required to develop a qualified workforce capable of underpinning the hydrogen industry and accelerating its growth; and
- fossil fuels: competing against fossil fuels that have the benefit of subsidies and no carbon tax on combustion of fossil fuels.
Republic of Chile
Current state of play
Chile has aspirations to be a global leader in green hydrogen. The country is uniquely positioned to develop a competitive green hydrogen industry due to its high potential for low-cost renewables resources, with the highest solar irradiance in the world in the north and with strong and consistent winds in the south.
In November 2020, the Chilean Ministry of Energy published its “National Green Hydrogen Strategy”. The strategy included the following ambitions:
- to become amongst the top five global green hydrogen producers and top three global exporters;
- development targets of 5 GW of hydrogen capacity under development by 2025 and 25 GW by 2030; and
- establish a northern and southern hydrogen valley to support production.
The strategy is designed to be implemented in three waves:
- Wave I (2020-2025): focus on domestic applications that are conducive to building knowledge, scale and infrastructure with a focus on projects that have the most promising economics;
- Wave II (2025-2030): leverage domestic base built during Wave I to rapidly scale and pursue the most promising export markets for both green ammonia and green hydrogen; and
- Wave III (2035 and beyond): expand domestic applications, scale exports to more markets, and leverage emerging technologies and applications for green hydrogen and derivatives as the economics of such applications reach breakeven.
Chile’s National Green Hydrogen Strategy has been lauded internationally for its proactive and realistic approach. However, there are still key challenges that both the public and private sector have to overcome to successfully implement this strategy, namely:
- regulation, licensing and permits: creating a regulatory structure that reduces uncertainty, lowers barriers to entry and accelerates and streamlines the licensing and permitting process;
- financing and incentives: sourcing funding to facilitate pilot projects, studies and incentives to support scaled projects, in addition to developing an export market;
- public and private sector cross coordination: encouraging formalized partnerships with both domestic and international players to promote domestic development and growth;
- infrastructure: repurposing carbon infrastructure and developing new infrastructure to support project development;
- R&D: development of fit for purpose technologies applicable to Chile’s geographic and ecological footprint;
- labor force: attracting necessary talent to build and expand the industry; and
- social/political unrest: addressing risks surrounding the upcoming Constitutional Convention elections in April, the drafting of the new charter and the November general elections.