South America: Future Global Green Hydrogen Hub?

by Thomas Andrew O’Keefe*

An oil rig off the coast of Brazil / Redacción EFEverde / Creative Commons license

A handful of South American countries have long produced hydrogen using fossil fuels for their domestic hydrocarbon, steel, and petrochemical industries, but early efforts by Brazil, Chile and Uruguay to shift to renewable and carbon-free energy sources, along with the emergence of new lower-cost technologies, could position the continent as a leading global green hydrogen supplier.

  • Hydrogen is the most abundant element in the universe and can be produced from water utilizing the electrolysis process whereby a direct current is applied to separate hydrogen and oxygen molecules. The hydrogen gas that is produced can be either burned – for heat or to generate electricity – or stored in fuel cells that produce electricity to power transportation.
  • South America has been producing hydrogen for several decades. Many countries on the continent are already important hydrogen producers for the steel and petrochemical industries, including the manufacture of fertilizers, as well as for refining heavy-crude petroleum products. The electricity to facilitate electrolysis in South America currently relies exclusively on fossil fuels. This explains why hydrogen production is today a major source of greenhouse emissions in some South American countries.
  • Countries with substantial hydrocarbon reserves such as Argentina, Bolivia, Brazil, Colombia, and Peru also have the potential to utilize natural gas to produce so-called “blue” hydrogen, which incorporates carbon-capture and storage technology. The technologies to ensure the elimination of all greenhouse house emissions associated with the extraction, transport, and use of natural gas have yet to be developed.

Three South American countries have a jump on producing “green” hydrogen, made exclusively with renewable and carbon-free energy resources such as geothermal, hydro, solar, wind, and even nuclear power for electrolysis.

  • In 2020 the outgoing administration of Sebastián Piñera of Chile launched an ambitious plan to convert the country into a major global exporter of green hydrogen by 2030. An Australian company at the end of 2021 announced plans to invest $8.2 billion to build a major export-oriented green hydrogen complex in the southern Argentine province of Rio Negro. A pilot project in Argentina has been producing small amounts of electrolytic hydrogen from wind power since 2008.
  • Chile and Uruguay are best positioned to attract green hydrogen investment projects, given their long-term national energy plans forged through extensive stakeholder consensus-building efforts as well as stable economic policies and predictable regulatory frameworks. These factors contributed to putting both countries at the forefront of the continent’s transition to a greener energy matrix. The Santiago metro system, for example, is now powered exclusively by renewable energy, while Uruguay is often ranked behind Denmark as a global leader in terms of wind-generated electricity.

Converting South America into a major global green hydrogen exporter will require new and less costly technologies to produce, transport, and consume it. Ideally, South American governments should encourage regional research and development of new technologies to reduce the current high costs to produce green hydrogen, perhaps with funding from the Development Bank of Latin America (CAF), which is now based in Montevideo, or the Fund for the Structural Convergence of the MERCOSUR (FOCIM). Regional economic integration schemes such as the Andean Community and MERCOSUR can also facilitate the creation of new supply chains for manufacturing competitively priced inputs such as fuel cells and electrolysers to produce hydrogen from water. Another missing piece is a low-cost way to overcome hydrogen’s comparatively low energy density. At present you need about three times more space to store hydrogen to make the equivalent level of energy sourced from natural gas. Retrofitting existing pipeline networks and devising innovative ways to more cheaply transport hydrogen over long distances, is also necessary.

  • South American countries would be wise to decarbonize domestic transport and industry through wide-spread use of green hydrogen before making the leap to global exports. Serving global markets sustainably will also require the deployment of low-carbon transport options to replace the current fleet of long-distance ships that rely on highly polluting diesel. Utilizing liquid hydrogen or ammonia and even methanol produced with green hydrogen to power ocean-going vessels may provide the solution.

June 3, 2022

* Thomas Andrew O’Keefe is President of Mercosur Consulting Group, Ltd. and a lecturer with the International Relations Program at Stanford University.

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