Introduction
On Thursday, August 4, 2022, the regional virtual event ".Green hydrogen: Challenges and prospects for its promotion and implementationthe seventh in a series of eight virtual events organized by the Raw Materials and Climate Project (MaPriC) with the support of the LEDS LAC platform. MaPriC is a project implemented by the German Development Cooperation (GIZ) together with the Ministry of Mines and Energy of Colombia (Minenergia). This event was co-organized with the Green Hydrogen Portfolio and Power to X projects of GIZ Colombia and with the platform H2LAC. It was attended virtually by 741 people, mainly from Colombia, Chile, Peru and Mexico.
In the first block, Green hydrogen opportunities in LACThere were four panelists: Herib BlancoPower to X Analyst at IRENA; Florian KolhammerTechnical Advisor of the Coordination Office of GIZ Germany; Sergio RuizCoordinator of the H2 Portfolio of GIZ Colombia, and Constanza MenesesContent and Networking Manager at the Platform H2LAC. On the other hand, in the second block, Panel of experiences in LAC the challenges for its promotion and implementation were addressed. The event was attended by Monica GascaHydrogen Leader of the Ministry of Mines and Energy of Colombia; Luis MarínDirector of the Hydra Project (initiative that seeks to allow mining vehicles to operate with green hydrogen); Juan Camilo MúneraDirector of Research and Development of OPEX (exclusive representative and distributor in Colombia of HOPPECKE), Silvio HeimmanCavendish (a company that promotes the development of clean energies such as green hydrogen), CEO of Cavendish (a company that promotes the development of clean energies such as green hydrogen). Purdy Group, Daniel PatiñoDeputy Financial Director of the Non-Conventional Energy and Efficient Energy Management Fund (Fondo de Energías No Convencionales y Gestión Eficiente de la Energía).FENOGE) y Janina FrancoSenior Energy Specialist of the World Bank. This block was moderated by Daniella RoughInternational Projects Coordinator at the U.S. National Renewable Energy Laboratory (NREL) and part of the team of the global secretary for LEDS GP. Finally, closing messages and conclusions of the event were delivered by Omar Guerraresearch engineer at NREL, Rodrigo VasquezCoordinator of the 4E Program, GIZ Chile and with Diego GrajalesClimate Change Coordinator of the Colombian Ministry of Energy.
The recording and materials from the event can be reviewed in this link.
Key messages
Block I. Hydrogen Opportunities
IRENA indicated that although it is possible to use green hydrogen (H2V) throughout the entire energy system, it should be prioritized in specific sectors where electrification is complicated or very costly, such as heavy industry and long-distance transport (air and sea). In addition, it can be converted into other compounds when combined with, for example, carbon dioxide to form methanol, or with nitrogen to form ammonia.
H2V is essential for decarbonization and in addition to reducing greenhouse gas (GHG) emissions, it also reduces other polluting compounds (it only emits water).
High cost is one of the main barriers to promote H2V, so it is necessary to boost innovation to improve the performance of technologies. In the political sphere, it is necessary to create markets; implement emission reduction certificates during production, transport and use, as well as regulate the electricity market. In the financial sphere, large amounts of capital are required for infrastructure, capital mobilization and risk management for new technologies.
By 2030, Chile and Colombia project an optimistic scenario in terms of technical potential and the cost of production could reach US$$1.5 per kg. These low costs and technical potential are more than enough to export the product. However, for LAC to be an exporter of H2V it is necessary that the certification systems are compatible and take into account that it will be easier to export H2V derivatives than liquid H2V. In the long run, there will be a lot of competition and many options for importers but decisions will be based not only on costs but also on geopolitical factors.
GIZ Germany shared that Germany's National Hydrogen Strategy published in June 2020 has the goals of promoting hydrogen as a key element for the energy transition in Germany and establishing a regulatory framework to drive H2V. However, the German government is currently updating the National Hydrogen Strategy due to the changes experienced with the pandemic. Another factor to consider is the supply of gas, as due to the war, it is not available from Russia and its price has quadrupled, which has had consequences on the promotion of the H2V market. In updating the strategy, it was learned that more renewable energies such as solar and wind are required and clean energy must be integrated into different sectors such as transportation and industry. In the short and medium term there will not be enough H2V and the best way to use what is available must be evaluated.
There is a high demand for political decisions by the German government to enable companies to assess the risks when investing and to be able to develop and apply technologies openly and in line with market indicators. It is also desired to promote and accelerate the H2V economy not only in Germany but also in Europe, maintaining German leadership in H2V technologies on an international level.
GIZ Colombia's Green Hydrogen (H2V) and Power to X (PtX) Portfolio of Projects is quite diverse despite its size and is focused on the development of standards, technical studies, capacity building and generating strategic alliances. Its differentiating contribution is to position Colombia as a reference in the region for the production of PtX (green ammonium). To incorporate the PtX component into Colombia's H2V roadmap, production and use prefeasibility studies are being carried out, feasibility studies are being conducted with selected companies and GIZ Mexico, and support is being provided for the development of regulatory policies to promote PtX. However, there are challenges in moving forward with the Portfolio:
- Capacity Building: There is little or limited availability of technical experts, so multi-thematic training is needed on regulatory, technical and governance issues.
- Relationship with the private sector: The aim is to formalize cooperation agreements and achieve co-financing commitments. With FENOGE, they have a database that has enabled them to identify potential partners for the project.
- Governance: National and local public policies need to be strengthened to achieve greater inter-institutional coordination. It is also desirable to establish H2V as part of long-term state and institutional policies.
- Technological development: sufficient renewable energy sources are required to produce H2V. In addition, the supply of technical experts in H2V or PtX production who are familiar with local conditions is limited.
H2LAC is a collaborative platform created by GIZ, the WB, ECLAC and the EU's Euroclima+ Program that promotes the development of H2V. Its objectives are: (i) to promote the exchange of information on the development and potential of H2V in the region as well as lessons learned; (ii) to collaborate with different countries; (iii) to position the region as a key player in renewable energies. Its mission is to concentrate efforts to promote H2V in LAC. There is potential in the region and many countries such as Argentina, Brazil, Chile, Colombia, Costa Rica, Paraguay and Uruguay have already developed Roadmaps to promote H2V.
The platform facilitates exchanges with existing stakeholders along the H2V value chain. They currently have a network of almost 40 partners from 13 countries including environment and energy ministries, international organizations, H2 associations and renewable energy associations.
Block II: Panel of experiences in LAC
The whole world is now looking at H2V as a key alternative and solution to decarbonize various sectors. Renewable energy prices are coming down, but we are not necessarily ready for a transition to H2V as we must recognize the gaps to ensure we have the regulatory and technical framework and market conditions in place.
Regulatory challenges
The Ministry of Energy and Mines of Colombia not only has the Roadmap for H2V, but also published on August 3 the regulatory decree of the Energy Transition Law (Law No. 2099), which lays the foundations for the H2V market framework in Colombia, gives responsibilities to different ministries and defines important aspects on the subject. The Roadmap, in which the support of international cooperation (GIZ and IDB) was key, will allow the new government to continue positioning H2V.
In terms of challenges, it is difficult to identify niches where it is efficient to use H2V. In addition, it will be a challenge for the new Colombian government to continue implementing and updating the Roadmap to make the H2V market a reality in Colombia. Another aspect to consider is that technology and costs vary, which directly affects the enabling conditions for its promotion.
Operational and technical challenges
The Hydra Project is a consortium that brings together different companies that have been producing or working with H2V, such as Engie, Mitsui, Antofagasta Minerals, EXAGON, among others. The project seeks to develop a power train capable of operating 100% with H2V in mining vehicles, replacing traditional fuels.
Mining research is key to the development of new technologies that allow mining companies to achieve their production goals while reducing GHG emissions. Aspects such as weight, volume required for storage, production site, transportation and location of refueling stations, as well as the time required for refueling, are fundamental, but also challenging.
OPEX has carried out the following projects to date: installing the first station (in Medellín) that generates, stores, purifies and offers H2V refueling; raising funds to obtain one ton of H2V to produce fertilizers and mobility; installing fuel cells in original lithium battery electric vehicles.
An ongoing challenge is to run the vehicle on H2V and to have sufficient recharging stations given the short autonomy of the vehicle. Another challenge is to identify the best method for decarbonization. To this end, they recommend maintaining openness and respecting the options offered by the market, as well as considering ventures.
In the city of San José and in the north of Costa Rica, a project has been launched with cabs that run on H2V; this is a fairly comprehensive initiative that includes the provision of the vehicle to the cab driver and its maintenance, as well as H2V for 8,000 k.m. per month.
Financing challenges and business models
FENOGE has launched the+H2 Colombia Initiative in line with both the Colombian government and the H2V Roadmap. The institution seeks to integrate and promote H2V and blue hydrogen throughout the value chain and not just focus on production. To this end, it relies on strategic alliances with key actors such as producers and financiers.
They structure tailor-made financing mechanisms and have been able to identify different projects, many of them oriented to the use of H2V in transportation and others to the use of its derivatives. Likewise, although they support the initial project definition stage, they are interested in accompanying the initiatives up to the implementation stage, i.e., seeking funds and financing for this purpose. Finally, they point out that it is a challenge to find additional resources from public, private or international cooperation sources, generate alliances and multiply the impact and scope of these resources and funds.
The World Bank is interested in promoting the use of H2V as it is critical for decarbonization and for a fairer transition where jobs that will be freed up by fossil fuels can be absorbed. On the other hand, they point to capacity building in this new energy sector and to consider the gender approach to close the existing gaps.
In recent years they have identified an increased interest in the LAC region to promote and develop H2V, with public policies, regulations and roadmaps.
In terms of challenges, risks have been identified for financing and attracting investors in H2V initiatives. In view of this, the WB seeks to provide greater security for this new energy source. The WB seeks to increase the scale of these projects in order to reduce production costs given that these are incipient and pilot technologies,
Closing message
In LAC there are clear signals for the promotion of H2V; each country has its aspirational goals and quantified targets.
It will be key for investors to understand the risks, opportunities, costs of capital and that each country will have a different scenario due to its regulations, policies and economic context.
Social and community participation must also be taken into account to identify benefits, but also negative impacts, if any. Alliances and common efforts working collaboratively are essential. The demand for this new fuel must be encouraged in a normative manner, the regulation and procedures for the approval of a project must be reviewed, and the mechanisms and rules must be clear.