With 60% of its installed capacity coming from renewable sources, Latin America enjoys a notable advantage in terms of availability and production costs compared to other parts of the world. Additionally, its access to both the Atlantic and Pacific Oceans facilitates direct export routes to European and Asian markets, where exponential growth in green hydrogen demand is expected in the coming years.
The potential for green hydrogen in Latin America is backed by an investment portfolio that has already surpassed $120 billion, according to BNamericas data. To date, authorities have received 73 project proposals, with Chile leading (26 projects), followed by Brazil (19), Mexico (9), Uruguay (3), and Colombia (3).
Progress and challenges for Green Hydrogen in Latin America
Chile leads this movement not only thanks to its abundant solar and wind resources but also through government policies that promote clean energy development. The Chilean government has expanded a green credit program through financial intermediaries, further boosting the country’s attractiveness for such projects.
Brazil, for its part, took a key step by approving legislation in July 2023 that regulates green hydrogen production. This legislative framework also includes tax incentives, subsidies, and voluntary certification for production. According to a Bloomberg NEF study, Brazil could achieve an electrolysis capacity of 3.8 GW by 2030, which would represent more than half of the estimated capacity for the region, projected at 6.8 GW.
In Colombia, the Ministry of Mines and Energy launched an ambitious long-term clean hydrogen plan in 2021. According to the National Hydrogen Association, there are currently 28 hydrogen projects under development in Colombia, with seven in the testing phase.
In Mexico, the outlook for green hydrogen has been less dynamic due to the stagnation of renewable energy development during President Andrés Manuel López Obrador’s administration. However, a study by energy consultancy Hinicio projects that accumulated investments for hydrogen production in Mexico could exceed $11 billion by 2050.
Green Hydrogen competitiveness in Latin America and the Caribbean will vary by country and application type
While countries like Chile and Brazil could achieve competitive production levels by the end of the decade, despite economic challenges like inflation and high-interest rates, nations such as Mexico, where natural gas is abundant, may face more difficulties making green hydrogen profitable.
A simplistic view might suggest that green hydrogen will only be competitive when production costs match those of conventional fuels. However, this does not take into account that many industries are willing to pay a premium for green hydrogen due to carbon pricing, regulatory requirements, access to green financing, and corporate sustainability commitments.
References: BloombergNEF.com, BNAmericas.com
