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Hydrogen is expected to have a substantial role over the coming decades in decarbonising the Chilean energy system. Ahead of the UN Climate Change Conference COP26, the Chilean government announced that Chile would be carbon neutral by 2050.
More information available online at: https://www.emol.com/noticias/Economia/2019/06/18/951626/Chile-y-su-meta-de-ser-carbono-neutral-El-ambicioso-camino-de-los-otros-paises-que-tambien-se-propusieron-serlo.html; and, https://news.bloomberglaw.com/environment-and-energy/chile-aims-for-first-green-hydrogen-production-by-end-of-2021
However, at present Chile is at an early stage regarding hydrogen production due to technical barriers, an underdeveloped legal framework and a lack of clear financial support mechanisms.
At present, hydrogen production in Chile is largely carried out by industrial gas producers and is primarily used in the refining industry (for hydrotreating, hydrocracking and desulphurisation), the food industry (in the manufacture of oils and margarines), the glass industry, the power generation industry (as a generator coolant), and in thermal and thermochemical treatments.
More information available at: https://4echile.cl/4echile/wp-content/uploads/2020/05/Prop-Estrat-Reg-Informe-Final_publicar.pdf
Every year around 58,500 tons of hydrogen are produced in the country, 98% of which is used by refineries and the rest for the manufacture of glass and food.
More information available at: https://www.agenciase.org/2019/11/20/el-combustible-del-futuro-el-hidrogeno-verde-en-la-mira-de-chile-y-el-mundo/#:~:text=En%20Chile%2C%20actualmente%20se%20produce,combustibles%20f%C3%B3siles%20como%20gas%20natural.&text=Al%20a%C3%B1o%2C%20en%20el%20pa%C3%ADs,fabricaci%C3%B3n%20de%20vidrios%20y%20alimentos.
Low carbon hydrogen is expected to have a role across a range of sectors, most notably in:
Hydrogen (specifically hydrogen fuel cells or similar) is seen as a potential solution for larger road vehicles in the Chilean public transport system.
More information available at: https://www.energia.gob.cl/rutaenergetica2018-2022.pdf
The Ministry of Energy announced that the public transport system should shift in the short term towards natural gas and hydrogen fuel cell systems, both contributing to reducing the pollution caused by current diesel and gas transport fleets. In addition, if successful, this shift will include efforts with various public and private industry players to develop technologies that could be applicable in taxi fleets, buses and commercial fleets for the distribution of goods and services.
At present, Chilean industry uses hydrogen (mostly “grey” hydrogen) as a feedstock for several industrial processes. With the development of concentrated solar power plants (“CSPs”) and wind farm technology over the coming decade, this hydrogen could be obtained through electrolysis. Currently, there are two examples of low-scale pure hydrogen producers in the country:
“INDURA Lirquén” is a green-hydrogen plant, located in southern Chile. Since 1996, it has been developing 99% pure green-hydrogen through electrolysis for the purpose of supplying hydrogen to local glass manufacturers.
“ASU Indura Graneros” is a hydrogen plant, located in central Chile, which produces and supplies pure hydrogen to local industries.
Finally, a big market player in Chilean industry is Linde, which in 2006 initiated the operation of a grey hydrogen plant, located in Concón, Chile with a production capacity of 4,200 kg/h of hydrogen. This hydrogen is supplied through a pipeline to the nearby oil refinery Empresa Nacional de Petróleo (“ENAP”), which has a hydrogen demand of 3,003 kg/h. This hydrogen production plant uses steam reforming methane with a thermal efficiency of 85%. It also distributes around 4,500 kg/month of hydrogen to external customers.
There have been some key advances in the implementation of hydrogen for use in fuel mining trucks. Overall, 25% of the total carbon footprint of local copper mines is produced by oil-based engines. In order to reduce Chile’s carbon footprint and contribute to the production of “green-copper”, Chile is promoting hydrogen fuelled mining trucks and other hydrogen-fuelled industry support vehicles. Chilean public entity Corporation de Fomento a la Produccion (“CORFO”)
also called for two public tenders to study the feasibility and implementation of two different technologies:
dual powered hydrogen-diesel engines for mining trucks; and
hydrogen fuel cell-powered mining trucks and support vehicles.
Tenders were awarded in 2019.
In the case of the dual powered engines, the project was awarded to the technological consortium composed of: ALSET, the University of Santiago, Pontificia Catholic University of Chile, Japanese NTT DATA, Compañía Minera del Pacífico, BHP CHILE, Anglo American Sur and ENGIE, amongst others. The purpose of this consortium was to develop a giant mining truck and demonstrate the technical and economic feasibility of mixing hydrogen with diesel. The total cost of this project is approximately USD 15,875,000, of which CORFO contributed USD USD 5,080,000 over the course of four years. The rest will be funded by the consortium. This project is directed by Alset Global
More information available online at: http://alset.at/
and it is already at the testing stage.
Exchange rate throughout this report $1 = 0,0013 USD.
Regarding the fuel cell-powered engines, the project was awarded to a second consortium composed of Federico Santa María University, Public Company CODELCO, Collahuasi, Metalpar, SIEMENS, ENGIE, the National Mining Society, the National Hydrogen Center of Spain and LINDE. This project has a total cost of approximately USD $16,500,000, of which CORFO contributed USD 825,000. This project is being directed by local Federico Santa María Technical University.
Regarding green hydrogen production, the World Energy Council identified Chile as the “hidden champion” in the race to develop a green hydrogen economy. In addition, a “National Green-Hydrogen Strategy” is being developed by the Ministry of Energy as a result of a public-private partnership process that will create a public report which will guide future public policies. The report is expected to be released in late 2020.
More information available at: https://www.energia.gob.cl/mini-sitio/hidrogeno-verde
In light of the above, it is estimated that by 2050, revenues from exports of green hydrogen could represent 10% of the current Chilean GDP. Furthermore, the Ministry of Energy estimates that by 2050, 50% of the hydrogen production market in Japan and South Korea could be captured, as well as 20% in China; the overall hydrogen production per year could reach 25 million tons.
More information available online at: https://www.senado.cl/senadores-conocen-las-ventajas-del-denominado-combustible-del-futuro-el/senado/2020-06-26/103338.html
2. MARKET PROSPECTS FOR HYDROGEN
The hydrogen market in Chile is at an early stage and has significant prospect for growth over the coming years. The Ministry of Energy has advised that hydrogen will be a key enabler for Chile to meet its 2050 net zero goals. To date, much of the funding has come from the public sector and foreign entities such as GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH in cooperation with public entities in Chile.
Website information: https://www.giz.de/en/html/index.html
Because of the nascent status of the hydrogen projects there has been no M&A activity in the sector and as such, little by way of private financing to date. This is expected to change once the Chilean government clarifies the legal framework for hydrogen projects.
3. CHALLENGES FACING HYDROGEN PROJECTS IN CHILE
In common with many other jurisdictions, Chile does not have a specific legislative framework for hydrogen projects across the various sectors. Therefore, it is important that new regulations are established to regulate the use of hydrogen in Chilean industry. There are a number of gaps and uncertainties that will need to be addressed before the hydrogen economy can truly flourish.
Financial support and incentives
The Chilean government supports the generation and use of alternative fuels generally and particularly hydrogen in the move to decarbonise the public transport system. However, there remains a need for more engagement of public and private funds in the development of the hydrogen sector across the board.
Research and education
Generally, there needs to be an increase in the amount of research that is conducted into hydrogen in order to fully understand the availability and applicability of the resource and the technology needed for its production.
4. CHILEAN REGULATION OF HYDROGEN
In broad terms, hydrogen in Chile is classified as a dangerous substance and, according to NCh382.Of98: 2003, it belongs to the Class 2.1: “flammable gases”. Therefore, the regulated activities are only those set out in the regulation. Namely, the following areas of activities are regulated:
transport of hazardous substances in public roads;
storage of hazardous substances; and,
possession of hazardous substances in the workplace.
The Ministry of Public Health regulates storage of dangerous substances (including flammable gasses), and basic sanitary and environmental conditions in the workplace pursuant to the following regulations:
Supreme Decree N° 43 approves the regulation of storage of dangerous substances.
Supreme Decree N° 43 is available online at: https://www.leychile.cl/Navegar?idNorma=1088802
This regulatory decree is the most complete regulation on hydrogen in Chile. It explicitly refers to the storage of hydrogen and is the most comprehensive in terms of specific measures such as safety distances and maximum storage capacities. However, this supreme decree explicitly indicates that it does not apply to "liquid and gaseous fuels, used as energy resources", which "must be regulated by the Ministry of Economy, Development and Reconstruction".
Supreme Decree N° 594 approves regulations on basic sanitary and environmental conditions in the workplace It regulates hydrogen implicitly when dictating provisions for “flammable substances” and on fire safety measures;
Exempt Resolution N° 408, approves a list of dangerous substances to health. This exempt resolution introduces hydrogen as a “hazardous substance” in both compressed and liquid forms, however it has not been regulated by the Ministry of Economy, Development and Reconstruction.
The Ministry of Transport and Telecommunications regulates the transport of dangerous substances by road and their handling in port facilities, in the following regulations:
Supreme Decree N° 298 regulates the transport of dangerous loads on streets and roads. It establishes general provisions for the transport of dangerous substances on public roads. However, it does not provide details or specific requirements for hydrogen or flammable gases transported in bulk. Nor does it contain provisions for the bulk transfer of flammable gases; and
Resolution N° 96, which updates and modifies handling and storage regulations of dangerous cargoes in port facilities. It has mainly administrative provisions, product classifications and indications of what can be deposited in certain port areas. It also does not reference the transfer of flammable gases in bulk.
In addition, international maritime shipping is regulated by the IMO’s International Maritime Dangerous Goods Code (“IMDG”).
Available online at: http://www.imo.org/en/Publications/IMDGCode/Pages/Default.aspx
Health & Safety
The Ministry of Labour and Social Welfare has also issued a regulation on the prevention of occupational risks, which indirectly applies to hydrogen projects as it requires employers to have an internal regulation of safety and hygiene in the workplace, by means of Supreme Decree N° 40. This Supreme Decree approves regulation on professional risk prevention and requires employers to prepare and keep current safety and hygiene regulations, in addition to informing workers of the risks they run and training them to adequately face such risks. These provisions mandate to update the safety and hygiene regulations to include “hydrogen” whenever it is incorporated into a work task, in addition to informing and training workers.
The National Service of Geology and Mining issued a Supreme Decree which establishes a mining safety regulation that could affect hydrogen indirectly. It does not refer to hydrogen directly, but this regulation allows the use of Liquefied Petroleum Gas (“LPG”) and Compressed Natural Gas (“CNG”) as a fuel for machinery in underground mines (under Article 129°), which suggests that they could also accept the use of hydrogen as a fuel.
Regarding the environmental aspects of hydrogen, it is estimated that the current regulations issued by the Ministry of Environment, addresses projects related to the hydrogen value chain and guides environmental impact statement proceedings. The Ministry of Economy and the Ministry of Environment are analysing in detail the current regulations in relation to hydrogen in order to propose specialised legislation.
In conclusion, the regulatory framework of hydrogen is insufficient for all of its applications, since the eventual spread of the use of hydrogen requires updated, specific and detailed regulations, covering situations not dealt with by existing regulations. In particular, provisions are lacking regarding high pressure vessels, cryogenic fluids (i.e. liquid hydrogen), flammable atmospheres, hydrogen production, explosion mitigation, ventilation needs, handling and transfer of hydrogen, and various foreseeable uses within the green hydrogen value chain.
A complete study of actual Chilean hydrogen regulation has been uploaded online, at: https://4echile.cl/4echile/wp-content/uploads/2020/05/Prop-Estrat-Reg-Informe-Final_publicar.pdf
5. REGULATORY BODIES
There is no specific regulatory body which is responsible for the regulation of hydrogen projects. Instead, a number of regulators have responsibilities depending on the activity in question.
Regulates the use of land
Superintendence of Health
Usually has the inspection role of the hazardous substance authority in relation to storage
Regulates workplace hazards regarding storage and use
Superintendence of Environment
Inspection of environmental compliance
Environmental Evaluation Service
Undertakes Environmental Impact Assessments and all proceedings related.
Superintendence of Transport
Usually has the inspection role of the hazardous substance authority in relation to transport.
6. UPCOMING DEVELOPMENTS
There have been several hydrogen related projects announced recently. Notably, the following measures show the progress being made in advancing the role that hydrogen can play in Chile’s energy, transport, industrial and heating sectors:
4EChile has published several articles and scientific papers showing the prospects and potential of hydrogen in Chile, including a complete study of current Chilean legal framework of hydrogen.
Please refer to the following articles: (i) “Tecnologías del Hidrógeno y Perspectivas para Chile”; and, (ii) “Proposición de Estrategia Regulatoria del Hidrógeno para Chile”; both available online at: https://4echile.cl/
In January 2020, the “Cavendish Mission” program was inaugurated. It consists of a series of four workshops that will provide a space for discussion, learning and convergence of initiatives to support at the local level the development of green hydrogen projects. The program is promoted by the Solar and Energy Innovation Committee of public entity CORFO, the Chilean Hydrogen Association and local private entity Innovation Club. The initiative seeks to encourage and prepare the public, private and academic sectors for a series of international activities and events that will take place during 2020. The purpose of these being to promote the economic agenda of the country and seeking to contribute towards the Chilean National Hydrogen Strategy.
More information available online at: https://www.comitesolar.cl/mision-cavendish-buscan-potenciar-desarrollo-de-hidrogeno-verde-en-chile/
The Ministry of Energy intends to publish the Chilean National Hydrogen Strategy in late 2020, which will be a key strategic document for the development of hydrogen in Chile.