Hydrogen law, regulations & strategy in Peru

Hydrogen projects in Peru have recently gained significant momentum as part of the country’s efforts to advance the energy transition and reduce carbon emissions, aiming for Net Zero by 2050. 

The Peruvian government is committed to cutting carbon emissions and promoting decarbonisation. This commitment is reflected in the new legal framework designed to support renewable energy. In March 2024, Law No. 31992 was enacted, promoting green hydrogen and designating it as a matter of national interest. This law, which we discuss in further detail below, creates a legal framework specifically for low-carbon hydrogen, defining green hydrogen as hydrogen produced using renewable energy with minimal carbon emissions. 

In terms of production, the Ministry of Energy and Mines is actively encouraging international investment in renewable energy and green hydrogen projects. Two major projects are currently leading the way (both currently at development stage) with a combined investment of $12.5 billion:

• Pheland Green Energy: This project aims to build a green hydrogen plant in Arequipa (south of Peru). The facility is expected to utilise advanced electrolyser technology powered by renewable energy sources like solar and wind to produce green hydrogen. 
• Verano Energy: This project looks to construct a plant to produce green ammonia for export. The plant will convert green hydrogen into ammonia, targeting international markets and enhancing Peru’s role in the global green ammonia sector. 

Peru currently only has one project in operation. This project, operated by Fenix Power, includes a photovoltaic plant and an electrolyser at Fenix Power’s thermal power plant located in Chilca (south of Lima). Fenix Power’s project is notable for its innovative approach, combining renewable energy generation with hydrogen production at a single site. This setup not only enhances the efficiency of hydrogen production but also contributes to reducing the overall carbon footprint of the power generation process.

As mentioned above, Peru has recently established a robust regulatory framework to promote and regulate investment in renewable energy projects. 

The most significant policy change is the enactment of Law No. 31992, which supports the use of green hydrogen. This law represents a milestone in advancing green hydrogen in Peru, designating green hydrogen as a matter of national interest and emphasising its role in reducing carbon emissions and facilitating Peru’s transition to a low-carbon economy. 

The first article of the law establishes that the foundations of the new regulation will promote research, production, transformation, storage, and adaptation of hydrogen within Peru. This law aims to provide certainty for stakeholders involved in green hydrogen development, thereby facilitating investment and the implementation of related projects. 

Although the implementing regulations for this new law have not yet been enacted, there is considerable drive from both the government and the private sector to develop these regulations. Implementing regulations are expected to be enacted by the end of 2024 or in early 2025.

Development 1

Significant progress towards a more sustainable energy transition was made with the enactment of Law No. 31992 (as set out above), known as the Green Hydrogen Promotion Law. This law was a milestone for promoting the development of green hydrogen as a key component in reducing carbon emissions and achieving energy decarbonisation. 

When first published, the definition of green hydrogen contained in Article 2 of the law did not clearly reflect a commitment to decarbonization, as it did not specify that ‘green’ hydrogen had to be produced exclusively from renewable energy sources, which is a crucial aspect for aligning the law with its sustainability goals. 

Recognising this gap, Legislative Decree No. 1629 was published on 22 August 2024, amending Law No. 31992. The amendment introduces a more precise definition that aligns with energy decarbonisation goals set out in the Paris Agreement, which Peru adopted in its Nationally Determined Contribution. Specifically, Article 2 of the law has been revised to define green hydrogen as follows:

“Article 2. Definition of Green Hydrogen 

For the purposes of this law, green hydrogen is that which is obtained from water through processes that use renewable energy resources.” 

This updated definition ensures that green hydrogen will be generated exclusively using renewable energy sources, guaranteeing that its production is entirely clean and does not produce CO₂ emissions. This modification reinforces Peru's commitment to energy transition towards a low-carbon economy, ensuring that green hydrogen projects fully comply with the environmental objectives of the law. 

With these changes, Peru's green hydrogen legislation is now better aligned with its sustainability goals, promoting cleaner and more efficient energy development. 

Development 2

The cement producer Yura, a subsidiary of Grupo Gloria, has unveiled its investment strategy for 2024 and 2025, which places a strong emphasis on sustainability and operational efficiency. The company plans to allocate between USD 50 million and USD 80 million to enhance plant functionality and expand its production capacity. 

In terms of renewable energy initiatives, Yura is advancing a green hydrogen project that will leverage energy from the newly established solar plant. This project, which requires an investment between USD 20 million and USD 22 million, is scheduled to commence operations in 2025. The green hydrogen will be utilised as a catalyst in the plant’s kilns to stabilise the flame and reduce coal consumption, thereby enhancing Yura's position as a sustainability leader in Peru’s cement industry. 

Yura has successfully lowered its CO₂ emissions to 436 kg per ton of cement, surpassing the national target of 520 kg. The company is also pursuing projects to incorporate end-of-life tyres (ELTs) and waste-derived fuels (WDFs) into its kiln processes. 

Development 3

In May of this year, H2 Perú, the Peruvian Hydrogen Association, in partnership with the UK Embassy in Lima, initiated a call for the creation of the Regulation Proposal for the Green Hydrogen Promotion Law. This collaborative effort aims to assist Peru’s legislative and regulatory bodies in crafting a comprehensive regulatory framework that aligns with international standards and best practices in the renewable and low-emission hydrogen sector. 

H2 Perú’s objective is to catalyse the development of a robust hydrogen industry by fostering dialogue and cooperation among stakeholders, including government entities, industry players, and research institutions. By leveraging global best practices, the initiative will help identify key opportunities and challenges for establishing a supportive hydrogen ecosystem. The initiative will consider regulatory, technical, commercial, and capacity-building aspects of the hydrogen ecosystem at a national level, paving the way for a sustainable hydrogen market. 

The proposed regulation is intended to ensure that all hydrogen-related projects and activities align with Peru’s broader sustainability and decarbonisation goals. This is crucial for integrating hydrogen into the country's energy mix whilst also adhering to environmental and economic objectives. The collaboration between H2 Perú and the UK Embassy aims to provide a well-rounded proposal that enhances the competitiveness and efficiency of the hydrogen sector, positioning Peru as a pivotal player in the global transition to clean and renewable energy sources. 

In May 2024, the Pontificia Universidad Católica de Chile was selected to develop the regulation, following a rigorous evaluation of techno-economic criteria. The university is now working closely with H2 Perú and the UK Embassy to draft the regulation. This draft will play a critical role in shaping the regulatory landscape for hydrogen in Peru.