Can De-Risking Make Chile and South Africa Leaders in the Green Hydrogen
Source：Hydrogen Fuel News
De-Risking Green Hydrogen Projects in Chile and South Africa: Unlocking a Sustainable Future
Green H2 is on track to become a vital component of global decarbonization efforts. However, the high cost and investment risks associated with its development present significant challenges—especially for countries in the Global South, like Chile and South Africa. This is where “de-risking” comes into play. But what does de-risking mean, and why is it so critical to green hydrogen’s success? Below, we explore this concept, recent developments in these nations, timelines for ongoing projects, and actionable steps to utilize green hydrogen technology effectively.
What Is De-Risking and Why Does It Matter?
De-risking refers to strategies aimed at reducing uncertainties and financial risks so private investors feel more secure in funding large-scale projects. For green hydrogen, this could mean introducing subsidies, co-financing with governments, or providing guarantees to mitigate the risks associated with market fluctuations or production scalability.
Countries like Chile and South Africa face additional challenges. They must overcome systemic financial vulnerabilities, such as economic instability or high borrowing costs, that can deter private investors. Without de-risking strategies, these nations struggle to secure the capital and infrastructure needed to position themselves in the global green hydrogen market.
Investment in clean hydrogen is essential not just for reducing global carbon emissions but also for tapping into new economic opportunities. For Chile, it offers a chance to transform its energy system using its abundant renewable resources. Similarly, for South Africa, the move could lower dependence on fossil fuels while creating jobs and attracting foreign investment.
Recent Developments in Chile’s Green Hydrogen Industry
Chile has emerged as a leader in green hydrogen thanks to its renewable energy sources. The Magallanes region in the south is home to the world’s largest project to produce e-fuels, which are derived from green hydrogen. Another key project in northern Antofagasta focuses on integrating green hydrogen into the mining sector, reducing the industry’s carbon footprint.
Chile’s government has also set an ambitious roadmap, projecting that the nation can produce cost-competitive green hydrogen by 2030, targeting 25 GW of electrolysis capacity for production. Partnerships with international companies, such as TotalEnergies and Siemens Energy, are already shaping the landscape, underscoring the importance of international collaboration in de-risking initiatives.
South Africa’s Green Hydrogen Ambitions and Challenges
South Africa boasts significant potential for green H2, particularly from its access to solar and wind energy. Sasol, a major chemicals company, is leading efforts to integrate clean hydrogen into its operations. The company has plans for green hydrogen projects in the country’s industrial hubs, such as Johannesburg and the Northern Cape, aimed at supplying products like green ammonia.
While South Africa has received interest from global investors, the nation faces pressing challenges. Access to affordable financing remains an obstacle, underscored by concerns over rising debt levels. De-risking these efforts requires innovative funding strategies, including public-private partnerships and collaborations with international agencies like the European Investment Bank.
Why Chile and South Africa Are Critical Players
Chile and South Africa stand out due to their geographic and natural advantages. Chile has some of the most competitive solar energy prices in the world alongside consistent wind patterns, making it ideal for producing green hydrogen affordably. Meanwhile, South Africa’s strategic location enables it to serve growing green hydrogen markets across Europe and Asia.
Both countries also share a common objective of leveraging green hydrogen to generate economic growth. By enhancing industries such as mining and chemicals, they could create value domestically while exporting clean energy to global markets. Chile and South Africa, if successful, could become cornerstones of the global green hydrogen supply chain.
The Timelines for Green Hydrogen Development
The window of opportunity for large-scale green hydrogen implementation is tight. Chile’s green hydrogen roadmap aims to have the first exports by 2030, with projects like the Magallanes facility playing a central role. Similarly, South Africa expects its new hydrogen plants, including ammonia production facilities, to start operating around 2027-2030. These are realistic but pressing timelines for completing infrastructure, securing funds, and implementing de-risking mechanisms.
How Can Green H2 Technology Be Applied Today?
Rather than wait for 2030, elements of green hydrogen technology are already ready for adoption. For instance, industries like mining and heavy transportation can start integrating green hydrogen to reduce reliance on fossil fuels. Mining operations in Antofagasta, Chile, and Sasol’s activities in South Africa can act as test cases that demonstrate hydrogen’s feasibility and scalability.
Local governments can also explore pilot programs for decentralized hydrogen production in off-grid areas, utilizing small and localized plants powered by renewable energy. This approach not only reduces emissions but also builds technical expertise and supply chain resilience, factors crucial for scaling larger projects.
Possible Solutions for Accelerated Green Hydrogen Uptake
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International Partnerships: Collaborations with developed countries could provide access to financing, technology, and expertise. For example, European countries dependent on hydrogen imports could co-finance projects in South Africa and Chile to ensure a secure supply chain while reducing upfront costs for these nations.
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Public-Private Co-Investment Models: Governments in Chile and South Africa can incentivize private investments by offering partial guarantees or taxation benefits. This reduces risk for private investors while ensuring long-term project viability.
- Incremental Implementation: Starting with smaller projects that supply existing industries, such as mining or chemicals, allows stakeholders to address logistical and financial hurdles in stages. This creates proof points for scaling up to exports.
Final Thoughts
Green hydrogen holds a unique promise for countries like Chile and South Africa, not just to combat climate change but to drive economic growth and secure energy independence. However, achieving this vision requires de-risking investments and fostering international cooperation. By applying lessons learned today—using hydrogen for industrial decarbonization or small-scale pilot programs—these nations can start realizing the benefits now while preparing for full-scale implementation by 2030. Effective collaboration and innovative strategies will help turn ambitious green hydrogen goals into accessible, sustainable realities for both local and global markets.
