Energy Transition

Latin America: a future clean hydrogen exporter?

Latin American countries can become exporters, local decarbonizers or focused players of clean hydrogen.

Latin American countries can become exporters, local decarbonizers or focused players of clean hydrogen. Image: Getty Images

Muqsit Ashraf
Group Chief Executive - Accenture Strategy, Accenture
Jorgen Sandstrom
Head of Energy, Materials, Infrastructure Programme, Industrial Transformation, World Economic Forum
  • Latin America’s abundant renewable resources can unlock cost-competitive clean hydrogen production.
  • Current challenges need to be addressed including lack of demand for both domestic and export markets, insufficient clean hydrogen infrastructure and technology adaptation.
  • Close collaboration between companies within industrial clusters, as well as regional and international collaboration, will enable Latin America to accelerate action and realize its potential.

In the global decarbonization landscape, clean hydrogen has become a crucial element for the energy transition. Its potential to reduce greenhouse gas (GHG) emissions in hard-to-abate sectors makes it a vital component in achieving a sustainable future. “Latin America, with its abundant renewable resources, has the potential to become a key player in the global clean hydrogen economy. In addition, investment in clean hydrogen infrastructure could help address energy security concerns and drive economic growth across the region,” says Andrés Rebolledo, Executive Director of the Latin American Energy Organization (OLADE). Through targeted strategies and embracing collaboration, the region can harness its potential to produce clean hydrogen at competitive costs, driving both local decarbonization and global exports.

Have you read?

Latin American countries are uniquely positioned to leverage their vast renewable energy resources to produce clean hydrogen. Depending on their regional-specific characteristics and short- and medium-term clean hydrogen strategies, countries in the region may follow one of three potential pathways: net exporters, decarbonizers, and purpose-driven players.

Net exporters, such as Argentina and Chile, prioritize the production of clean hydrogen for trading it on international markets, aiming to become globally competitive through cost-effective production, robust trade infrastructure and transparent certification schemes.

Local decarbonizers, such as Brazil, Colombia and Mexico, initially prioritize the use of clean hydrogen to decarbonize their domestic economies before expanding into exports.

Focused players, such as Panama and Uruguay, adopt a targeted approach, developing clean hydrogen for specific applications, such as shipping, to complement existing fuels and technologies.

Clean hydrogen economy challenges

Despite its great future potential, the clean hydrogen economy in Latin America currently faces several challenges:

  • Low demand. Demand for both local consumption and exports of clean hydrogen remains limited. There are only a small number of offtake agreements in place, and few projects are reaching final investment decision.
  • Low progress on dedicated infrastructure. Though several clean hydrogen hubs have been announced, few are under construction. These clusters integrate various aspects of the hydrogen supply chain to facilitate its efficient production, storage, transportation and use.
  • Technology adaptation and workforce development. The region is still highly dependent on international manufacturers for key components. Technology adaptation to local requirements is needed, as well as development of local skilled talent to support the clean hydrogen economy.
  • High costs prevent price competitiveness. Despite low renewable energy costs, clean hydrogen remains expensive compared to conventional hydrogen, making it difficult to secure offtake agreements.
  • Lack of standards and certification. The region requires a common definition of standards and guidelines to ensure the safe and reliable production of clean hydrogen and its derivatives. As these regional schemes advance, they will need to align with global standards and certifications.
Loading...

Enabling measures to advance the clean hydrogen economy

To address these challenges, enabling measures across six key areas have been identified. These measures, while primarily aimed at governments and policy-makers, also require the involvement of players in infrastructure, technology and finance, as well as offtakers.

  • Technology and talent. A primary objective across the region is to focus innovation and research and development (R&D) efforts on scaling up the technology needed in the clean hydrogen value chain, such as electrolyzers and hydrogen pipelines. In parallel, increased funding for research centres and training programmes to upskill local talent is essential.
  • Cost. Targeted government support through balanced incentives for clean hydrogen projects across the value chain is needed. In addition, collaboration between nearby industries – for instance, in industrial clusters – can help reduce costs by sharing resources, developing shared infrastructure and leveraging economies of scale.
  • Standards and certifications. Regional agreements and partnerships are needed to standardize regulations and certifications. For example, defining technical, safety and carbon intensity standards.
  • Demand. International demand can be stimulated through long-term trade agreements and by defining operational rules for international trade. For domestic use, demand aggregation in hard-to-abate industrial clusters can play a key role in reducing offtake risks by pooling together demand from multiple industries with public procurement, to develop and ensure a more diversified – and thus less risky – “market”.
  • Infrastructure. Centralized and shared infrastructure, such as clean hydrogen hubs, can streamline the production, storage, distribution and use of hydrogen and its derivatives. In parallel, the development of ports and transportation capabilities is key to enable exports. Additionally, repurposing existing infrastructure for specific uses, such as localized refuelling stations, can accelerate the adoption of clean hydrogen for specific applications.
  • Pace of development. Coordination among the players across the whole value chain is key alongside promoting knowledge-sharing and proposing innovative financing mechanisms.

Collaborating to unlock the clean hydrogen opportunity

Collaboration at local, regional and global levels is pivotal in accelerating the clean hydrogen economy. This can distribute required investments and risks, create market stability by aggregating regional supply and demand and accelerate technology and infrastructure R&D. Collaboration across the clean hydrogen ecosystem can help identify common challenges, share best practices and provide a platform to advocate for regional needs and support. In addition, aligning regional regulations with international standards can enable efficiencies and synergies. Pursuing an inclusive clean hydrogen economy approach by convening all relevant stakeholders, including policy-makers, industries, financial institutions, academic organizations, local communities and non-governmental organizations (NGOs) can foster a sustainable transition that benefits all players. Public acceptance is also fundamental, and it is pivotal to learn from adoption of other clean energy technologies in the region and meaningfully engage with local stakeholders as technology and infrastructure is planned and deployed.

A relevant example of regional collaboration in Latin America is CertHiLAC – a joint effort between the Inter-American Development Bank (IDB) and OLADE to create a certification system for clean hydrogen production in Latin America and the Caribbean. It was launched in November 2023, and already more than a dozen countries have signed up. Certification in general is key to promote traceability, environmental and social sustainability. CertHiLAC in particular pays close attention to responsible water management and respecting local communities and indigenous peoples.

Discover

How is the World Economic Forum facilitating the transition to clean energy?

The Accelerating the Clean Hydrogen Economy in Latin America report, developed by the World Economic Forum in collaboration with Accenture, analyzes the clean hydrogen economy development journey of selected countries, deep-dives into the ambitions and challenges in the region, and provides perspective on key enabling measures for the region. Latin America’s potential is significant and, by leveraging each country’s characteristics and ambitions, the region can collectively accelerate its journey toward becoming a key player in the global clean hydrogen future. Collaboration among companies and governments located in proximity in industrial clusters together with public and government stakeholders is critical for accelerating clean hydrogen by sharing risk and resources, developing shared infrastructure, aggregating demand, enabling economies of scale and facilitating access to funding. In light of this, the World Economic Forum’s Transitioning Industrial Clusters initiative, in collaboration with Accenture and EPRI, will continue to advance cooperation and shared vision in industrial clusters to drive economic growth, employment and the energy transition.

Loading...
Don't miss any update on this topic

Create a free account and access your personalized content collection with our latest publications and analyses.

Sign up for free

License and Republishing

World Economic Forum articles may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use.

The views expressed in this article are those of the author alone and not the World Economic Forum.

Share:
A hand holding a looking glass by a lake
Crowdsource Innovation
Get involved with our crowdsourced digital platform to deliver impact at scale
World Economic Forum logo
Global Agenda

The Agenda Weekly

A weekly update of the most important issues driving the global agenda

Subscribe today

You can unsubscribe at any time using the link in our emails. For more details, review our privacy policy.

Innovation can disrupt the mining industry. These sustainable start-ups are leading the way

Miranda Barker

November 29, 2024

Renewable energy and the US: This 3-step plan can make it happen

About us

Engage with us

  • Sign in
  • Partner with us
  • Become a member
  • Sign up for our press releases
  • Subscribe to our newsletters
  • Contact us

Quick links

Language editions

Privacy Policy & Terms of Service

Sitemap

© 2024 World Economic Forum