As clean and low-carbon hydrogen projects receive worldwide financing, additional measures could accelerate their development and reduce bottlenecks such as regulatory and infrastructure barriers.
Enabling infrastructure is crucial to ease hydrogen project difficulties, while repurposing, reusing, and sharing infrastructure could be beneficial. Investing in repurposing natural gas infrastructure already available to both natural gas consumers and producers, could be much more cost-effective than creating everything from scratch and would play a crucial role in achieving sustainable development.
Clean and low-carbon hydrogen, the molecule produced with either water and renewable electricity or fossil fuels and carbon capture, utilization, and storage (CCUS) technologies, is critical in achieving a net zero economy. According to the Organization for Economic Cooperation and Development (OECD), net-zero plans in most advanced economies are largely unachievable without substantial hydrogen and renewable electricity imports from developing countries (OECD, 2022).
Furthermore, according to the International Renewable Energy Agency (IRENA), 10% of global emissions abated to achieve a net zero future by 2050 would come from the clean and low-carbon hydrogen industry (IRENA, 2022), together with related investments and infrastructure.
With this promise and the availability of renewable energy resources worldwide, many countries have focused their efforts in becoming major clean and low-carbon hydrogen producers, drafting appropriate legislation, creating attractive regulatory schemes, and incentivizing private investments in the industry. Many countries in Latin America and the Caribbean have followed this path, seeking to become relevant players in the future hydrogen industry and achieving greater socioeconomic development through it (IDB, 2023).
The role of hydrogen in achieving a Net Zero Economy
Unfortunately, the current international scenario has hindered clean and low-carbon hydrogen development. High interest rates around the globe have increased financial costs, supply chain constraints have impacted the acquisition of key components (i.e. electrolyzers), and limited hydrogen transportation and storage infrastructure has increased investment needs beyond production.
While interest rates are external factors that might decrease as inflation gets controlled and supply chain constrains might ease with more electrolyzers producers around the world, the need for additional infrastructure to connect supply and demand is essential to facilitate investments in clean hydrogen production.
As of 2023, less than 1% of the hydrogen produced worldwide with low emitting technologies and even less is used for its energetic attributes (IEA, 2023). However, repurposing underused existing fossil fuel infrastructure can play a major role in easing investments to produce and consume hydrogen and its derivates, methanol and ammonia, for their energetic and fuel qualities.
Repurposing Existing Infrastructure for Hydrogen: A Cost-Effective Solution
Countries, like the Netherlands, have studied this possibility and found that repurposing existing natural gas transmission infrastructure, especially pipelines, is four times more cost-effective than building new infrastructure from scratch (0.84 versus 3.2 million euros per kilometer). The study estimates 1.5 billion euro the total investment required for the Netherlands to connect industrial clusters with local producers and storage locations using available infrastructure.
Of this amount, 650 million euros would be allocated for new infrastructure, representing 40% of the total budget but only 15% of the total infrastructure. If all the infrastructure were new, the total cost could reach to 4 billion euros (Government of the Netherlands, 2021).
Moreover, European countries are intensifying efforts to develop ports, conversion facilities, and new shared pipelines. The Delta Rhine Corridor (Delta Rhine Corridor, 2024), a network of pipelines connecting the port of Rotterdam to industrial clusters in the Netherlands and Germany, exemplifies this ambition. This project integrates the entire hydrogen ecosystem, including CO2 collection from industrial clusters and ammonia connections. It aims to transport hydrogen, CO2, and ammonia through three pipelines and bring energy from offshore wind farms ashore via three direct current connections. This project will evaluate the connection and possible synergies with other networks. Currently, there are over 130 hydrogen transmission projects and more than 20 hydrogen terminal and port projects underway for ammonia, methanol, hydrogen and CO2 (H2 Infrastructure Map, 2023).
Unlocking the Hydrogen Potential in Latin America and the Caribbean
Latin America and the Caribbean should actively explore the potential of repurposing existing and sharing new infrastructure to accelerate the development of the clean and low carbon hydrogen industry and its entire value chain, from renewables to hydrogen production through water electrolysis, to methanol and ammonia production to decarbonize local industries as well as provide clean fuels for heavy duty transportation.
This approach could unlock substantial socioeconomic benefits, including job creation, energy security, and economic development, by substantially reducing costs and positioning the region as a key player in the global clean hydrogen economy. In Latin America and the Caribbean, Argentina, Bolivia, Brazil, Chile, Mexico, Uruguay, and Trinidad & Tobago, have substantial fossil fuel infrastructure assets, such as international oil & gas pipelines, offshore oil & gas platforms, and storage terminals that could be repurposed for the hydrogen industry.
Exploring the cost of repurposing existing and underused infrastructure as well as developing new shared infrastructure for the clean and low carbon hydrogen industry in Latin America and the Caribbean would be essential to attract private sector investments and increase competitivity in the local hydrogen industry.
Furthermore, a comprehensive analysis of available infrastructure in the region could provide a second life for potential stranded assets and, at the same time, save important financial resources. The IDB is preparing a study that will crossmatch information of existing infrastructure and potential new shared infrastructure with locations of abundant renewable energy resources. These efforts would provide crucial information to further advance the development of the clean and low carbon hydrogen industry in Latin America and the Caribbean.
Embracing the potential of repurposed and shared infrastructure will unlock sustainable growth and secure a cleaner, greener, and safer future for Latin America and the Caribbean. The time to act is now.
Leave a Reply