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Latin American hydrogen demand could increase by up to two-thirds by 2030: IEA

19 August 2021 William Fleeson

Latin America's demand for hydrogen could grow by as much as two-thirds by 2030, bolstering support for low-carbon hydrogen in the region in the process, a new report found.

The International Energy Agency (IEA) on 12 August released "Hydrogen in Latin America: From near-term opportunities to large-scale deployment," which argues that low-carbon hydrogen, as a promising but undeveloped clean technology, could benefit the Latin American regional economy if given the right opportunities.

By the same logic, progress is critical in the near term—which the IEA defines as the 2020s—if policy and industry leaders want to see their hydrogen industries compete on the world stage.

"The next decade will be crucial for the long-term promise of low-carbon hydrogen in Latin America, and much can be done today to develop and demonstrate emerging technologies and prepare the ground for their future scaling-up," the report said.

The report lays out two cases for Latin America's hydrogen growth: a Baseline case is most likely, and an Accelerated case defines a more optimistic growth outlook. The Baseline case shows a demand increase of 52%, reaching 6.2 million metric tons (mt) by 2030. Regional hydrogen demand totaled 4.1 million mt in 2019, or about 5% of global demand, according to the report.

Almost all of the Baseline case's growth would occur in existing technologies and processes, specifically in the oil refining sector. Ammonia production likewise would grow by more than 50%, stemming from demand in Brazil and Mexico.

In the Accelerated case, demand would rise by 67% to 6.8 million mt. It would be driven by new applications in transportation and industry, as well as a "rapid deployment of enabling infrastructure" like recharging stations for electric vehicles, whose batteries can run on hydrogen fuel cells.

New applications in industry and transportation make up almost 18% of total hydrogen demand over the Accelerated case forecast period. The report noted that this demand source would depend on the development and installation of hydrogen types that are "not technologically mature" as of now, such as green hydrogen produced by electrolysis with renewable energy.

Currentinfrastructure

Hydrogen production infrastructure is highly variable across the region currently, in that nearly 90% of the industry is located in five countries, the IEA noted. Perhaps furthest along is Chile, which aims to become a "powerhouse of the hydrogen economy," with specific goals to produce the world's cheapest green hydrogen by 2030, and to be a top-three hydrogen exporter by 2040.

Demand is likewise highly concentrated. Trinidad and Tobago, for example, accounted for 40% of the region's total hydrogen demand in 2019. In the steel industry, Brazil and Mexico together accounted for 80% of all regional production—in other words, the two countries form a major demand source for current and future hydrogen. The report noted that a tailored hydrogen approach would be best, given Latin American countries' widely divergent industrial and emissions profiles.

In short, the region has a base from which to develop a regional hydrogen industry further. But building a more robust hydrogen value chain poses a "complex challenge" that will require capital and policy attention spanning decades.

The region's existing hydrogen facilities could benefit from being retrofitted with carbon capture and storage technologies, such as at ammonia plants and large crude oil refineries, according to the report. The IEA emphasized the difference between current hydrogen forms and future, "low-carbon hydrogen"—of which Latin America has only three, pilot-level projects currently.

Latin America's hydrogen potential exists for domestic use as well as for exports. Thus, the region's ability to develop hydrogen-based energy, for itself and its trading partners, could ultimately bring a multiplying effect from investments made today, the report argues.

Export-focused

Etienne Gabel, a senior director in the Latin American gas, power, and renewables team at IHS Markit, emphasized the importance of hydrogen for export from Latin America to other parts of the world.

"The region's hydrogen ambitions very much revolve around exports: Latin America aims to be a global export hub," he said. Latin American countries will need to be able to compete with future hydrogen supplies from places like the Middle East and North Africa, as well as Australia, in the expected future demand centers in Europe and Asia.

Gabel affirmed the view that much needs to be done in the region's hydrogen development. But which countries are most likely to profit is unclear.

"This certainly remains anyone's race," he said.

Historically, the region has served as a testing ground for energy technologies in the past, Gabel said, especially for work by international companies as they fine-tune the technologies for worldwide deployment. Latin America could therefore be a region to watch for signs of hydrogen's broader progress—and setbacks—as the technology matures.

To achieve the region's potential, the IEA recommended Latin American nations identify further near-term opportunities, focus on early-stage research and development, and build long-term strategies for hydrogen at national, regional, and international levels.

Posted 19 August 2021 by William Fleeson, Senior research analyst for Executive Briefings, IHS Markit

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