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LatAm H2 - The Growing Importance of Low-Carbon Hydrogen in Latin America

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LatAm H2: The Growing Importance of Low-Carbon Hydrogen in Latin America | September 2022 5 According to a 2020 study by the World Bank's Energy Sector Management Assistance Program, the cost of green hydrogen production is estimated to be approximately (a) US$4.50-4.80/kg, assuming an alkaline electrolyzer is installed and the levelized cost of energy (LCOE) is ~US$30/MWh, or (b) US$5.00-5.80/kg, assuming a PEM electrolyzer is installed and LCOE is ~US$30/MWh. This study also revealed that at a LCOE below ~US$25/MWh, some electrolyzer companies in Chile and other Latin American countries are quoting a green hydrogen total production cost below US$3.50/kg. With the right conditions in place, some Latin American countries could soon reach a sustainable and competitive scaled-up green hydrogen production cost. Chile for example, has announced a target price of US$1.50/kg of hydrogen by 2030. By 2023, the World Bank estimates that in the northern parts of Chile the price of green hydrogen in certain scenarios could range between US$1.80-3.00/kg. In Brazil, 85% of energy production comes from renewable sources, with increasing focus on wind and solar as alternatives for the more traditional hydro sources and the advantage of combining both sources at the same location such as in certain northeastern states. A recent McKinsey study shows that the Levelized Cost of green Hydrogen (LCOH4) produced in Brazil would be around USD 1.50/kg of hydrogen in 2030. This is in line with the LCOH of the best locations in the U.S., Australia, Spain and Saudi Arabia. According to this same study, by 2040 this cost could drop to approximately USD 1.25/kg of hydrogen. Still, transport infrastructure must also be developed throughout the region, as the lowest production costs may be located in regions that are not well connected or are distant from current hydrogen demand hubs, such as industrial clusters. (Note: none of the target costs quoted above account for additional expenses of ammonia synthesis, export infrastructure development, vessel chartering and other necessary export activities/infrastructure.) The adjacent map from the IEA showing expected hydrogen production costs demonstrates that Latin America has a land area of over 800,000km 2 in which the IEA ultimately expects hydrogen production via electrolysis to be possible under US$1/kg of hydrogen using a combined solar and wind-based energy supply by 2050. (This is consistent with the approach taken by the US$6.5 billion NEOM Helios project in Saudi Arabia). For perspective, the current U.S. presidential administration has a 2030 target of producing green hydrogen at US$1.00/kg. LCOH via electrolysis powered by hybrid solar PV and onshore wind, Latin America, 2050

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