“Green hydrogen production in the metropolitan region in Chile : assessment of future feasibility”

Abstract

Currently, most of the green hydrogen projects in Chile are located in the north and south of the country, while a significant part of the local demand is expected to be concentrated in the central zone, specifically in the Metropolitan Region. This work assesses the future feasibility of green hydrogen production in the Metropolitan Region of Chile in order to discuss the policies that can be taken to ensure the supply of green hydrogen in this region. Chile has an unbundled electrical system where electricity producers settle their differences between generation and contracted PPA sales on a spot market with a centralised cost-based dispatch design. A different approach to the traditional levelized cost of energy analysis is used in which the break-even point of an on-grid green hydrogen plant depends on the cost of electricity. I calculate the willingness to pay for electricity from the plant and contrast with electricity prices in the Metropolitan Region. Under an optimistic scenario of hydrogen plant inputs and a current forecast of electricity prices until 2040, the feasibility of green hydrogen production is barely possible. The analysis identifies a number of key variables that can be taken into account by policy makers in order to support the realisation of this scenario.