Uruguay outlines a strategy to export and create a local green hydrogen market

By July 1, 2021 6   min read  (1134 words)

July 1, 2021 |

Fuel cells works, hydrogen, Green Hydrogen, h2, Uruguay, fuel cells
At the international Hydrogen Americas Summit with Latinamerica Focus event, Minister Omar Paganini explained that Uruguay is interested in the production of green hydrogen as a “natural result” of its energy matrix, based heavily on renewable energies and with the capacity to increase its potential.

Paganini explained what actions are being outlined to bet on the production of green hydrogen, with the support of the IDB and consultancies, while strengthening local capacities in the matter, through different programs that take advantage of their strengths as a country.

The Minister of Industry, Energy and Mining, Omar Paganini, spoke at the international event Hydrogen Americas Summit with Latinamerica Focus , a summit that takes place between June 8 and 11.

The Paganini exhibition took place virtually on June 10 . Other leaders and specialists from Latin America and the Caribbean participated in the same block.

“There is no doubt that hydrogen will play a very important role in global decarbonization , and Latin America has the opportunity to join,” said the minister.

Paganini explained to the audience that, although Uruguay does not have a hydrogen market – the exception is Ancap, which consumes hydrogen derived from its own refining process – and that it does not have its own fossil energy sources, it is interested in the production of green hydrogen, that is, derived from renewable sources. This decision “is the natural result of its remarkable energy transformation,” he said.

This energy transformation means that today the Uruguayan matrix is ​​63% renewable and 37% fossil, unlike what happened at the beginning of the century, when it had fulfilled its possibilities in terms of the use of hydroelectric energy on a medium and large scale. The country, which had become dependent on this source of electricity, which is highly variable year-on-year, had to import electricity in years with low rainfall. At that time, the Uruguayan energy matrix had few sources, and there was a strong dependence on imported fossil fuels, which represented 63% of the energy matrix.

Instead today, said Paganini, Uruguay has acquired a new role in the region , by ceasing to be an energy importer and becoming a net exporter . “Since 2013 Uruguay has maintained this condition, without interruptions,” he explained. Therefore, in 2019 our country exported 3 TWh to Brazil and Argentina, with an average price of 28.7 USD / MWh. In 2020, the figure was 1 TWh.

The hierarch also pointed out as relevant the fact that Uruguay’s oil consumption has practically not changed since 1965, even though its economy multiplied by three, its population grew 30% and the number of vehicles has increased “exponentially” since then. .

“As a result of the energy policy and the different instruments developed by the country to promote private investment, Uruguay today generates 97% of its electricity from renewable sources ,” said Paganini. Of this total (average of the last four years), 50% corresponds to hydroelectric energy, 30% to wind energy, 15% to biomass and 3% to solar.

“But our renewable energy potential is really greater, ” said the minister. He argued that today Uruguay has 1.5 GW of wind energy installed, when its potential is 30 GW onshore and more than 250 GW offshore . As for solar energy, today the installed capacity “is small, less than half a GW, but the potential is close to 450 GW”.

The head of the Ministry of Industry, Energy and Mining (MIEM) added that there is a very good complementarity between solar and wind energy (50 and 50%). “In the seasonal and daily cycle, the complementarity allows high capacity factors, close to 60%, and very good conditions for electrolyzing, which lowers the costs of green hydrogen production,” he said.

For this reason, the authorities foresee that, by 2030, the price of green hydrogen production will be close to 1.8 UDS / kg in plant, and will be slightly higher than 3 USD / kg in Europe, “depending on the carrier ” . This statement by Paganini derives from a study carried out between MIEM and the port of Rotterdam.

However, beyond the export potential, “we believe that there is an interesting local market to develop, thinking in the medium and long term,” added the chief. This local market includes the substitution of diesel in freight transport. In this area, the potential demand is equivalent to 150,000 tons of green hydrogen per year by 2025.

In addition, a market for green fertilizers is foreseen , using ammonia. The potential import substitution demand for fertilizers is 100,000 tons of green hydrogen per year.

Regarding maritime transport, “Uruguay has good ports , which are a key part of its economy, so we identified a potential for green ammonia or methanol production as fuel for ships,” said Paganini.

“We are working on creating the conditions for the development of these markets, outlining our strategy to develop local demand and exports,” he added.

For this reason, today Uruguay is developing its green hydrogen strategy , with the support of the Inter-American Development Bank and foreign consultancies, Paganini said. This takes into account different scenarios regarding local consumption and exports.

In a conservative scenario, it is expected that in 2050 the production of green hydrogen will be 0.4 million tons per year, which is double the Uruguayan national energy production. In an average scenario, the production of green hydrogen will reach, in the same year, 0.8 million tons, which is three times the national energy production. In any case, Paganini clarified, these are primary approximations.

Although it has the support of the IDB and international consultancies , the minister pointed out that Uruguay needs to “generate technical capacities at the government level, in the private sector and academia.” To that end, different actions are being developed.

On the one hand, the H2U pilot project was launched , bringing together the private and public sectors , at a small-scale level and in the freight transport sector. The project will allow to acquire learnings. Currently, there is dialogue with private companies, through a data room , to establish the conditions of a bidding process in the last quarter of 2021.

Likewise, a working group was created that includes, among others, Ancap, UTE, MIEM and the Ministry of the Environment, with the aim of jointly developing different actions .

Meanwhile, together with the National Research and Innovation Agency (ANII), a program is being implemented to support academia and the private sector to find solutions to the challenges of green hydrogen in Uruguay. “We seek to build capacities among students and future professionals in the field of green hydrogen,” said Paganini.

The chief added that Uruguay has good capacities in terms of governance and environmental and social factors, which makes it attractive for investments in this sector. It also has a solid investment promotion regime. Paganini also highlighted the strategic location of our country; its ports, airports and free trade zones; and the quality of its telecommunications infrastructure.

“We believe that Latin America has a very good opportunity , considering our geopolitical situation in the new energy scenario,” the minister closed.

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