The Chilean government wants to transform our country as the cheapest green hydrogen producer worldwide and to become a relevant player in this industry globally.
Green hydrogen can be obtained through hydrolysis. This is a relatively simple process that consists of separating compounds from water by means of electrical discharges. In this way H2 and O2 are obtained. For this process to be economically profitable, two fundamental elements are needed: low-cost electricity and abundant water.
Chile currently has low-cost electricity thanks to the massive introduction of non-conventional renewable generation. In the north of Chile is the Atacama Desert, a privileged place for the development of photovoltaic plants and concentrated solar power plants. On the other hand, the southern coasts, as a result of the strong winds from the South Pacific, are an ideal place for wind energy generation. This energy generation is currently greater than the country's consumption demands, and has the potential to continue growing. It is estimated that by year 2030 Chile will be able to produce up to 70% of energy surplus and will be mainly an electricity exporter. Therefore, this surplus of cheap electrical energy should be used to produce green hydrogen.
On the other hand, the abundance of water needed to produce green hydrogen is available throughout the country. In the south, it is provided by natural freshwater sources. In the north there is also access to the fresh water needed to produce green hydrogen from seawater desalination plants.
Chile faces two main challenges in order to become a relevant exporter of green hydrogen. The first challenge refers to the need to develop a comprehensive and complete regulation related to the green hydrogen industry. The second challenge refers to the need to define the legal nature of fresh water produced by desalination plants to be used for hydrogen development in the north of the country.
To address the first challenge, the government has taken the first steps to create a legal framework, declaring green hydrogen as a fuel and not as a hazardous substance. This means that, for marketing purposes and for certain safety standards, fuel standards can apply and not the higher standard appliable to hazardous substances. But the government's efforts have not stopped there, it has also created an action plan to define a regulatory framework to cover all aspects necessary to exploit green hydrogen efficiently.
The main government agencies involved in the regulation necessary for the development of the green hydrogen industry are the Ministries of Energy, Mining, Environment and the Superintendence of Electricity and Fuels.
In order for Chile to be a competitive producer of green hydrogen, it is necessary to establish an organic and complete regulation that integrates the competences of the different state agencies. In this way the Government could generate the necessary legal certainty to facilitate the development of projects and to attract foreign investment to develop green hydrogen production projects.
The Ministry of Energy together with the Superintendence of Electricity and Fuels should establish the technical parameters and safety standards necessary to be able to build and operate a green hydrogen generating plant. To do so, they must take into account the international requirements so that the hydrogen produced is effectively considered as green hydrogen by other countries. In addition, they must regulate the process that investors must follow to obtain the sectoral environmental permits for the construction and operation of green hydrogen generating plants.
Once the technical parameters and suitability standards for the construction and operation of green hydrogen production plants are determined, the authority should also regulate the conditions for transporting and storing green hydrogen.
Once the regulation and production of green hydrogen is consolidated, the government should promote the creation of the necessary infrastructure to be able to export green hydrogen competitively. Chile has extensive experience in importing liquefied natural gas (LNG), whose handling on land and sea transport is similar to that of hydrogen.
The Ministry of Mining will also play a key role in the viability of green hydrogen in Chile. There is no international regulation governing the use of green hydrogen in large-scale mining yet. But hydrogen can be incorporated as an energy source, either through as synthetic fuels or as a fuel directly. If it is possible to incorporate the use of green hydrogen and its derivatives in large-scale mining, a thriving domestic market could be created, capable of strengthening the national industry and preparing it for the international market. This would be a contribution not only for the energy industry, but also for the global mining industry as a whole.
Considering that the challenge facing Chile is urgent, since international competition is already developing, in order to implement a comprehensive legislation Chile must rely on the international regulation of green hydrogen.
In this sense, the Spanish regulation regarding the construction and operation of green hydrogen plants is very relevant, since Spain is currently the largest producer of green hydrogen in Europe. In order to establish safety measures for green hydrogen generating plants, we should follow the international safety standards provided by the National Fire Protection Association. On the other hand, the international standards ISO Nº16110, 22734, among others, are a relevant source of technical guidelines that can be adapted by chilean regulation.
Currently, the most abundant sources of non-conventional renewable energy in Chile are the photovoltaic parks in the Atacama Desert. The only existing facilities in the northern zone to obtain the necessary water to produce green hydrogen is through desalination plants.
The second major challenge of the chilean legislation refers to the lack of legal definition of fresh water produced by seawater desalination. Although Chile has a very detailed regulation on fresh water and its use, it is being discussed in the National Congress whether desalinated water should be considered as a national good of public use or a good subject to private ownership.
This discussion of desalinated water as either a national good of public use or as a private good, results, for the moment, in a lack of legal certainty for investors on the conditions of use of desalinated water. The declaration of water as a national asset for public use entails the requirement to obtain certain permits from the General Water Agency (Dirección General de Aguas) for its use and disposal. On the other hand, if it is considered a private good, desalinated water can be disposed of like any other privately owned industrially produced good.
A possible solution to the current discussion on the legal status of desalinated water could be to establish onerous desalination concessions, with the right of ownership over the fresh water produced. This would insert desalinated water into an already existing legal regime within the national legal system, thus avoiding any doubt about the law applicable to desalinated water.
As a conclusion, we could say that Chile is taking the necessary steps to become a globally relevant player in the production of green hydrogen. And the national commitment to develop green hydrogen has not left investors indifferent. Currently, in the south of Chile, there is a being developed, corresponding to the first plant in the world to produce synthetic fuel based on green hydrogen. Once the government succeeds in regulating the green hydrogen industry with a comprehensive legal status and the conditions for the use of desalinated seawater are defined, Chile will achieve its goal of becoming the world's cheapest producer and a key player in the production of green hydrogen.
Arteaga Gorziglia is a member of Ally Law, a global law firm network providing sophisticated legal services to major corporations with a sharp focus on value. Its 72 firms include nearly 3,000 lawyers in 100 business centers worldwide. For more information, visit www.ally-law.com.
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