Colombia gains position in the green hydrogen industry in Latin America

Hidrógeno verde-posicionamiento de Colombia

Colombia publishes today the hydrogen roadmap, a key step for the strategic positioning of the country in an industry that could revolutionize energy markets in the coming decades.

Hydrogen, the most abundant chemical element in the atmosphere, which can be used as an industrial raw material, fuel and energy vector for the storage and transport of energy. When it comes from renewable energy sources – wind and solar-, the Green hydrogen may be essential in the race to decarbonisation, especially for sectors with difficult electrification. From Namibia to Canada, from Chile to the European Union, policy makers are looking at renewable hydrogen like never before.

This agenda is also advancing in Colombia, where on August 15 the public consultation period for the Colombian hydrogen roadmap closed, and which is finally published today on September 30, 2021.

The objective of the Colombia Hydrogen Roadmap is to contribute to the development and implementation of green hydrogen in Colombia, in which steps and milestones are identified in the short, medium and long term. This will help reinforce the Government’s commitment to reducing emissions stipulated in the 2015 Paris Agreement targets.

The Ministry of Mines and Energy may use this Roadmap to continue decarbonizing the energy sector. This tool analyzes the capacity to produce hydrogen, reduce emissions, its internal demand and export potential. Likewise, the regulatory measures necessary to promote this technology are analyzed, and to be able to advance in the implementation of a hydrogen deployment plan in Colombia.

For its preparation, the Colombian Government has the support of the IDB, through the Program UK Sustainable Infrastructure (UKSIP), which is being key to mobilizing strategic investments from the private sector to promote sustainable low-carbon infrastructure. Green Hydrogen fits into the UKSIP framework as it contributes to meeting the energy efficiency and emission reduction goals of the energy, transport and industrial sectors.

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Table of Contents

Colombia’s position

Colombia has strategic advantages in hydrogen for two reasons:

  • High availability of renewable energy sources to produce green hydrogen in the north of the country (Guajira);
  • Geographic location. Colombia is the nexus between Central America and South America and is linked through transportation, distribution and trade networks with five other countries. In addition, it is located between two oceans, as a node of maritime trade and export with 10 port areas, with Cartagena (Caribbean) and Buenaventura (Pacific) being the most important ports.

In addition, Colombia has significant reserves of oil, natural gas and coal that provide it with a position close to self-sufficiency in fuels and that could be used for the production of blue hydrogen through carbon capture and storage (CCUS).

How is the regulatory framework of a new industry enabled?

The country is committed to the decarbonization of the economy, including the goal of reducing greenhouse gas emissions of 51% by 2030 in its NDC. It is also evaluating the implementation of a tradable emission quota system, with a carbon tax that facilitates the entry of blue hydrogen into the Colombian economy for the duration of the transition to green hydrogen.

As incentives, the Energy Transition Law, No. 2099 establishes a favorable tax framework for investment in non-conventional sources of energy contributing to the recovery of the economy. The Law considers green hydrogen so much that it will enjoy the tax benefits established in Chapter III of Law 1715 of 2014; like blue hydrogen.

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Also, it is important to mention Bill 365 of 2020, which promotes new technologies, to use green hydrogen as fuel in different industries.

What messages does the roadmap give?

The roadmap projects an internal demand in Colombia of 1.6-1.8 Mt of hydrogen in 2050, with a solar potential that only in the La Guajira region reaches 42 GW. If all this renewable potential is exploited in the production of green hydrogen, after its conversion up to 3.2 Mt or 5.8 Mt could be obtained (including offshore potential). Therefore, there is the possibility of supplying Colombia’s demand for hydrogen by 2050 with the potential What do renewables offer?.

The levelized cost of hydrogen (LCOH) value obtained in 2030 from USD 1.7 / kg is very similar to the objectives of relevant countries in terms of hydrogen, such as Australia and Chile, positioning Colombia as a relevant actor globally in the future hydrogen market.

The analyzes show that as of 2030 green hydrogen will be able to be produced in some regions, reaching cost parity for blue hydrogen. In the Guajira region, price parity for wind hydrogen would be reached in 2027 with blue hydrogen (by gasification of coal); and in 2037 the equilibrium point of solar hydrogen would be reached.

Colombia gains position in the green hydrogen industry in Latin America

Source: i-deals Innovation & Technology Venturing Services (Consulting Firm that developed the Hydrogen Roadmap of Colombia)

Blue or green hydrogen?

To take advantage of this opportunity, it is important not to lose sight of the infrastructure necessary to enable blue hydrogen in the first years of the technology’s deployment. 15-20 years are expected to do the blue hydrogen bridge with CCUS to green hydrogen, given that production demand can be amply supplied with green hydrogen from 2030-2040. Therefore, it is vital not to invest in assets that may eventually be strandedEven more so when carbon capture technology is still incipient and expensive.

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Taking into account the times in LAC for the design, tenders, construction and start-up of new technologies, it could be the case that by the time the associated blue hydrogen technology is installed, the green hydrogen technology is already mature.

In conclusion, blue hydrogen would make possible an early decarbonisation of certain industrial applications, having a short-medium term window of opportunity. It would be a low-emission alternative for the progressive transition of the country’s mining and gas sectors while taking advantage of the large reserves of gas and coal and the expert know-how of the Colombian industry. Blue hydrogen would serve as base to start expanding the hydrogen value chain in Colombia to the large-scale competitive development of green hydrogen.

Between 2030 and 2040, the coexistence of blue and green hydrogen is expected according to the natural resource available for its production in each region of Colombia. Starting in 2040, green hydrogen would prevail as the most competitive alternative throughout the Colombian territory. In terms of reduced emissions, the energy demand supplied by green or blue hydrogen would represent 9.6% of the total energy demand by 2050. This would represent a potential of reduction of emissions of 38 Mt of CO2 annual with respect to the value of 2020 that would help Colombia in its decarbonization goals.

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