Chile’s government aims to open a $728m fund next year to de-risk private investment in the country’s green hydrogen projects, according to
local reports.
Chile is expected to be
one of the top ten renewable H2 producers in the world by 2030, owing to its strong solar irradiance in the north and strong winds in the south.
But despite having a pipeline of more than 40 green hydrogen projects, few, if any, have reached a final investment decision, with banks reluctant to issue loans without firm offtake agreements in place.
So the Chilean government’s development agency, Corfo, plans to open the so-called PFCH2V (Corfo Green Hydrogen Finance Programme) fund from Q3 2024 to help projects reach financial close.
The facility is backed by the World Bank, the European Investment Bank (EIB), German state-owned international development bank KfW and the Washington DC-headquartered International Development Bank,
the last of which approved its $400m loan to the government last week.
The World Bank will provide an initial $150m towards the programme, with $200m at a future stage. The EIB and KfW are reported to be providing the fund with $110m each. While this adds up to $770m, the nearly $50m extra will go towards six projects that were awarded cash from an initial $50m trache of funding by Corfo at the end of 2021.
Those six projects are expected to produce 400MW of capacity by 2025, although this is a far cry from the country’s target of 5GW by that year.
While some reports suggest that PFCH2V will initially provide projects with grants, a draft World Bank document from late April, seen by Hydrogen Insight, splits the mechanism of its loan into two parts.
The first allows the government to provide sub-loans to both green H2 projects and sub-projects throughout the value chain (such as renewables and water processing) at preferential rates for up to 40% of the total capital cost of an electrolyser system. It will also finance reserves to cover potential non-payments throughout the supply chain or “technical deviations” in the plant’s expected performance. The second part will cover a wide array of supplementary activities to support the H2 sector, including workforce training and project management or consultancy fees.
While Chile may be able to produce some of the cheapest green hydrogen in the world, due its strong winds and sunshine, transporting that H2 — whether in the form of ammonia or other derivatives — to demand centres in Europe or Asia might tip the balance towards potential exporters that are geographically closer, such as the Middle East, Africa or Australia.
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