On Thursday, April 25, 2024, the Chilean government announced the Green Hydrogen Action Plan 2023-2030, a comprehensive strategy to promote the development of the green hydrogen industry and its derivatives in the southern country. This action plan builds on earlier efforts by the current and previous administrations to position Chile as a leading producer of low-cost green hydrogen (green H2) on the international market. The Green Hydrogen Action Plan aims to industrialize the national economy by replacing polluting industries with sustainable ones and achieve the country's goal of carbon neutrality by 2050.
The plan covers 18 different categories, including governance, information/education, economic and financial incentives, environmental management, sustainability, regulation, permitting, additional infrastructure, energy costs and transmission, research and development, and opening up to international markets. It outlines 81 action items across the country. These measures will be implemented in his two stages. In the initial phase (2023-2026), the plan will focus on the necessary steps to grow the Green H2 industry, including defining environmental, social and labor standards, streamlining the permitting process, promoting research, promoting incentives, and strengthening relationships. Focus on establishing conditions. with potential buyers. The second phase (2026-2030) will build on these foundations and focus on the development and decarbonization of the green hydrogen industry with an emphasis on regional and local development.
Some of the most notable action items included in the plan to boost private investment include:
- Creation of the Emissions Trading System (ETS). The government is proposing the introduction of a cap-and-trade system in the energy sector to expand domestic hydrogen demand in key sectors. The goal is to drive demand for hydrogen as a low-carbon alternative, and pilot programs will be developed to accelerate the introduction of new hydrogen-based technologies to decarbonize emissions-intensive sectors. As emissions caps are gradually lowered, companies will face increased incentives to adopt low-carbon alternatives such as green hydrogen. The pilot program is designed between 2024 and 2025, and its implementation is expected to begin during 2025.
- Tax measures. Along with other tax reforms, the government will (i) provide tax incentives for companies that develop new technologies such as electromobility, renewable energy, and green hydrogen and production projects that promote the decarbonization of the production base; We aim to establish this. (ii) ) reduce the income tax rate to 25% and establish a 2% tax under the general tax system for businesses; This tax can be deducted through investments that increase productivity, such as acquiring high-tech equipment. (iii) improve taxes; Credits available under “Ray” I+D” is a law that provides certain tax credits for private investment in research and development. These tax reforms are expected to be submitted to the Chilean Congress in 2024 and approved in 2025.
- Streamlined permitting process. The government plans to introduce administrative and legislative reforms to simplify the process of permitting and licensing project development. The new bill, known as the Sectoral Licensing Framework Act, aims to reduce permit approval times by 30% and establish cross-cutting measures across all relevant agencies involved in approving key permits. These reforms will create a unified permit information system with standardized forms for each sectoral entity, with the exception of environmental permits under the Environmental Assessment Impact System. These reform bills are expected to be submitted to the Chilean Congress in early 2024 and approved in 2026.
- US$ 1 billion financial institution. Corfo (Production production corporationChile's Economic Development Agency will be used primarily to induce private investment, with government support in different stages of green hydrogen project development, focusing on production, demand, and “acquisition of parts and components.” We are establishing a financial facility that will Components for Green Hydrogen Facilities.” This financing platform (funded by the International Development Bank and his CORFO) is under development and is currently defining project eligibility criteria and is expected to become operational in the second half of 2024.
- Expanding CORFO's Green Credit Program. The program provides financing to financial intermediaries that finance investments in renewable energy, energy efficiency, electromobility, climate change, storage and circular economy projects. By the end of the first semester in 2024, the program will support the development of the Green H2 project.
- National land awards. The government aims to accelerate “.Ventana Al Futuro” initiative (a program launched in 2021 that allows for the direct award of state-owned land for the development of green hydrogen production facilities). The 2023-2030 action plan focuses on finalizing land allocations based on the original plan. Ventana Al Futuro We plan to begin the process and launch a second program in 2025 to allocate additional state land for the development of the Green H2 project.
- International certification. In order to meet the regulatory and certification requirements being developed by the world's most prominent centers of clean hydrogen demand (e.g. the European market, South Korea and Japan), the Chilean government is expected to develop two main measures. Masu. Strengthen the certification system and strengthen the National Renewable Energy Registry (RENOVA). In the first initiative, the government will develop a certification system that is aligned with international standards and specific requirements from major import markets, but also addresses the unique characteristics of Latin America and the Caribbean. The second initiative will focus on making RENOVA a fundamental platform for the development of hydrogen certification systems.
Chile has launched a comprehensive and ambitious plan to position the country as a world leader in green hydrogen production. The Government recognizes the importance of strong public-private partnerships to reduce risk and ensure early project success. Additionally, the plan aims to support the first wave of industrial green hydrogen projects that will act as a catalyst for market growth and help reduce uncertainty.
The continued development and implementation of the Green Hydrogen Action Plan will depend on Chile's ability to attract investment, foster innovation, and establish a favorable regulatory environment. Overall, the plan represents a bold and necessary step forward towards Chile's energy transition goals, with key steps to provide tax incentives and streamline the regulatory process for infrastructure development and green hydrogen projects. It is not without serious challenges, including timely approval of the bill.
As more information becomes available on the various initiatives under the Green Hydrogen Action Plan, new opportunities and challenges will become an important part of the appetite for investment in developing Chile's undoubted potential in the nascent green hydrogen market. may be identified by the private sector as an element. .
