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    Green Hydrogen: Guild Warns of High Costs of Energy Withdrawal Projects, Proposes Measures

    September 26, 2022 - CE Noticias Financieras


      The announcements of various green hydrogen projects in Chile do not cease. Expectations are high, although doubts are latent as to whether this industry can be fully developed in the country.

      A concern for the take-off is the cost of the production of the also called renewable hydrogen. This, since the projects that feed hydrogen plants with electricity generated by renewable sources connected to the National Electric System (SEN), would pay for the costs of renewable electricity and systemic costs.

      This is confirmed by a study by the consulting firm Inodú for the Chilean Hydrogen Association (H2 Chile), which found that initiatives that need to withdraw electricity to meet their demand will have to pay various additional charges.

      The study - which is projected to 2031, when a good number of plants would be in operation - identifies that projects that need to make withdrawals to supply their demand will have to pay different charges, such as national transmission, zonal transmission, public service charge and other systemic costs, such as complementary services, green tax, charge for technical minimums and other cost overruns, among the factors considered.

      And the systemic charges in the different hydrogen production systems modeled - alluding to projects in different locations, energy sources and capacity - even exceed the levelized electricity costs projected in the national strategy, which spoke of values close to 1.5 (US$/KGH2) in 2030.

      Likewise, in some specific conditions of location and connection characteristics, systemic costs could reach up to US$30/MWh. In other words, "connected projects would be exposed to these systemic costs plus the cost of renewable electricity, which is particularly worrying because of the competitiveness of our renewable hydrogen", explains the general manager of the Chilean Hydrogen Association, María Paz de la Cruz.

      Courses of action

      Faced with this, the guild urges to work on a strategy to reduce systemic costs. Thus, four courses of action are identified that point to operational and regulatory aspects to work together with the public sector and the legislature.

      The first aims at reducing costs associated with national transmission. These could be achieved to the extent that increases in the Annual Transmission Value per Tranche are contained. Among the actions is to maximize the use of the network by applying automatisms and new ways of measuring the transmission capacity of the system in real time; to contemplate the evaluation of the final price of electricity to customers when considering expansions of the national and zonal transmission system, and to encourage customers to develop on a larger scale distributed generation behind the meter.

      The second point is the reduction of systemic costs associated with the operation of the SEN. This includes, for example, promoting the reduction of technical minimums of thermoelectric units, enabling non-conventional renewable energy plants and storage units to provide complementary services, and promoting improvements in the flexibility of thermal power plants.

      Another aspect is to advance in the incorporation of demand in development poles of the transmission system. According to the guild, a legal amendment is required to strengthen the transmission system associated with the demand for renewable hydrogen projects.

      And finally, due to the magnitude of the projected systemic costs, it is highly probable that the major development of hydrogen projects will be carried out in isolation from the electrical grid, i.e., the formation of isolated power systems (SAP) is foreseen, which is why it is aimed to advance in the development of a specific technical standard.

      Therefore, it is suggested that the National Energy Commission (CNE) advance in the definition of technical standards related to the quality of supply for hydrogen supply in SAPs.


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