The Age of Green Hydrogen: A Huge Opportunity for Argentina?

What is Green Hydrogen?

In recent years, green hydrogen has become one of the fastest-growing sources of clean energy.  But what is green hydrogen and why could this be a fantastic opportunity for Argentina to become a major player in this new industry?

Hydrogen is an unlimited source of energy (it is the most abundant gas in the universe) that can be obtained in different ways, some cleaner than others.  The sources and methods through which it is obtained will define whether it is classified as “grey,” “blue” or “green.”

One way to obtain hydrogen is through electrolysis, a process used to separate hydrogen from oxygen.  This separation process requires large amounts of electricity and water.  When this electricity comes from renewable sources (wind or solar essentially), the resulting hydrogen is called “green hydrogen.”  As we will see later, producing green hydrogen also requires large extensions of land. 

The combustion of hydrogen produces only water: it is a zero-emission fuel.  Green hydrogen has other advantages.  It can be stored, transported, and also used in a wide range of industries and activities, from (and particularly) the shipping, aviation and automobile industries, to power generation and climatization of office buildings and households, just to give a few examples.

Global Overview

There are currently over 350 hydrogen projects globally, more than 120 of which have been announced in 2021 alone. This means billions of dollars in investments in green hydrogen.  All of the most powerful countries in the world are showing high levels of strategic interest in green hydrogen.

One of the propellers of that interest is the new ESG standards taking effect all over the world as a result of international agreements (such as the Paris Agreement) and new legislation deriving from those agreements; these standards require drastic reduction of emissions over the next few decades.

The EU has launched its very ambitious “Fit for 55” program that demands at least a 55% emissions reduction target by 2030.  The program will have a significant impact on many industries, transportation being one of them.  For example, by 2035 cars will have to meet a zero-emission standard.

What role does green hydrogen play in this new scenario?  From a general global standpoint, without its production on an industrial scale, meeting reduction of emissions targets required under the Paris Agreement (that the U.S. has now re-entered) will be impossible.   According to some reports, demand for hydrogen is expected to increase by 7% per year until 2050, and it will need to be generated with renewable energy if the world expects to meet zero emission targets by then.

A very interesting example of just how fast green hydrogen is gaining momentum is the automobile industry.

Hydrogen is certainly not a novelty to car manufacturers: over 15 years ago, BMW introduced its first fully hydrogen-fueled luxury car. 

But so far lithium has been the most successful source of energy used in the car industry, although hydrogen seems to be catching up at a growing pace.  Three recent events are very illustrative of how green energy is earning its place as a significant source of clean energy for major car manufacturers:

• As part of its Environmental Challenge 2050, Toyota announced this year that its second-generation Mirai model completed 1003 kilometers (621 miles) running on a single tank of green hydrogen.  According to media reports, Toyota has released a large number of its hydrogen-related patents so that other manufacturers can take advantage of them at no cost and join the mission of making hydrogen the main source of energy over the next decades.
• Hyundai, the largest Korean car manufacturer, has been making hydrogen-fueled buses that are operating in that country since 2019,  and recently began testing its hydrogen powered “Elec City Fuel Cell electric bus” in Germany, to potentially present this vehicle in the EU.
• Hyundai is also working on a heavy-duty service truck, the first hydrogen-powered mass-produced truck in the world.  There are already several dozens of these trucks rolling down the roads of Switzerland, and more are on the way.

Argentina and its Potential Role in the Green Hydrogen Revolution

With the introduction of all these very ambitious standards and programs all over the world, countries that can produce green hydrogen at large scales will have the chance to export to countries that will not be able to cover their domestic needs.  Argentina has a great opportunity to play a major role in the age of green hydrogen.

Production of green hydrogen requires significant amounts of three main elements, all of which Argentina can offer:  (i) wind or sunlight to generate renewable electricity to apply to the electrolysis process, (ii) water, to separate the hydrogen from the oxygen; and (iii) land, to install windmills or solar panels.

For example, a project to produce 1,200 metric tons of hydrogen per day requires approximately (i) 5 GW of renewable energy capacity, (ii) 18,000 cubic meters of water per day, and (iii) 60,000 hectares (148,300 acres) of land.

The Patagonia region in the southern part of the country is, according to experts, the best place in the world to produce wind power.  With a surface of just over one million square kilometers (386,000 square miles), the region has approximately 4000 kilometers (2500 miles) of coastline facing the Atlantic Ocean.  On the opposite side of the country, Argentina’s Northwest region has one of the highest levels of solar radiation on the planet. 

As if that wasn’t enough, Argentina also has ports located in strategic points that can facilitate exports of produced and stored hydrogen.

General Overview of Relevant Argentine Statutes and Regulations

In addition to general rules on doing business in the country, there are several sets of specific regulations that should be analyzed when considering a green hydrogen project in Argentina.  A brief summary of some of the more relevant ones follows.

Electricity Framework

If the project involves feeding electricity into the grid, statutes and regulations governing generation and supply of electricity apply at the federal and provincial (state) level.

Rules on electricity generated from renewable sources are not a new matter in Argentina. Federal laws specifically related to and promoting renewable energies have existed for over 20 years, with different levels of success.  Law No. 25,019 on the “National Eolic and Solar Energy Framework” was enacted in 1998; it was followed by Law No. 26,190 in 2006, and significantly amended by Law No. 27,191 in 2015, under which most of the current renewable energy projects in operation materialized.  Law No. 27,191 requires that by 2025, 20% of all national electricity consumption come from renewable energy sources.

Environmental Regulations

Federal and particularly provincial and municipal environmental regulations must be carefully reviewed.  It is very common to have provincial and municipal regulations setting limitations on the permitted environmental impact of a project, requiring prior impact studies that must be approved by the local authorities, regulating the use of water, etc. 

Restrictions on Land Ownership

As mentioned above, a green hydrogen project requires the use of large surfaces of land.  There are two main sets of regulations that restrict ownership or possession of land by foreign persons or entities.

The first group of rules relate to Border Zone Areas.  If the location of the project falls within a border zone area, prior approvals from federal authorities may be needed for foreigners (persons or entities) to purchase or lease property.

The second group of rules are essentially the Rural Land Law and its implementing decree and ancillary regulations.  This law includes restrictions on the number of hectares that can be owned by foreigners in Argentina.  The amount varies, among other factors, per region throughout the country.

If there will be foreign investors involved in the project, these regulations should be analyzed in detail to determine if any limitations apply and if any prior approvals or filings are required.

Hydrogen Regulations

There is currently no legal framework that specifically addresses the production of green hydrogen in Argentina, although there is one precedent. In 2006, Congress passed “Hydrogen Promotion Law” No. 26,123.  Implementing regulations that were key to this law were never issued.  Law 26.123 included a 15-year fiscal benefit program to incentivize investments in hydrogen as a source of energy, which has virtually run out.  With the benefit program expired, the law has little bearing on new projects.

Challenges and Conclusions

A green hydrogen project requires several years of research, studies, engineering and construction before any hydrogen is produced.   Significant investments are needed throughout the process.  A project of this caliber may take well over a decade before it becomes profitable.

If the green hydrogen industry develops as most experts are estimating, Argentina has a unique chance of becoming a major producer and particularly exporter of green hydrogen, which would result in a significant and much needed boost to its economy.

A new, modern legal framework promoting green hydrogen production will be a key factor if Argentina expects to develop and give impulse to this industry.  

Tax benefits and incentives will be of the essence in these regulations, in particular “fiscal stability” benefits where, subject to compliance with conditions set in the legal framework, projects are guaranteed no changes in the fiscal “status quo”  for a specific number of years.  Additionally, to allow the development of this new industry, the legal framework should include suitable investment protection mechanisms focused on shielding exports of green hydrogen structured through long-term agreements from adverse governmental interferences.

Few topics should be less controversial than the protection of the environment, reduction of emissions and promotion of sustainable, clean sources of energy.   They have become a key part of every political platform, regardless of ideology.  It would seem that agreeing on a legal framework that may allow a significant flow of long-term investments into Argentina to create a new, clean industry that could have a significant and positive effect on our economy should not be too difficult to achieve.

Only time will tell.  But there are some positive signs: 

• Argentina has its own ambitious sustainable development plan with aggressive target requirements by 2030 that cannot be met with its currently installed renewable energy capacity, so it is expected that clean energy projects will be promoted over the next several years.
• Although not the same as enacting a new framework, but clearly showing the country’s interest in becoming a player in the hydrogen industry, Argentina entered into a Memorandum of Cooperation with Japan in 2019 to “work on the development of hydrogen as a clean fuel and promote investments in this field.”  Also, The Fraunhofer Institute of Germany, one of the world’s leading research organizations, has entered into agreements with several Argentine provinces  with the goal of producing green hydrogen by 2030.
• Finally, but certainly not less importantly, there are already a few green hydrogen projects in progress in Argentina, mostly in their preliminary stage.

In conclusion, there should be no doubt that Argentina has a fantastic opportunity to become a major player in this industry, not just as a domestic producer but also as a major exporter of green hydrogen.  Natural conditions for these projects are hard to match elsewhere. 

The fact that there are already projects underway seems to indicate that the question is not if there will be green hydrogen plants in Argentina, but when.  Hopefully a new legal framework promoting green hydrogen will follow to attract more investment in this growing, sustainable industry.