Research Team Green hydrogen in Argentina and Uruguay: Policy making under conditions of high technological and systemic uncertainty

Project description

Hydrogen is seen as a central element of the global energy transition. In this context, "green hydrogen" (GH2) is at the center of analyses and funding measures. Green hydrogen is produced from water by electrolysis and the electricity used is generated from renewable sources, primarily solar and wind energy. Europe, Japan and South Korea will become major importers of GH2 in the coming decades, while countries in the global South have great potential for producing GH2.

The ramp-up of a global green hydrogen economy is still characterized by numerous technological and systemic uncertainties. For example, it is not yet clear at what prices GH2 will be traded in the long term and how it can be transported internationally in large quantities. Blue hydrogen, which is produced using conventional methods for capturing and storing CO2 emissions, is significantly cheaper than GH2 for the foreseeable future. Without sustainable political preferences on the part of importers, GH2 can hardly become competitive.

This results in difficult trade-offs for potential GH2 producing countries. If they decide to enter an international GH2 economy at an early stage, they may be able to secure an advantageous position on the international hydrogen market. However, they are also taking high risks if the hoped-for export potential cannot be realized or can be realized much later than expected due to the uncertainties outlined above. Many countries are therefore focusing on dual strategies and intend not only to export green hydrogen, but also to use it to decarbonize industry and transport domestically. This can increase added value and help to create jobs. The research project examines how the countries of Argentina and Uruguay deal with the uncertainties outlined above in order to make sector policy decisions, particularly with regard to the question of export versus local use of H2.

Argentina has considerable potential for both GH2 production and domestic use in a fairly developed industry. Large gas and oil reserves also allow the development of production capacities for blue hydrogen. Argentina has well-developed research and innovation capacities, especially in the energy sector. An Argentine hydrogen strategy will be adopted in 2023.

Uruguay has massively expanded the generation of electricity from wind energy in the last ten years, around 98% of its electricity now comes from renewable sources and the country is a net exporter of electricity. In July 2022, the country adopted a GH2 roadmap that focuses much more strongly on potential hydrogen exports than the considerations of its southern neighbor. Due to a rather small industrial sector, local application possibilities are strongly focused on the production of fuels for the transportation sector.

Both countries share the concern that the production of GH2 is increasingly competing with other economic sectors for available water resources. Climate change and the El Niño phenomenon have led to significantly reduced precipitation and extended droughts in 2023 and have increasingly brought the water issue to the center of political discourse.