Colombia: Experiences from Latin America to accelerate green hydrogen investment

Within the framework of the LAC H2 Summit 2024, which took place in Cartagena, the financing side event entitled “Experiences from Latin America to accelerate investment in green hydrogen” was held, organized by the Euroclima Program, through Deutsche Gesellschaft für Internationale Zusammenarbeit. The objective of the event was to facilitate a comprehensive dialogue between the public, private and financial sectors of the region, in order to promote investment in the sector. During the session, current regional and national initiatives were presented, as well as the financing modalities employed by different financial institutions.

After a brief context of regional cooperation through the H2LAC platform, the European Investment Bank and the State Development Bank of the Federal Republic of Germany KfW, presented the modalities and instruments used in line with the promotion of investment in green hydrogen in Latin America. They also presented the experiences of financing in the area in Colombia, Chile and Brazil to encourage the development of projects.

The following is a summary of the key points addressed and concluded:

1. Financing

Following the discussion on financing instruments for green hydrogen and financial risks in Latin America and the Caribbean, the need to promote investments in various technologies and along the value chain was highlighted. At the same time, the importance of combining and harmonizing national and international instruments to reduce risks in the region was highlighted.

The private sector in Brazil noted that it is not easy to access financing from multilateral banks for their projects. The governments of Chile and Colombia are working on specific financing instruments for green hydrogen in the form of a Facility.

1. Challenges in the countries and the region

Regarding project financing risks in the sector, one of the main ones mentioned was the lack of buyers or “offtakers“. In this line, it is important to identify those buyers and markets willing to pay the value of green hydrogen, considering that its high CAPEX and OPEX costs continue to be one of the main obstacles in the advancement of the industry. However, it is expected that, being an economy of scale, these costs will decrease over the next few years. In the face of this challenge, government incentives along the value chain and specifically for demand could be crucial.

In this context, the role of local demand was also highlighted as crucial as a first step to create a national and regional market. Through regional (public-private) cooperation and dialogue it is possible to foster and establish a hydrogen economy with a long-term vision.

1. Just transition

The working groups also addressed social acceptance as one of the key factors for a just energy transition, which must be addressed from the beginning of the projects through knowledge management mechanisms and social tools. Thus, it is necessary to start from a complete and transparent diagnosis from local companies and to advance in a joint work in line with a development that integrates the social and environmental level.

The LAC H2 Summit 2024 – Latin America and the Caribbean: Moving towards a sustainable transition with green hydrogen and its derivatives through public-private collaboration, was an initiative of the Colombian Ministry of Mines and Energy, the regional alliance LAC Clean Hydrogen Action (LACH2Action) and the German Development Cooperation (GIZ) GmbH.