Industry associated with the use of hydrogen energy
Industry associated with the use of hydrogen energy
Business Model Description
Use of renewable energy for the generation of green H2 together with its derivatives (NH3, Synfuesl Jetfuel and green steel). This production chain ranges from electricity generation from renewable sources (wind, photovoltaic, on-shore or off-shore), conversion to H2 (hydrolysis plants), generation of new fuels, application to transport (road, maritime) and finally export logistics in ports.
Expected Impact
Generation of green H2 is a step towards decarbonization, it will cause an increase in GDP, exports, generation of foreign exchange and job creation.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Uruguay: Countrywide
Sector Classification
Renewable Resources and Alternative Energy
Uruguay is currently one of the few countries with a surplus of renewable energy. It has 98% of its electrical matrix from renewable sources. This implies a challenge in terms of the transition in the use of these sources by the sectors of activity, transportation and domestic consumption. In turn, Uruguay competes in the world market for the generation of new green energy alternatives.
Alternative Energy
Investment Need
Uruguay faces the challenge of the second energy transition. As a small economy in the south, it has 4 differentiating attributes: potential to generate renewable electricity (wind, photovoltaic and offshore expansion); capacity factors of 60% due to solar and wind complementarity; availability of current renewable electrical energy; logistical access to ports and routes.
Policy priority
Generation of renewable energies, could replace imports and dependence on fossil fuels, as well as increase export bill. This value-generating capacity of the sector is included in the H2U Government Program, which has the task of promoting the early development of the sector.
Investment opportunities
Decarbonization strategy determines a space of business opportunities with generation of sources of green energy. Uruguay has sustainable electricity surplus and idle generation capacity which makes it a competitor for experimental pilots. Among the possibilities are Green H2, methanol and other types of alternatives for cargo fuels, maritime transport and aeronautics.
Fuel Cells and Industrial Batteries
Pipeline Opportunity
Industry associated with the use of hydrogen energy
Use of renewable energy for the generation of green H2 together with its derivatives (NH3, Synfuesl Jetfuel and green steel). This production chain ranges from electricity generation from renewable sources (wind, photovoltaic, on-shore or off-shore), conversion to H2 (hydrolysis plants), generation of new fuels, application to transport (road, maritime) and finally export logistics in ports.
Business Case
Market Size and Environment
USD 100 million - USD 1 billion
H2 has become the energy vector for the decarbonization of the freight transport sector and the central axis for meeting the deadlines and commitments assumed. It is estimated that by 2025 a global demand of 5.3 Bill, of which 0.3 B corresponds to the domestic potential market. Market growth may be of the order of 10% from 2030.
Indicative Return
< 5%
Business models on the green generation of H2 are still in innovative development processes. Although MPVs have been reached, they have not reached a sufficient scale to achieve a substantial reduction in costs. However, in the industry (based on reports from specialized consultants) there is the conviction that the innovative process will lead to lower costs relative to the use of fossil fuels.
Investment Timeframe
Long Term (10+ years)
Power generation projects require at least 10 years of amortization. Profitability is still dependent on subsidies and fiscal promotions from the governments, present in the Uruguayan Program.
Ticket Size
> USD 10 million
Impact Case
Sustainable Development Need
The challenge of Uruguay's development in the long term requires the diversification of its productive matrix, from primary base production to new innovative sectors. The development of a new branch of production in the energy sector enables GDP growth, job creation and improved development in cities and towns in Uruguay.
It is necessary to accelerate the decarbonization process, with the main destination being the transport matrix in principle.
Taking into account factors of scale and the important demand for exports to developed economies, the H2 process calls for the expansion of renewable energy generation in the short term, in addition to incorporating innovation processes and the development of state-of-the-art technologies.
The development of a new branch of production in the energy sector enables GDP growth, job creation and improvement of development in cities and towns of Uruguay.
Gender & Marginalisation
The dynamics of Uruguayan growth is highly dependent on the price of "commodities", and the result of growth in upward phases is concentrated in a small group of companies. The realization of this type of industrial processes has a considerable impact on the generation of employment, poverty reduction and enables improvements in distribution.
The realization of this type of industrial processes has a considerable impact on the generation of employment, poverty reduction and enables improvements in distribution.
The location of these plants will develop localities in the rural environment, where conditions of marginalization are experienced and that on many occasions end up in processes of migration to cities where their situations of poverty and vulnerability are consolidated, especially in children.
Expected Development Outcome
Intentional: Reduction of CO2 emissions in Uruguay as in export countries through the decarbonization of their consumption matrices.
Decrease in GHG emissions in the cargo transportation sector, the main source of generation.
Increase in GDP due to the generation of renewable energy. Increase in GDP due to exports and generation of energy with a high commercial value. Increase in investments from foreign sources.
Increase in activity in related activities (value chain) and in territories far from urban centers. Decrease in unemployment. Increased income, enabling improvement in distribution. Increased well-being of the general population.
Gender & Marginalisation
Increased employment opportunities and improved income for populations living in the interior of the country, where the activities will take place. These zones are determined by the existence of wind farms or the capacity to generate photovoltaic energy (north and northwest zones). The combination with CO2 from the biomease is linked to the forestry, lumber and paper pulp industries.
Primary SDGs addressed
7.2.1 Renewable energy share in the total final energy consumption
Currently the generation of electrical energy is 97% from renewable sources, however renewable sources are 63% of the consumption matrix. There is a challenge in the decarbonization process of the consumption matrix, especially transportation
NDC for Uruguay sets a CO2/GDP target of 24% (7). The goal can be complemented with a strategy to reduce the proportion of non-renewable energy consumption by 500 bp (37% to 32%) in the same period.
12.a.1 Installed renewable energy-generating capacity in developing countries (in watts per capita)
4% of heavy transport explains 36% of GHG generation in the transport sector.
Reduce the level of GHG generation from heavy transport by 25% by 2025.
It is possible to identify energy innovation projects presented at COMAP as an indicator of the incorporation of technology in the sector.
Increase in investment projects that use renewable energy technologies.
1.2.2 Proportion of men, women and children of all ages living in poverty in all its dimensions according to national definitions
The incorporation of renewable energy sources in the transport and machinery sector is marginal. The production of green H2 would generate 35,000 jobs.
Increase in the rate of activity in the renewable energy sector. Indicator that does not yet exist, but its construction will be the effect of progress in the development of the sector.
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Planet
Corporates
Public sector
Outcome Risks
There is competition to allocate pilot investments because they validate processes and install plants and relevant actors in the economies that have the best conditions in terms of comparative advantages, economic stability and tax benefits and other types of subsidies. Uruguay fundamentally competes with Chile in receiving investments from the main European companies in the sector.
Risks associated with new technologies and being pioneers in their incorporation.
Subsidies and financial supports need to be deployed in abundance, competing during times of fiscal constraint.
Impact Risks
The use of energy sources based on green H2 are demanding of scarce materials and minerals in the manufacture of components. In turn, hydrolysis technologies use fresh water. Both factors stress resources in different ways, which become scarce and generate dependency risks, at least in the short term.
Impact Classification
What
production of green H2 and derivatives for export and domestic consumption.
Who
International companies, local renewable energy production, increase in forest biomass, population in general, especially those living in the areas of greatest influence.
Risk
loss of investment due to competition from other countries; delayed reaction in the levels of concessions and exemptions by the public sector or state-owned companies.
Impact Thesis
Generation of green H2 is a step towards decarbonization, it will cause an increase in GDP, exports, generation of foreign exchange and job creation.
Enabling Environment
Policy Environment
Uruguay is promoting the generation of projects for the generation and use of H2 as an energy source. The H2U Program establishes special promotional conditions that are added to the tax incentives for investments in general.
The Ministry of Industry and Energy is the body in charge of promoting the development of this industry.
The set of information related to the renewable energy sector is compiled on a website.
Financial Environment
Financial: Investments are green and have an ESG impact. The issuers are the front-line companies in the energy sector. Income streams are guaranteed on export. There will be capital concessions and government technical assistance facilities.
Fiscal: There are currently mechanisms for tax exemptions of up to 100% of investments in green technologies like this one.
Others: There is an open process for receiving investment proposals and all of them will be studied to select some and ensure the facilities and conditions of profitability, generation of infrastructure and other demands of investors. The government opens a roadmap and a manifest interest in committing to advance along this line
Regulatory Environment
There is a general regulatory framework for the generation of renewable energy, a market in significant expansion and which implied the demonopolization of the generation of energy from the state company UTE, which still retains the monopoly of electricity distribution
Projects for the production and use of fuels based on H2 are covered by the investment promotion law.
The set of regulations (Laws and Decrees) can be consulted at.
Marketplace Participants
Private Sector
H2 producing companies; forestry and biomass producers; demanding national transportation and industry companies; international companies importing H2 and derivatives.
Government
H2 producing companies; forestry and biomass producers; demanding national transportation and industry companies; international companies importing H2 and derivatives.
Multilaterals
IDB (Inter-American Development Bank), CAF (Andean Development Corporation), WB (World Bank).
Public-Private Partnership
Energy Market, business chambers
Target Locations
Uruguay: Countrywide
References
- (1) https://www.gub.uy/ministerio-industria-energia-mineria/politicas-y-gestion/impulsando-economia-del-hidrogeno-verde
- (2) https://www.airliquide.com/stories/hydrogen/hydrogen-vision-societal-project-sustainable-future
- (3) https://fch.cl/iniciativa/hidrogeno-verde/
- (4) https://www.akersolutions.com/
- (5) https://enertrag.com/en/audience-pages/hydrogen-customers
- (6) https://www.lindehydrogen.com/
- (7)https://visualizador.gobiernoabierto.gub.uy/visualizador/api/repos/%3Apublic%3Aorganismos%3Aambiente%3Avisualizador_cdn.wcdf/generatedContent
- (8) https://www.gub.uy/ministerio-industria-energia-mineria/politicas-y-gestion/impulsando-economia-del-hidrogeno-verde
- (9) https://ben.miem.gub.uy/caracteristicas3.php
- (10) https://www.gub.uy/ministerio-industria-energia-mineria/comunicacion/noticias/sobre-proyecto-piloto-h2u
- (11) https://www.gub.uy/ministry-industry-energy-mining/hydrogenoverde
- (12) http://www.energiasolar.gub.uy/index.php/investigacion-e-innovacion/investigacion-fotovoltaica/investigacion-fotovoltaica-proyectos-de-investigacion#
- (13) https://www.gub.uy/ministry-economy-finance/communication/news/adjustment-basic-general-criteria-functioning-decree-268020-anexo-i
- (14) http://www.efficiencyenergetica.gub.uy/
- (15) http://www.efficiencyenergetica.gub.uy/marco-legal
- (16) https://www.gub.uy/ministerio-industria-energia-mineria/hidrogenoverde
- (17)https://visualizador.gobiernoabierto.gub.uy/visualizador/api/repos/%3Apublic%3Aorganismos%3Aambiente%3Avisualizador_cdn.wcdf/generatedContent
- (18)https://visualizador.gobiernoabierto.gub.uy/visualizador/api/repos/%3Apublic%3Aorganismos%3Aambiente%3Avisualizador_inventario.wcdf/generatedContent