Beyond Sahara, green hydrogen transition could lead to unexpected partners for Germany
In 2020, Germany launched its national hydrogen strategies as part of its ambition to further develop and scale up the technology to achieve carbon neutrality by 2050 (or even by 2045, as was communicated recently by the federal government).In this strategy, the introduction of green hydrogen is key, considering the potential of this fuel to transform industries that as yet cannot be powered by electricity, such as heavy industrial processes, commercial flights or maritime transportation. In this context, the establishment of strategic partners is key to fostering Germany`s low carbon future. Potential partners are Europe`s southern neighbours such as Morocco, Algeria, Tunisia or Egypt, which have large renewable resources in solar energy and where pipelines are available for liquid hydrogen transportation.
However, economics alone cannot drive these decisions. For cooperation to be successful, partner countries must, on the one hand, be able to provide stable hydrogen at competitive prices, and on the other, be reliable and committed to an energy transition agenda.
As a way of weighing these additional variables, we developed an index to measure aspects such as countries' environmental commitments, the quality of their environmental regulation, and the quality of their governance. Although an evaluation based on these aspects tends to favour traditional western partners such as Norway, Canada and the United States, there are also surprises, such as the case of Chile. The South American country ranks in the fifth position and is the best-evaluated emerging country on the list.
Although Chile is not a traditional hydrogen producer, it stands out for other credentials. The country has managed to attract important national and foreign investments for the generation of renewable energy, based on an adequate regulatory framework and incentives for investment in this type of energy. For example, in 2020 it received 14 billion USD in foreign investment, positioning itself as the fourth biggest destination, just under the much bigger countries of Brazil, India and Mexico. On the other hand, Chile stands out for its international commitments in environmental matters. It has thus far committed to producing 70% of its electricity from clean energy by 2030, as well as reaching carbon neutrality by 2050.
The nation also has good relations with the European Union and Germany in particular, with established agreements in different areas of cooperation, such as trade, research, and political dialogue. Since 2002, an Economic Partnership Agreement between the EU and Chile has been in force and is now being updated.
Moreover, Chile and Germany recently signed an energy partnership with the aim of boosting renewable energy and energy efficiency.This cooperation has already brought about concrete effects. One of them is the private-public agreement between both nations to produce green hydrogen from wind energy in the southern region of Magallanes. A second and very recent outcome was the inauguration on 8 June 2021 of a 210 MW solar thermal plant in the Atacama Desert (the biggest of its kind and the first in Latin America), which had the participation of German and Chilean companies, the German cooperation agency and the German Development Bank.
This case shows the importance of diversifying the range of partners for Germany in order to avoid supply dependency on a single region. While projects geared towards renewable energy production in North Africa are attractive, there are several associated risks, such as divergent economic priorities of their governments, political instability, and more restrictive regulations. Hence, despite the existence of ongoing projects, the generation of renewable energy by these countries is still low compared to countries like Chile. The German strategy cannot put all its eggs in one basket.
Index Results
The following publication presents some of the results of the group project 'Prospects for green hydrogen: How Climate diplomacy can support German and Global Energy Transition,' developed by candidates from Willy Brandt School in conjunction with adelphi.
