Published on March 7th, 2022
Synthetic fuels and chemicals based on renewable energies may offer Argentina an attractive, climate friendly option to accelerate the country’s economic development. Based on the favorable conditions for renewable energy generation, Argentina can build sustainable Power-to-X markets, reduce dependence on imports and position itself as a global frontrunner through innovative technologies.
Since November 2021, the Argentinian team of the PtX Hub is complete, and activities are now being implemented at full strength. In cooperation with its main counterpart from the Argentinian Government, the Secretary of Energy, and the implementing partners, the think tank Agora Energiewende and the German chemistry association DECHEMA, the project seeks to support the development of a sustainable Power-to-X market in Argentina in the mid- and long-term.
In 2019, Argentina’s aggregated demand for hydrogen by domestic industries amounted to 350,000 tons (IEA). Presently, grey and captive hydrogen covers this demand. The grey hydrogen is generated from imported or domestically extracted natural gas, therefore adding to the country’s climate emissions. In the long-run, Power-to-X could enable various local industries, such as the steel and chemical industry as well as fertiliser production to operate climate-neutrally.
The demand for fertilisers, for example, has almost tripled in the last 20 years. Although local production is growing rapidly, there is still a high dependency on imports, covering 65% of domestic fertiliser consumption in 2020. Locally produced PtX based fertilisers would offer a chance for Argentina to reduce import dependency and volatile commodity prices, while reducing its carbon footprint.
The steel sector is another relevant vector in Argentina’s economy: According to the Argentinian Chamber of Steel, when all the value chains related to steel are considered, they account for 60% of Argentinian industrial activity, while the steel industry alone accounts for nearly 8 %. As of the last national greenhouse gas inventory the steel and iron sector represent roughly 3.5% of national GHG emissions. Before the pandemic, Argentina produced around 5 million tons of steel annually, of which nearly 20 % was destinated for export. Sustainably produced steel could become interesting for international buyers. In 2021, several members of the chamber expressed their commitment to emission reductions. One of the outlined strategies contains the use of green hydrogen in steel reduction processes in the future, however only in the long-term.
To tackle the shift from grey to green hydrogen – generated using renewable energies – Argentina must first increase the share of renewable energies in its electricity mix. In 2020, renewable energy accounted for approximately 10 %. According to the Argentinian law 27.191, passed in 2015, the aim is to reach 20 % by 2025. To achieve this goal, the country can take advantage of its great natural potential for the expansion of inexpensive wind and solar energy. In some parts of Patagonia, for instance, wind parks reach capacity factors above 50 % and the solar irradiation in northwestern regions of the country can reach up to 2000 kWh/kWp. Nevertheless, currently the expansion of renewable energies is slowed down and for relevant use of green hydrogen and PtX in the long run, the share of renewable energies should increase significantly, also beyond 20 %.
Building on its high potential for the development of a Power-to-X market, Argentina has already drawn from its experience in pioneering green hydrogen production: One small test plant has already been installed in 2008 and the state-owned energy company IEASA announced plans to build the first large-scale plant in the country.
However, challenges remain. Due to the difficult economic situation, foreign direct investment rate at high risk, which limits the country’s possibilities at accessing international finance. Currently, the production of green hydrogen competes with the production of grey hydrogen, generated at competitive costs, from natural gas, being the fuel that dominates the national energy supply. The political framework regarding hydrogen still needs development. Although Argentina sanctioned a law to promote the development of hydrogen in 2006, unfortunately it was never regulated and never went into effect. Against this background, a new law proposal recently is being under preparation by Argentinean government. Details are not public yet, but this law could issue tax exemptions to hydrogen projects and put a special focus on green hydrogen through specific incentives.
In the future, Argentina might become a significant partner to the EU and export PtX products to European countries, most of which cannot produce PtX products as cost-efficient.
The PtX Hub aims to contribute to developing the right strategies and political frameworks to kickstart production of PtX products, which could both be traded in domestic and international markets. Next to identifying promising PtX applications and business models in Argentinian industries and sectors, the PtX Hub will organise capacity building measures and multi-stakeholder dialogues. In July 2021, the PtX Hub held its first training workshop in Argentina. Other planned activities include the analysis of local aspects relevant to the energy transition, for example, potential socio-economic effects.
Read more about the work of the PtX Hub in Argentina here.
Sarah Lalee contributed to this article.
