Vesna Marinkovic U.
The expert emphasizes that to economically replace gas with green hydrogen, especially in a country with subsidized fuels, it is essential to have at least $20 billion in profitable investments.
1Lately, there has been talk about the possibilities of Green Hydrogen in Bolivia’s energy matrix. What is the status of these projects in the country?
Currently, Bolivia is considering venturing into the production of green and low-carbon hydrogen from various perspectives, including the evaluation of specific projects such as the H2 Bolivia S.A. project in Oruro, and smaller-scale projects in other regions of the country. There is also a national strategy and plan, as announced by the Ministry of Hydrocarbons, which has been in progress for quite some time. In any case, both advances are happening, and they will eventually reach the project execution phase, which is what truly matters.
In a macro view, Bolivia is progressing in this new area, and I believe it will become a reality because it benefits everyone. It is beneficial for the country in terms of industrialization, energy transition, and creating alternatives to reduce natural gas consumption and diesel imports in the medium term. It also contributes to the national economy by attracting investments and injecting fresh capital, all under the premise that Bolivia could efficiently produce green hydrogen compared to other countries.
Oruro is an open and innovative place that has historically struggled to create macroeconomic alternatives to mining…
2You are developing a project being implemented in Oruro, precisely as a green hydrogen and ammonia production plant that aims to serve both the national and international markets. What are the most notable characteristics and progress of this initiative?
We are developing it in an interesting way. To understand it, think about the decades of development in the Liquefied Natural Gas (LNG) world. LNG projects were initially conceived as inflexible, large-scale endeavors to achieve low prices. However, over the years, the LNG market evolved, and now there are cheap small-scale liquefaction alternatives. A couple of years ago, when interest in green hydrogen began, many projects opted for pilot scales and roadmaps showing capacity increases over the years to achieve stable and lower prices in the medium to long term.
In our case, at H2 Bolivia, we have aimed directly at large-scale production because, first, we can think in those scales unlike many other countries, and second, because in a place like Bolivia, we could do it with high efficiency, achieving lower prices sooner. High efficiency and large scale are prerequisites to economically replace gas or diesel, especially in a country with subsidized fuels.
To reach the point where Bolivia can start this coherent substitution, at least $15 to $20 billion in profitable investments are needed. The Oruro project has been designed to initially attract investments of around $2 billion to initiate the wheel’s movement and gradually expand capacities so that we can achieve sustainable substitution over time.
3Why Oruro and what are the competitive advantages?
Oruro has extremely high solar radiation, one of the highest in the world in terms of utilizable potential with the right technology. However, that alone is not enough. It is also necessary to have various favorable factors for the application of technologies and concepts found in Oruro, such as high potential for closed-cycle hydro projects, extensive flat and available areas, suitable temperatures, easy provision of mining materials, etc., all contributing to increased potential.
Equally important to all the above, Oruro is an open and innovative place that historically has not been able to create more macroeconomic alternatives to mining. In this openness and innovation, they have seen the potential and want to develop it under good conditions with companies willing to invest in that location.
Finally, personally, I believe Bolivia owes much to regions that have contributed significantly and are not currently in their best economic situation. Attracting investments to Oruro is good for everyone, as they would later replicate in different parts of the country, impacting both socially and economically.
4The projected investment for this project in the country can be multiplied, right?
As mentioned, we estimate that in the first stage, about $2 billion can be invested. However, as the project has been conceptualized and studied, it has been seen that it can be executed in Oruro under certain conditions, allowing us to expand capacity and easily multiply it by 10.
5What conditions are required to attract these investments?
Like any mega project with a Project Finance financial structure, the conditions are the same: a) Technical solidity, which exists in this project; b) Favorable regulatory framework for investments, being worked on by the Ministry; and c) A market linked to exports since the Bolivian market is very small. For the level of required investments to achieve low prices and be a market that subsidizes energy, it must be linked to exports. These exports will allow us to use the large installed capacity, impacting economies of scale that will gradually enable supplying the subsidized local market from the beginning. Without this, it is not possible to produce large quantities and achieve low prices in line with our national subsidy policy.
6With the current state of declining natural gas reserves in our country, what advantages can be observed using Green Hydrogen?
Conceptually, under the premises I mentioned earlier, it is possible to produce increasing volumes that gradually displace natural gas in domestic consumption, allowing for increased exports to Brazil or industrialization. Concrete examples include blending up to 20% hydrogen into gas pipelines, thereby reducing domestic consumption by 20%. It also involves generating electricity with cheap hydrogen, where the competition is even stronger because the price of natural gas for internal generation is highly subsidized. However, by subsidizing the domestic hydrogen market with exports, we could, for example, generate electricity in combined cycles with an H2-GN mix or pure H2. This is the point of the highest natural gas consumption in Bolivia and therefore where we could have the most impact.
“We believe that the model we have considered is suitable in that regard and will not only bring investments but also development to areas in need, knowledge, and sustainability…”
7How much does Bolivia need to invest to achieve energy independence and change its matrix?
To achieve a significant level of energy independence, we need a smart mix of hydro, solar, wind, and green hydrogen, not solely relying on green hydrogen. In this regard, Bolivia has been doing well in diversifying its energy matrix with the incorporation of solar, wind, and hydro projects. Hydrogen is just another option we can create to advance this path.
In our estimates, to start – just start – on the path to energy independence with green hydrogen, we need a minimum of $5 billion with conditions for both domestic and external market sales. Then, to have a significant role in independence, we need at least $10 billion that generate adequate returns.
If we want to explore the scenario where green hydrogen is the cornerstone of energy independence focused solely on the domestic market, we are talking about a minimum of $40 billion and thinking about not necessarily recovering them immediately. Which is not viable. Therefore, we need to export it on a large scale and progress gradually.
8The project has been recognized by the United Nations, what aspects have motivated this recognition?
The United Nations Industrial Development Organization (UNIDO) issued a global assessment known as the Global Call 2023. In this evaluation, the H2 Bolivia project in Oruro was recognized as the third-place project worldwide in its category. Several aspects were evaluated, including the advanced use of technology, efficiency, structure, and feasibility, among others. On one hand, the technical and economic robustness of the project was verified, and on the other hand, the socio-economic impact it could have through the fulfillment of the United Nations Sustainable Development Goals (SDGs), or in our case in Bolivia, the National Development Plan (PDES) and the Patriotic Agenda.
In summary, the viability and purpose of the project were verified, and the potential for attracting investments and benefiting our society and economy was validated. From my point of view, they saw that implementing it is very beneficial for Bolivia, based on the structure we provided.
En resumen, se verificó la viabilidad y sentido del proyecto y se validó el potencial de atracción de inversiones y beneficio para nuestra sociedad y economía que tiene el proyecto para nuestro país. Desde mi punto de vista, vieron que realizarlo es muy bueno para Bolivia, según la estructura que le dimos.
9How do you view the progress of the national hydrogen strategy, and what aspects should it contain to be truly effective and executable, considering that several countries have already presented theirs and are very competitive?
It will be published soon, as publicly announced by the Ministry of Hydrocarbons. I believe that for it to be effective and not remain a mere study but be translated into regulations and laws, it must be simple: it has to be efficient and attractive for investments, regardless of their public and/or private source, as the country cannot afford to invest billions publicly at this time. However, there should be a balance where we can attract investments. We believe that the model we have considered is appropriate in that regard and will not only bring investments but also development to areas in need, knowledge, sustainability, and another opportunity for the transition to a new energy matrix.
