As the global demand for clean energy continues to rise, Latin America has discovered two new resources – lithium and green hydrogen. The region currently accounts for about a quarter of the world’s green hydrogen projects. Bolivia, Argentina, and Chile constitute the “Latin American Lithium Triangle”, with about 60% of the world’s lithium resources.

The International Renewable Energy Agency published the latest Global Renewable Energy Outlook report recently. It claims that renewable energy investment needs in Latin America and the Caribbean are estimated to be $45 billion per year by 2050, with economic returns of $3-8 billion for every $1 invested. According to the agency, Latin American countries have a large and untapped renewable energy potential and are highly attractive investment destinations for renewable energy projects.

Resource Advantage

Latin America has abundant hydropower resources. The Amazon River is the river with the largest discharge, the largest basin area and the largest tributaries in the world. Brazil is one of the countries with the most abundant water and energy resources and the highest utilization rate of hydropower in the world. More than half of the region’s electricity supply is hydropower, of which Brazil, Paraguay, Panama, Uruguay, Venezuela, Columbia and other countries hydropower accounts for more than 60% of their total electricity generation.

At the same time, Latin America has the world’s richest solar and wind energy resources. Northern Chile, for example, has an average of 4,000 hours of sunshine a year and high radiation levels, making it one of the most active regions for solar investment in Latin America.

Great Potential for Development

According to the analysis of the latest report of a consulting company, starting from 2032, after the first batch of offshore wind power projects in Latin America is expected to come online, offshore wind power activity will maintain a compound annual growth rate of 15.4%. Brazil and Columbia will become the field of offshore wind power in Latin America. Latin America will see a significant increase in offshore wind projects. It is expected to reach 34GW of installed offshore wind capacity by 2050.

Strong Investment Trends

New investment in clean energy in Latin America declined significantly in 2020 due to the impact of COVID-19. However, strong growth in wind and solar power drove investment to rebound strongly to nearly $20 billion in 2021, reaching a high record. In the first half of 2022, clean energy investment in Latin America continues its good momentum, reaching $7.7 billion.

With the increasing demand of batteries around the world, lithium mining production will increase exponentially in the next few years. Bolivia’s Salar de Uyuni has the world’s largest lithium deposit. Together with Argentina and Chile forms the “lithium triangle” and holds about 60% of the world’s lithium resources. In addition, lithium hard rock deposits have recently been discovered in Peru.

The vertical integration trend of the battery manufacturing value chain is becoming increasingly prominent, and lithium accounts for 4%-7% of the value composition of batteries. Among them, the Chinese market will show strong demand growth, mainly due to China’s energy transition and the growing popularity of new energy vehicles.

Global Green Hydrogen Production Capacity Increased

In Latin America, renewable energy resources accounts for a relatively large share of hydrogen production cost, about 60%, giving the region a significant advantage in hydrogen prices and a favorable position in the field of green hydrogen production. It is estimated that the cost of green hydrogen in Chile is expected to match that of conventional fossil fuel power generation in the medium term, regardless of the cost of carbon dioxide, making it a global leader. Governments in Latin America have also taken positive steps to support the development of the green hydrogen industry. Countries such as Chile, Uruguay and Columbia are all developing green hydrogen industry strategies and plan to develop production and export capacity in the next few years.

In addition, from a global perspective, the development potential of hydrogen energy is huge. With appropriate policy support, global hydrogen production is expected to reach 187 million metric tons by 2050, which is expected to meet 7% of the world’s energy needs. However, if more robust policies ensure the production of 696 million metric tons of hydrogen, it could meet 24% of global energy needs.

Conclusion

Green hydrogen and lithium will play an increasingly important role in promoting the energy transition and achieving net zero emissions. While expanding investment opportunities in Latin American lithium mines, China should also pay attention to the policy risks of resource nationalism in Latin America. It will contain the environmental and social risks of existing lithium mining models, and the geopolitical risks of strategic competition between China and the United States.

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