Renewables in Brazil: Green Hydrogen in a Nutshell

published on 17th November 2021

Basic concepts: general introduction and worldwide perspective

Basically, green hydrogen is a term used to refer to hydrogen acquired from renewable sources (i.e., in a process that has no carbon emissions). This technology is based on the generation of hydrogen, a universal fuel, light and very reactive through a chemical process known as electrolysis. In this process occurs the segregation of the hydrogen from the oxygen in water. Thus, if electricity is obtained from renewable sources, the energy is produced without emitting carbon dioxide into our atmosphere. According to the International Energy Agency (IEA), obtaining green hydrogen through electrolysis would save 830 million tons annually of CO2 , that is emitted when this gas is produced by fossil fuels.

Although it is a solution to reduce carbon dioxide emissions, the viability of green hydrogen should be carefully studied before any big investment, given that to produce it requires a high production cost, compared with other energy sources. However, as the decarbonization of the planet progresses, renewable energy generation has also become cheaper, which also shall be a trend to green hydrogen.

Currently, this somehow new technology to generate renewable energy source has increased in a worldwide perspective. For example, in Germany, according to German government representative Peggy Schulz, Hydrogen consumption is 2.5TWh, but they are projecting that by 2030 Germany will have a demand of 90 to 110 TWh, which means that they will need to import energy to meet this demand. This way, seeking a strategic partner for the export of H2V, is vital. And Brazil is well suited for this position, since producing H2V in the country is cheaper than in Germany, and several German energy companies have subsidiaries in the country. The European Commission has presented an initiative to invest $67 billion in clean fuel production. National hydrogen strategies are underway in countries such as Germany, the Netherlands, Portugal, and the United Kingdom. Nowadays, these mentioned countries have looking for additional resources in foreign countries and Brazil can be seen as the hot spot for increase the production.

Green hydrogen projects in Brazil

According to the National Bioenergy Union in Brasil, there are expectations that in 30 years the green hydrogen (H2V) could represent up to 20 percent of the global energy matrix. Several multinationals are to invest in green hydrogen plats for production unit in Brazil. As Brazil is one of the countries with the greatest potential for generating renewable electricity in the world and considered one of those with the lowest marginal production costs, the Brazil-Germany Chamber of Commerce and Industry is eyeing partnerships with national companies. Since the beginning of 2021, press released that six memorandum of understanding have been signed with the states of Ceará, Pernambuco and Rio de Janeiro. The investments under study total at least US$ 22.2 Billion, considering the current currency exchange rate (~5,25 BRL/USD). For instance, one of the five largest iron producers in the world, the Australian Fortescue announced the construction of a H2V plant budgeted at US$ 6 Billion in the Port of Pecém, Ceará.

In addition the company released that is also studying the possibility of setting up a unit at the Port of Açu in Rio de Janeiro. According to the president of the Port of Açu, José Firmo, it has already signed three more secret contracts with other companies that want to produce H2V. Another Australian company, Enegix Energy, is also in the study phase to invest US$ 5.4 Billion in a plant in the Port of Pecém, Ceará. Together with the Australians, the French company Qair released that is studying two similar projects in the Northeast, a strategic location, given that it is closer to the USA and Europe. In April 2021, the company signed a memorandum of understanding for the installation of an H2V plant budgeted at US$ 3.8 Billion in the Port of Suape, Pernambuco. Along with this, they have already started studies for another plant worth U$ 7 Billion at the Port of Pecém, Ceará. The industrial gas producer White Martins, from the German group Linde, is also moving toward this market. It was released that the company is evaluating a H2V unit in Ceará. Without detailing values or the capacity of the enterprise, Guilherme Ricci, director of green hydrogen and natural gas of the company, stated to Brazil’s National Union of Bioenergy in July 2021 that the fact that White Martins already has a gas factory in the Port of Pecém, Ceará could facilitate the investment in the H2V plant.

Wood Mackenzie, a company specialized in energy consulting with its headquarters in Edimburgo, United Kingdom, recently posted a report stating that H2V production costs are „falling rapidly” and the production cost of this renewable source shall be equal with gray hydrogen by 2030 in some countries (e.g., Brazil), and by 2040 in developed markets such as the United States, European Union and Australia.

Although it does not yet have H2V projects underway in Brazil, Britain's British Petroleum announced projects that Brazil will have „a relevant role” in meeting the Paris agreement targets and that the „versatility of hydrogen can improve the resilience and flexibility of the entire energy system”.

Brazil saving no efforts to be sustainable and has been invested significantly in a more friendly environment for businesses

Brazil has been striving to improve its image to the world, both in terms of environmental issues and business related issues. President Jair Bolsonaro emphasized at his speech during the opening of the United Nations General Assembly, on September 21st, Brazil's characteristic as the country with the largest renewable energy matrix in the world, with the largest areas of environmental preservation and with a potential yet to be developed in this segment.

It can also be highlighted the Brazil government's strategy to promote private sector investments in infrasctucture, through investment concessions, which amounted to 100 billion Brazilian Reais since the beginning of the government in 2019; specially the Railroads concessions which amounted to 6 billion Reais in investment, according to government reports. This strategy will improve the country's transport modal, currently predominantly road, to one more based on railroads, which shall bring both economic and ecological benefits, since the railroad is a less polluting matrix.

Despite of increasing inflation scenario (as most of the countries worldwide), the Brazilian economy managed to go through the most critical moment of the pandemic with relative success, compared to other countries in the region. The government created the largest income distribution program, which served a large part of the Brazilian population, who worked informally and could not maintain their income during the lockdowns. Recently, the OECD revised upwards the Brazilian GDP growth from 3.7 percent to 5.2 percent for 2021.

The reputation factor also matters when talking about sustainable development and there is a great effort to highlight the ecological and economic potential of Brazil, which has the largest number of preserved hectares in the world, but still faces pressure from international organizations for preservation of native vegetation. Brazil is the country with the highest proportion of preserved area, according to data from the UN (FAO). For instance, around 60 percent of the Brazilian territory is preserved against approximately 35 percent of Canada and the United States. The preserved area in Brazil is almost three times the world average.