Amid increased activity and growing expectations for the development of the green hydrogen industry in Brazil, market players have intensified demands for draft regulations and government initiatives to promote the development of the sector.
Green hydrogen projects under development in Brazil already add up to more than USD 30bn in potential investments, according to the independent National Clean Energy Institute (Inel) data. Inel created a special secretariat to discuss green hydrogen initiatives in 2022 and has been meeting with project developers and government authorities to advise on public policies for development of the sector. The initiative comprises companies such as Quinto Energy, AES Brasil, Raizen, Unigel, Nova Engevix, Thyssenkrupp, Vale and Porto do Açu, Inel’s undersecretary Frederico Freitas told Infralogic.
“Inel was able to form a pool of companies that make up our technical group and the degree of maturity and potential for economic development for Brazil was evidenced. There is no doubt about the good receptivity of the federal government,” he added.
Freitas considers that Brazil has all it needs to lead the production of the alternative fuel in the world in the short–term, as long as the federal government better defines strategic actions for the commercialization and use of this emerging energy source.
The undersecretary observes that federal authorities are starting to debate green hydrogen’s transversal role in multiple industries, including in the manufacturing of goods that could be exported with a green label.
He highlights that the project portfolio of projects from the companies involved in Inel’s working group adds up to an additional 15 GW of power generation for green hydrogen production in Brazil, which could fuel the production of 1.5 billion tons of green hydrogen per year.
Brazil’s National Transportation Confederation (CNT) has mapped 12 green hydrogen and green ammonia projects in the country. In its Hidrogênio Renovável report, the CNT highlights that the majority of the projects are located in the state of Ceará, which is where most renewable electricity generation is located in the country and which also has ports with direct connection to international markets.
Green hydrogen projects in Brazil:
|Porto do Pecém (CE)||Feasibility studies||Hydroelectric||H2||600 Kt H2 /year|
|Porto do Açu (RJ)||Feasibility studies||Multiple||NH3||300 MW|
|Fortescue – Porto do Pecém (CE)||Initial studies||Offshore wind||H2||15 Mt H2 /year|
|Qair – Marítimo Dragão (CE)||Initial studies||Offshore wind||H2||296 Kt H2 /year|
|Cactus Energia – Porto do Pecém (CE)||Initial studies||Multiple||H2||10,5 Kt H2 /year|
|Ingenostrum – Total Eren (CE)||Initial studies||Non-disclosed||H2||Non-disclosed|
|White Martins (RS)||Initial studies||Offshore wind||H2||Non-disclosed|
|Unigel Fase I (BA)||Investment phase||Onshore wind||NH3||60 MW|
|Unigel Fase II (BA)||Feasibility studies||Onshore wind||NH3||240 MW|
|Shell Fase I – Porto de Açu (RJ)||Initial studies||Non-disclosed||H2||10 MW|
|Shell Fase II – Porto de Açu (RJ)||Initial studies||Non-disclosed||H2||100 MW|
|EDP – Porto do Pecém (CE)||Under construction||Solar||H2||3 MW|
Unigel's fertilizer projects in Camaçari, in the state of Bahia, and Raízen Energy's research and development project it's working on with Shell in São Paulo, are the most developed initiatives, according to Freitas.
“Shell and Raízen have been conducting research in the state of São Paulo to produce hydrogen from ethanol. We call this type of production ‘biological routes’ and it would require much less water than the well-known electrolysis process,” he added.
In a move to meet the market’s expectations, Brazil’s National Senate has set up a special committee to debate green hydrogen policies and regulations.
Senator Cid Gomes, who represents Ceará, is leading the initiative and stated that studies have already shown that Brazil can produce green hydrogen at a very low cost due to its location and renewable generation potential.
Sen. Gomes mentioned his state of Ceará is a pioneer in the initiative as it has already signed multiple MoUs with developers, thus gathering several under development projects.
Developing an export market
Brazil has a green energy economy in operation that Europe can only dream of achieving in the next few decades, a first source active in the market said. According to Brazilian government data, renewable energy already makes up 84% of Brazil’s energy matrix, including generation from hydroelectric plants.
With such high potential to produce green hydrogen, the sector could focus its efforts on producing green hydrogen for export, with the main target market being the EU, a second legal source advising on sector projects said. In the northeastern state of Ceará in the Port of Pecém, which is the closest point to Europe, there is a large project under development which will have capacity to produce 10,500 tons of green hydrogen and 5,250 tons of green oxygen. A second project, being developed by Brazilian developer Unigel and German company Thyssenkrupp was officially announced in January this year, and is set to be Brazil’s first active industrial-scale green hydrogen production plant with an investment of BRL 7.8bn.
Unigel's hydrogen plant will require investments in three phases. In the first stage of the project, already under construction, the company is investing USD 120m to install three 20 MW electrolysers.
However, the second source believes that export agreements could still take years as the technology’s implementation is still at a very early stage and it could be a while before enough hydrogen is produced for export from these facilities.
Exporting green hydrogen will depend on Brazil developing a national policy and also on how it positions itself in the global market, Freitas said.
“When Europe says it wants hydrogen, it has a clear purpose for this fuel: that it is industrial for the production of manufactured items. In this sense, Brazil needs to take a stand and make the most of this opportunity by evaluating what is better for the country,” he observes. “We could take hydrogen for them to produce steel or use green hydrogen to produce green steel domestically and then sell it to European countries,” he added.
While exports are a realistic possibility for the nascent industry, a third market player said the country should place importance on Brazil producing green hydrogen for its domestic market.
"There are locations in other parts of the country that could focus on producing hydrogen for domestic use," the first source said. "Brazil is a huge agricultural country, which is in need of fertilizers, which means that a large focus of green hydrogen production should go towards servicing that. One issue could be that the EU could look to closer producers like Egypt for green hydrogen imports, which would limit demand for green hydrogen produced this side of the Atlantic Ocean."
Lining up to European standards
Focusing on producing green commodities and creating green industries in Brazil is a smart way to circumvent the difficulties that would come with transportation to Europe but Freitas stressed that there is still a lot of political work to be done to boost Brazilian production.
“If the use of nuclear energy is considered green, why cannot the use of energy from hydroelectric plants be?,” he asked. “Brazil needs to have a strong position in the international debate so that we are not submissive to the rules that Europe dictates. This will demand efforts from our Foreign Relations Ministry.”
Initial steps on collaboration have already been taken under the International Council on Large Electric Systems (CIGRE), a Paris-based global market association created in 1921 for the collaborative development and sharing of power system expertise that gathers professionals from over 90 countries and 1,250 organizations. In September 2022, Brazil's Chamber of Electric Energy Commercialization (CCEE) representatives proposed to launch an international committee at CIGRE to debate rules comprising suggestions and needs of all countries producing green hydrogen, Freitas said.
All three sources who spoke to Infralogic see interest from European players in investing in the Brazilian green hydrogen market. However, larger players are holding back for now and waiting for sector-specific legislation and for the market to develop further, the first source said. This is because projects are still very expensive, so it is a high-risk investment. At this point, agreements are made with state governments and under state regulations, rather than under a federal regulatory framework. This can make things quite complicated for foreign investors as they are dealing with various regulations in different areas, the third source pointed out.Brazil currently has two bills regarding green hydrogen production being debated in the National Congress. PL 1878/22 regulates the production and uses for energy purposes of green hydrogen, while PL 725/22 aims to set establish parameters to encourage the production of renewable hydrogen, including hydrogen as a transition option to a low-carbon economy.
Some of the legislation put forward in Brazil in 2022 is still awaiting approval. The first source thinks that new legislation could be ratified in a couple of years, but the second source believes it could be stalled for much longer, and stated that, unlike in the EU, it is harder to predict how long legislation will take to pass in Brazil.
The timeframe for progress on the legislation could take several years, but the second source does not see this as an issue, because they believe investors will continue existing projects, like those mentioned above, even without legislation. At the same time, having too much legislation could be detrimental to the sector as it could put in place too many restrictions, making it harder for investors to get involved, the first source said.
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