Green hydrogen: what to do to avoid missing the train?

O green hydrogen can play a fundamental role to help the world reduce greenhouse gas emissions with the aim of achieving “net-zero emissions” by 2050.

As a complement to other technologies, including renewable energy and biofuels, green hydrogen has the potential to decarbonize industries, including steel, petrochemicals, fertilizers, heavy transport, maritime navigation and aviation, as well as for help with energy generation, among other applications.

O Brazil could become one of the world leaders in the production of green hydrogen – which uses renewable energy sources, such as wind, solar and water.

In fact, the country has unparalleled attributes, as renewable sources of energy in abundance, integrated electrical network low-carbon technology and a relevant national industry for generating demand – in addition to an important strategic geographic position to export green hydrogen, mainly to Europe and the United States.

According to a recent study by McKinsey & Company, hydrogen could contribute more than 20% in global emissions reductions annually.

In the case of Brazil, production could generate a total opportunity of US$ 15 million to 20 billion in revenues by 2040, with almost half of this amount going to serve the domestic market, especially heavy transportation, steel production and other energy-intensive industries.

Additionally, another US$ 4 million to 6 billion could come from exports of green derivatives to the USA and Europe, as production costs in Brazil would be more competitive compared to exports from other countries. Still, some projects stand out in Brazil.

At the end of 2021, a joint venture was announced between the Government of the State of Ceará and the Port of Rotterdam (the largest and main in Europe), making the Pecém port complex It will now house one of the largest green hydrogen production projects in the country.

The project, which focuses on exports, must produce on a large scale to serve the domestic market, with applications in heavy mobility, the steel industry, chemical production and mixing for gas transport networks.

The supply will take place from an industrial unit with an installed electrolysis capacity between 100 MW and 150 MW, during an activation period that runs until 2026. However, the main objective is to reach 4 GW of capacity in 2030.

In another important initiative, in mid-2022, the Suape Industrial Port complex announced that it will lease an area for the installation of an industrial plant producing green hydrogen.

The estimated investment is US$ 3.5 billion, with 1 GW of electrolysis capacity and an area of 72.5 hectares. The lease will be for 25 years, with an extension for an equal period possible.

The area is located outside the Organized Port polygon, being directly administered by the port state-owned company. In the future factory, green hydrogen will be produced from the desalination of seawater.

Another notable project is from Unigel (Brazilian Chemical Industry Unigel), which announced, in January 2023, that it will invest up to US$ 1.5 billion in Bahia to produce green hydrogen.

The complex stands out as the country's first installation for industrial-scale production. Located in Camaçari, the first of three phases should be inaugurated by the end of this year, expanding capacity until 2027 producing 100,000 tons of hydrogen, or 600,000 of one of its derivatives, ammonia.

And finally, also among the projects of great relevance, are the Shell Brasil and Porto do Açu who signed, in November 2022, a Memorandum of Understanding (MoU) for the joint development of a pilot plant for generating green hydrogen at the port facilities, located in the northern region of the state of Rio de Janeiro.

The project is expected to be ready in 2025 and will have an initial capacity of 10 MW, reaching 100 MW, with estimated investments between US$ 60 million and US$ 120 million.

It is observed in the projects mentioned above that investments in infrastructure development are taking place, mainly in port areas to facilitate access to inputs and product distribution for export or the domestic market.

However, for green hydrogen to make an important contribution to the energy transition, it is necessary to accelerate the development of distribution infrastructure, the integration of the entire value chain and, inevitably, increase large-scale production over the next decade.

On the demand side, public regulation and policy makers should create more incentives for the green economy and/or taxes for the fossil economy, in addition to establishing quotas so that companies can develop more aggressive energy transition plans.

Evidently, these incentives and/or taxation need to be well structured so as not to create competition and/or competitiveness imbalances, in addition to considering the characteristics and level of development of each sector of the economy.

Hydrogen demand will achieve large-scale adoption only when a supply of low-cost clean hydrogen is available.

This will require an increase in electrolysis capacity and follow-up renewable energy capacity, as well as the construction of carbon capture, utilization and storage infrastructure.

The sooner these investments are made to achieve large-scale production, the faster it will be possible to achieve cost competitiveness.

There is no doubt that Brazil could be one of the most competitive places in the world to produce green hydrogen.

To achieve this, the country needs to accelerate the development of local and international demand, preferably with long-term contracts and, thus, guarantee the flow of investments necessary to carry out the first projects and associated infrastructure.

Equally important, the country needs to develop appropriate public policies and regulations to establish a favorable business environment in the long term.

At a time of great uncertainty, adversity and investment limitations by the public sector, attracting private capital requires efficient coordination and balance of the various interests in question.

These factors make the construction of a long-term State agenda that promotes stability, predictability and legal security for the sector and the country even more critical. Without this, Brazil runs the serious risk of being left behind – as usual, losing the tram.

The opinions and information expressed are the sole responsibility of the author and do not necessarily represent the official position of Canal Solar.