Exploring Brazil's Potential as a Leading Exporter of Green Hydrogen

Since 1972, owing to the United Nations Conference on Human Environment, many countries have initiated debates on environmental issues. This trend has persisted to the present day, as evidenced by frequent Conferences, such as the annual COP meetings. Consequently, numerous international organizations have committed themselves to developing means of reducing environmental impacts. Among the various changes essential for advancing environmentally friendly practices, the energy sector has proven to be of paramount significance. Energy generation has long been possible throughout both non-renewable and renewable sources.

In fact, over the past years, our lifestyle has demanded an increasing amount of energy. It is estimated that by 2040, global energy demand will increase by more than 18%, exacerbating climate change due to the continued dependence on fossil fuels such as petroleum and carbon (IEA, 2019). Consequently, this increased demand is drawing more attention to investments in sustainable means of energy. Specifically, companies and industries are taking substantial steps and investing in what they believe will be the "fuel of the future": green hydrogen; H2V.

Why Green Hydrogen?

Hydrogen emerged as a proposed solution following the Petroleum Crisis of the 1970s when petroleum prices reached a peak of US$ 124 per barrel, in today's dollars (MOUAWAD, 2008). Since then, hydrogen has garnered increasing attention. While in 2020, hydrogen demand was estimated at about 87 million metric tons (MT), its projection is to reach between 500-680 million MT by 2050 (IEA, 2019). In 2022, hydrogen production reached an estimated $130 billion in the production market (IEA, 2019).

Currently, the vast majority of hydrogen production relies on processes that use natural gas as a resource, commonly known as gray hydrogen, which is highly pollutant, emitting 10kg of CO2 for each kilogram of hydrogen produced. Similarly, there is blue hydrogen, derived from the capture and storage of resulting CO2, which is less pollutant, but still generates from 1 to 3 kg of CO2 for each kilogram of hydrogen. In contrast, green hydrogen is produced through the electrolysis of water, separating oxygen and hydrogen using renewable electricity. For this reason, green hydrogen is considered a significant investment opportunity due to its abundant and storable nature, as well as its clean and carbon emissions-free production.

Brazil's Renewable Energy Outlook

Furthermore, Brazil's renewable energy has been steadily increasing its share in the Brazilian Energy Matrix, rising from 39,5% in 2014 to 47.4% in 2023 (EPE, 2023). This increase has primarily been driven by wind, hydroelectric, solar, ethanol (sugar cane) and hydrogen originated resources. Despite this, the country still possesses the capacity to further expand these resources. Given Brazil's geographical dimensions and production capabilities, it presents a favourable potential for future exports. While Brazil does not currently produce green hydrogen, there are ongoing projects, with a focus on the northern region of Brazil due to its water availability and large-scale production of solar and wind energy. Companies like Neoenergia, Enerfin, Siemens Energy, Ocean Winds, among others, have already signed Memoranda of understanding (MOUs) for the development of green hydrogen in Brazilian ports such as Pecém (Ceará), Suape (Pernambuco) and Açu (Rio de Janeiro).

Economic Opportunities

It is estimated that by 2050, Green Hydrogen could represent between 12% to 22% of global energy demand. More specifically, in the context of Brazil, the country is expected to have an entirely new energy matrix dedicated to the production of H2V by the year of  2040 (GURLIT ET AL, 2021). Additionally, calculations indicate that hydrogen demand in Brazil could reach up to 9 million tons by 2040 (SEBRAE, 2023). Consequently, Brazil may face important challenges to develop the green hydrogen industry, including the need for substantial investments in the production of an additional 180 gigawatts of renewable energy. It is noteworthy that this value is only slightly lower than Brazil's total energy production capacity across all matrices (SEBRAE, 2023).

As outlined, Brazil's capacity to generate green hydrogen from renewable energy sources is being recognized by various companies. As a result, numerous major players within the energy sector are betting on significant financing for solar and wind energy projects in the country. A recent study by Clean Energy Latin America (CELA), utilizing their new index tool, concluded that Brazil's green hydrogen production costs could drastically decrease with increased incentives (RAMOS, 2023). This research, which is revised biannually, indicates that current costs ranging from US$2.87-US$3.46 per kilogram may transition to a range of US$1.69- US$1.86 per kilogram with additional investments (CELA, 2023). Correspondingly, these mega investments are likely to create substantial prospects in the market for small service providers across various segments.

Considering not only the significant role green hydrogen is expected to play in the energy market but also the major players' general aim of a more sustainable future, firms are steadily increasing their investment efforts in the fuel.

References

Agência Senado. “Brasil Tem Grande Potencial de Produção de Hidrogênio Verde, Dizem Especialistas.” Senado Federal, 17 May 2023, www12.senado.leg.br/noticias/materias/2023/05/17/brasil-tem-grande-potencial-de-producao-de-hidrogenio-verde-dizem-especialistas.

Cowan, Vaitea. “How Green Hydrogen Could End the Fossil Fuel Era | Vaitea Cowan | TED.” Www.youtube.com, 14 Sept. 2022, www.youtube.com/watch?v=9OLxBvLvCoM.

EPE Brasil. “Balanço Energético Nacional.” EPE, EPE, 2019, www.epe.gov.br/pt/publicacoes-dados-abertos/publicacoes/balanco-energetico-nacional-ben.

Gurlit, Wieland , et al. “Hidrogênio Verde: Uma Oportunidade de Geração de Riqueza Com Sustentabilidade, Para O Brasil E O Mundo | McKinsey.” McKinsey & Company, 25 Nov. 2021, www.mckinsey.com/br/our-insights/hidrogenio-verde-uma-oportunidade-de-geracao-de-riqueza-com-sustentabilidade-para-o-brasil-e-o-mundo.

IEA. The Future of Hydrogen Seizing Today’s Opportunities. June 2019.

Mouawad, Jad. “Oil Prices Pass Record Set in ’80s but Then Recede.” New York Times, 3 Mar 2008, www.globalenergyprize.org/en/2023/09/08/brazil-can-produce-green-hydrogen-at-the- price-less-than-3-per-kilogram/.

Mueller De Lara, et al. Hidrogênio Verde: A fonte de energia do futuro/ Green Hydrogen: The energy source of the future. Novos Cadernos NAEA. 2023.

NATIONAL INTELLIGENCE COUNCIL. “Climate Change and International Responses Increasing Challenges to US National Security through 2040.” National Intelligence Estimate.

Ramos, Camila. “ Brazil Considered to Be among the Most Competitive Green Hydrogen Players.” BNamericas.com, 1 Sept. 2023, www.bnamericas.com/en/news/brazil-considered-to-be-among-the-most-competitive-green-hydrogen-players.

SEBRAE. Hidrogênio Verde: Um Grande Negócio Para O Brasil. 6 Feb. 2023, sebrae.com.br/sites/PortalSebrae/artigos/hidrogenio-verde-um-grande-negocio-para-o-brasil,bb9b36b2d0826810VgnVCM1000001b00320aRCRD.