|
|
| Fig. 1: Simple Illustration of Electrolysis Process for Green Hydrogen Production. (Source: Wikimedia Commons) |
Much has been written about the potential of Green Hydrogen, given its high energy potential (3x the value of diesel) and low emissions.
For Brazil, Green Hydrogen has been lauded as an area in which Brazil could have potentially extraordinary competitive advantages. In this report, we will look at those competitive advantages and assess the current state of the market, the product cost of green hydrogen in Brazil and how big that market could be. Given a federal working group is currently proposal a new Hydrogen Law, to be considered by congress in November, these considerations are timely.
Much like the rest of the world, Brazil currently mainly produces grey hydrogen for the consumption of refinery and fertilizer industries. [1] These sectors are highly pollutant and contribute 10 kg of CO2 emissions for every kg of H2 produced. Today, this grey hydrogen represents a 400,000 tonne/year internal market, 95% dominated by Petrobras for its own uses (in other words, there is no commercial market).
Brazil currently produces small quantities of certified green hydrogen at a plant in Pernambuco state, in the country's Northeast. However, major green hydrogen production and export hubs are in feasibility studies at Pecem port, Ceara state; Acu port, Rio de Janeiro state; and Rio Grande do Sul state. All are being supported by their respective state governments, and cumulate in US $30 billion in hydrogen project investments announced for Brazil.
Green hydrogen is made through a process called electrolysis, powered by renewable energy. Electrolyzers consist of an anode and a cathode seperated by an electrolyte, as demonstrated in Fig. 1.
| H2O (liquid) + 237.2 kJ/mole electricity |
| + 48.6 kJ/mole heat → H2 + 1/2 O2 |
Electricity: In 2022, the total generation capacity of Brazil reached 206.5 GW of which 85% was from renewable sources, compared to ~20% in the US. [2] This makes Brazil 7th in total installed capacity, 3rd in absolute installed capacity of renewables, behind China and the US, with the highest % of renewables.
Up to 70% of the cost of hydrogen is the cost of energy. According to estimates by the IPEA, for Brazil's green hydrogen to be competitive, renewable energy prices have to be between US $10/MWh and US $30/Mwh. Brazil's LCOE for renewable energy was already US $20-US$40/MWh (USDBRL rate at 1 USD for 5 BRL) demonstrating that Brazil is moving towards that optimal range. [3] Estimates expect the LCOE of Solar and wind to reach US $15 consistently by 2040.
Renewable electricity prices in Brazil are so low for a few key reasons:
Capacity factors of solar and wind are at least 50% higher than the global average
Seasonal complementarity of solar, wind and hydropower.
Fast response resources such as hydropower (over 100 GW) and thermal energy
A single national grid allowing for power transfers between regions.
This cost competitiveness will create competing demands for that renewable energy as demand for it also outpaces supply. Whether green hydrogen will be able to compete on that basis, remains to be seen.
Transport: The geographic location of the northeast ports and presence of industrial consumers can be a great differential for Brazil both for exports and the internal market. The current grey hydrogen industry already finds itself in coastal regions with relevant pipeline infrastructure.
Tax Benefits: In some states, like Ceara, the government has added additional competitive advantages through the Exporting Processing Zones. Companies that operate in the area, and that apart of the Industrial Complex of Pecm, have significant tax exemptions and reductions both at the state and federal level. They are estimated to reach as high as 40% discount to investments in comparable regions.
While Brazil has significant competitive advantages, the following significant challenges remain.
If Brazil were to attend to internal market demand for green hydrogen (expected at 7-9 million tons) as well as external exports (2-4 million tons), then the additional electricity demand on the grid would be up to 40 GW by 2030 and up to 200 GW by 2040. This represents 20% and 100% of the current grid.
Last year the grid expanded by 8% Year on Year (YoY). [2] This demonstrates the extent to which much of this will come down to political will to expanding the grid at an accelerated rate, and providing the accompanying regulation. Ultimately, politics.
© Julia Sekula. The author warrants that the work is the author's own and that Stanford University provided no input other than typesetting and referencing guidelines. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.
[1] "Produção e Consumo d Hidrogênio em Refinarias no Brasil," Empresa de Pequisa Energética, May 2022.
[2] "Summary Report 2003: Reference Year 2022," Brazil Ministry of Mines and Energy, 2023.
[3] "Caderno de Preços da Geração 2021," Empresa de Pequisa Energética, Aug 2021.
