Spotlight: Brazil’s green hydrogen challenges

While Brazil is moving forward with the regulation of its incipient green hydrogen market, there are significant challenges to be overcome in order to enable planned investments.

Leandro Alencar, regulatory director of the local hydrogen and sustainable fuels association (ABHIC), considers that one of the main challenges is the development of hydrogen infrastructure. 

"Significant investments are needed to develop a robust network. This includes everything from building production plants to creating an efficient distribution and storage network," he told BNamericas.

The cost of producing green hydrogen is still a sensitive point. According to Alencar, it needs to be reduced from the current US$5-6/kg to between US$1.5-2/kg, which is the cost of gray hydrogen, extracted from natural gas.

He also underscored that legislation needs to create conditions that allow for a reduction in capex and opex, as well as technological advances and improved performance in the electrolysis process.

"In other words, generating more hydrogen with less energy for the various existing electrolyzer technologies, such as alkaline electrolyzers, proton exchange membrane electrolyzers or solid oxide electrolyzer cells," he said.

Alencar also advocates direct subsidies and more incentives to develop human capital, certification and technological innovation. 

"Without these measures, Brazil could face difficulties in keeping up with the rapid evolution of the sector at a global level," he added.

Another challenge is to integrate national and international standards so that hydrogen produced in Brazil is competitive on the global market. 

"The lack of harmonization could limit export opportunities and the attraction of foreign investment," warned Alencar. 

Gabriela Fischer, a partner in the oil and gas area at law firm Trench Rossi Watanabe, said that there are still regulatory uncertainties. 

"The law provides, for example, for a competitive process with criteria for selecting projects to obtain tax credits, and there are uncertainties about how this will be regulated," she told BNamericas. 

"It’s interesting to highlight the possibility of the [the local oil, gas and biofuels watchdog] ANP adopting a regulatory sandbox and specific solutions on a case-by-case basis to unblock projects and allow the hydrogen market to advance," Fischer said. 

A regulatory sandbox or experimental regulatory environment is an environment in which the regulatory body allows a company to operate with different rules from other companies for a certain period of time in order to test an innovation.

This exception is created so that companies can test innovations that could not be tested without changing the rules. The tests are closely monitored by regulators to assess the benefits to society and the risks they may bring

PRICES

In a study launched in 2023, Clean Energy Latin America (CELA) concluded that Brazil is capable of producing green hydrogen at a level cost of between US$2.87/kg and US$3.56/kg in some strategic locations.

According to the organization, with optimizations and incentives – especially fiscal and regulatory – the cost could reach US$1.69/kg, which is highly competitive with grey hydrogen. 

In a new study released this week, CELA states that the production of green ammonia in Brazil, made from low-carbon hydrogen, has a high degree of competitiveness compared with traditional fossil fuel methods. 

Considered essential for decarbonizing agricultural production and other economic activities, green ammonia has a local production cost of between US$539/t and US$1,103/t, while ammonia production from grey hydrogen is between US$361/t and US$1,300/t, according to CELA's LCOA Brazil Index.    

CONTRACT

Prumo Logística, its affiliate Porto do Açu Operações and Norway’s Fuella AS have signed the first area reservation contract for the low-carbon hydrogen and derivatives hub at the port complex located in the north of Rio de Janeiro state. 

Under the agreement, Fuella will secure a significant area within the hub, whose total area is 1Mm2. 

The companies also signed a memorandum of understanding (MoU) with the aim of implementing a green ammonia plant of up to 520MW, based on water electrolysis. 

This unit will have the potential to produce 400,000t/y of green ammonia, which can be shipped through the Port of Açu's liquid terminal for export or domestic use.