Green hydrogen, Brazil, and the global energy transition

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Hydrogen is one of the most abundant chemical elements on Earth. However, it is also one of the most reactive elements, the reason why it is not found in an isolated form, but as part of other substances such as water and hydrocarbons.

Such characteristic of this gas requires some chemical processes – which need the use of energy – to obtain the hydrogen in an isolated form and, thus, allow its use to store and generate energy. For this reason, hydrogen is considered an “energy vector”.

There are several sources of energy that can be employed in the hydrogen production, such as natural gas and mineral coal, cases in which the gas obtained is classified as gray and brown hydrogen, respectively.

The so-called green hydrogen is produced through water electrolysis, by the use of renewable sources of energy such as wind and solar, thus, it does not release carbon dioxide (CO2) into the atmosphere.

This attribute, added to the practicability of its transport and storage, makes green hydrogen a strategic energy vector for the current worldwide energy transition process, which has decarbonization and energy security as its main goals, under the terms of the Paris Agreement entered into in 2015.

The European Union countries stand out in terms of green and low-carbon hydrogen demand.

This is because, on the one hand, such countries are large consumers of fossil fuels that urgently seek to change this status (in 2021, they adopted a legislation package – Fit for 55 – establishing as new climate goals the reduction of at least 55% in greenhouse gas emissions by 2030). On the other hand, these countries do not have the necessary conditions to produce this energy vector, particularly due to the low capacity to generate renewable energy. By way of example, it is estimated that Germany will be able to produce, approximately, only 10% of its internal demand for green hydrogen and, consequently, it will have to import the residual demand.

According to the report “Global Review Hydrogen 2021”, published by the International Energy Agency (IEA), one of the main challenges for this energy vector to consolidate in the market is the production cost, which includes the cost of the renewable energy and of the electrolyzers used therein.

For no other reason, pursuant to the “World Energy Outlook 2021” by IEA, in the year 2020, only 1% of all global hydrogen production (90 Megatons) consisted of low carbon.

In this sense, it must be regarded that, according to the “Green hydrogen cost reduction” report, published by the International Renewable Energy Agency (IRENA) in 2020, reducing the renewable energy cost and improving electrolysis technologies can make green hydrogen competitive by 2030.

This scenario gives countries with a high production capacity, just like Brazil, a relevant opportunity to generate renewable energy.

According to the “Hydrogen in Latin America” report (IEA, 2021), Latin America hold the conditions to be a major green hydrogen exporter, by virtue of its potential to produce energy through renewable sources. An assessment of this report carried out by the Hydrogen Observatory of the Electricity Industry Study Group (GESEL), of the Federal University of Rio de Janeiro, highlighted the potential of Brazil and Chile to reach the capacity to produce this type of hydrogen at a feasible price, based on energy generated by solar and onshore wind sources.

In Brazil, this is not a new topic. The Brazilian government, in 1998, implemented the National Hydrogen Energy Reference Center (CENEH) and, in 2005, published the “Roadmap for Structuring the Hydrogen Economy in Brazil”, among other initiatives.

More recently, in compliance with the deadline set out by the Brazilian Energy Policy Council (CNPE), through CNPE Resolution No. 6/2021, the Ministry of Mines and Energy (MME) published, in August 2021, the “Proposals for Guidelines of the National Hydrogen Program – PNH2”, structured in six thematic axes: (1) technological strengthening; (2) training and human resources; (3) energy planning; (4) legal-regulatory framework; (5) market growth and competitiveness; (6) international cooperation; in addition to a transversal axis, which is the promotion of public acceptance of hydrogen.

Such document aims to be another step to pave the way of the green hydrogen in the Brazilian energy industry. We still need to advance in terms of regulation, so that a proper environment can be created to safely attract the large investments necessary to consolidate Brazil as a relevant player in this energy vector market.

Regardless of the maturity of our legal system, the large national and international interest in this topic has already resulted, only in the State of Ceará, in 17 memoranda of understanding entered into by and between the government and companies for the future green hydrogen production at Pecém Port Complex, which has been named “Green Hydrogen Hub”.

Just to illustrate the amounts involved in the negotiations between the government of Ceará and the interested companies, Fortescue Future Industries’ plans encompass an investment of USD 6 billion to produce 15 million tons of green hydrogen between 2025 and 2030. The companies BI Energia, Cactus Energia Verde and Uruquê Energias Renováveis executed some memoranda of understanding that provide for investments of over BRL 26 billion for the construction of three renewable generation projects, including an offshore wind farm, in addition to an electrolysis plant, aimed at green hydrogen production.

If the Brazilian public authorities do its share, at the necessary pace, fostering the establishment of legal and regulatory conditions and public policies to create an environment that promotes the development of hydrogen-related businesses, Brazil will be able to make use of its potential to produce energy from renewable sources, not only to maintain its sustainable energy matrix, but also to act as a major green hydrogen exporter for countries that intend to decarbonize their economies.