Brazil has the potential to become a leading player in the emerging green hydrogen economy. The country already boasts a high penetration of renewables and has both the infrastructure and the geography to serve future global demand.

Few regions can compete with the resource potential of Brazil’s northeastern coastline. Blessed with reliable and consistent winds—plus sunshine throughout much of the year—the climate is perfectly suited for green hydrogen production. Its proximity to both Europe and North America also offers a strategic and logistical advantage.

50% – Hydroelectricity share of energy mix

A 2023 study from German research body the Fraunhofer Institute for Solar Energy Systems ISE, supported by the German government, found that shipping liquid green hydrogen from the state of Rio Grande do Norte to Europe could cost €5.71/kg ($6.11/kg), cheaper than all other countries in the study and even beating local rival Colombia, on €5.86/kg. In Latin America, only Chile is expected to be cheaper.

Government incentives have already boosted the share of renewables in Brazil’s energy mix. Hydroelectricity dominates with a 50% share, yet wind and solar combined has risen to 28%, according to the latest data from trade body the Brazilian Solar Photovoltaic Energy Association.

“Brazil’s clean energies have been developing exponentially over the last 20 years,” said Rodrigo Rodi, legal counsel at Brazilian energy specialist law firm Edelstein Advogados. “Brazil now has a large energy surplus that could be reconciled through green hydrogen production.”   

Starting from square one  

The Brazilian government is keen to look at how best to incentivise future green hydrogen production. In August 2021, the authorities launched guidelines for the National Hydrogen Program, aimed at fast-tracking production and building a competitive market.

“Considering that activities related to green hydrogen are expensive, the offer of financing conditions and fiscal incentives [will] play an important role in reducing the cost of investments and the gap between the cost of green hydrogen and already mature technologies for fossil fuels,” said Rodi.

The federal government and Congress are looking at possible incentives. Brazil has few tax incentives across the green hydrogen value chain. Purchasing electrolysers, for example, still carries very significant upfront investment costs. Improvements in technology might help lower this cost curve in time, but tax exemptions for purchases would help accelerate uptake in the near term.

“The possibility of creating new tax incentives for this industry should not be ruled out,” said Andre Edelstein, partner at Edelstein Advogados. “As an example, it is possible that the government will establish new tax exemptions for electricity generation projects, even if not located next to the green hydrogen production plant.”

Debating public policy  

Beyond the government producing a roadmap, there are also two draft bills being discussed in the Senate. One proposes a mandatory hydrogen percentage at the delivery and exit points of gas pipelines to encourage its use. The other sets out broad public policy for the regulation of production, use, transport, storage and commercialisation of green hydrogen.

“Brazil now has a large energy surplus that could be reconciled through green hydrogen production” Rodi, Edelstein Advogados

At the legislative level, the Special Committee of the Senate for Public Policy Debate on Green Hydrogen (CEHV) has been created with the aim of promoting discussions on the topic. The CEHV is set to last two years and is tasked with analysing potential obstacles and challenges by listening to experts in public hearings, learning about domestic and international experiences, and examining proposals being processed in the National Congress.

“CEHV recently made available a preliminary report in which they drafted a bill for the implementation of a regulatory framework for green hydrogen,” said Edelstein. “Under [Brazilian president] Lula’s administration, more attention and concrete action has happened. The federal government is committed to conducting an extensive dialogue aimed at bolstering the domestic industry and advancing the green economy.”  

Leading from the front  

Several projects have already been sanctioned and planned in Brazil’s far northeast. In the Port and Industrial Complex of Pecem, located in the state of Ceara, electric utility EDP Brasil is developing a pilot plan consisting of a 3MW solar plant and an electrolyser able to produce 250Nm³/h of green hydrogen. In December 2022, the country’s first ever green hydrogen molecule was produced at EDP’s Pecem plant.

In late October, Brazilian renewables firm Cactus Energia Verde also signed a pre-contract with the Port and Industrial Complex of Pecem worth around $2b in investment. The project is scheduled to reach startup in 2027, producing 190,000t/yr of green hydrogen as well as more than 1mt/yr of renewable ammonia when it achieves full capacity. The announcement was the fourth pre-contract at the Green Hydrogen Hub in Pecem. So far, 33 memorandums of understanding have also been agreed at the port.

The Export Process Zone (ZPE) of Ceara, an area of international trade intended for companies focused on the production of goods to be exported, created the green hydrogen hub. The hope is that green hydrogen producers located in the ZPE will benefit from tax exemptions and trade advantages, as well as other administrative shortcuts. Plants located there will also be able to use the gas transport network of the ZPE to transport green hydrogen to the port.

Given that a significant portion of green hydrogen production in Brazil can be exported while still satisfying domestic needs, businesses have the opportunity to establish themselves in ZPEs to take advantage of various incentives, including tax benefits. Under the current ZPE regime, raw materials, intermediate products and packaging materials purchased on the domestic market or imported by a company authorised to operate in a ZPE have reduced import tax liability.

Other states in the northeast are also looking at long-term opportunities. In Camacari, a city in the state of Bahia, Unigel—one of the largest chemical industries in Latin America and leader in the production of fertilisers and ammonia—intends to use green hydrogen to produce green ammonia. The project is slated for completion in 2027, with investments totalling more than $1.5b.

Further south, operators are looking at existing infrastructure. “The Acu Port in Rio de Janeiro, for instance, boasts ample water resources for electrolysis, along with a high incidence of sunny days and favourable wind conditions,” said Rodi. “The surrounding area already hosts at least 14 intended offshore wind projects that could further enhance production capabilities.” Shell’s Brazilian subsidiary plans to install a pilot project at the site and expects startup by 2025.

In the state of Parana, utility firm Companhia Paranaense de Energia has called for research and development projects aimed at producing green hydrogen from biofuels and other organic waste. In the state of Goias, Eletrobras Furnas, a regional power utility and a subsidiary of hydroelectric operator Eletrobras, has opened a green hydrogen power plant using power from a nearby hydroelectric plant. A floating solar plant was installed with electrolysers to produce green hydrogen and the pilot project and has already produced 1.5t.

Building bridges

The government is also looking to build bridges with other nations, particularly in Europe. The Brazilian and German authorities created a green hydrogen alliance in August 2020. “The idea is to hold an auction in Brazil, with a guarantee of contracting by the German government,” said Rodi. “Rio Grande do Sul, the southernmost state of Brazil, has [similarly] established a partnership with the Netherlands to promote the green hydrogen market in the state’s ports.”  

Brazil’s efforts to become a major player in the green hydrogen market are still in the early stages, but the project pipeline is growing rapidly, and international backing highlights the long-term potential. If the country can replicate the successes of its offshore pre-salt oil reserves, it will certainly become a clean energy heavyweight.



{{ error }}
{{ comment.comment.Name }} • {{ comment.timeAgo }}
{{ comment.comment.Text }}