Green hydrogen has established itself as one of the main solutions for the global energy transition, attracting significant investment and generating expectations around the world. In Brazil, a country with vast renewable potential, the scenario is no different.
The approval of the Hydrogen Legal Framework and the creation of the PHBC (Low Carbon Hydrogen Development Program) in 2024 marked important advances, but many challenges still need to be overcome for the country to reach its full potential in this promising market.
In an exclusive interview to Canal Solar, Sérgio Augusto Costa, president of ABHIC (Brazilian Association of Hydrogen and Sustainable Fuels), assesses the panorama of green hydrogen in the national scenario, highlighting regulatory advances, investment potential, and the difficulties that projects face to become viable.
Sérgio also addresses how memoranda of understanding signed between national and international companies can be transformed into concrete initiatives and comments on the importance of incentives to reduce production costs and develop competitive technologies.
In this conversation, the executive also analyzes the global challenges for the expansion of green hydrogen, the necessary technological advances and the prospects for 2025, in addition to pointing out which hydrogen-derived fuels may stand out in the coming years.
Check out the main excerpts from the interview below:
The year 2024 was marked by significant advances in the green hydrogen sector, consolidating its position as a key player in the global energy transition and attracting major investments. What is your assessment of 2024 and what is the current scenario for green hydrogen in Brazil?
Brazil has enormous potential when it comes to green hydrogen and its derivatives. The country has a potential investment of US$200 billion over the next 20 years, according to projections by consultancy McKinsey & Company, and could become one of the largest producers and exporters of this input.
However, as this is still a new sector in Brazil, we faced many challenges at the beginning, especially in 2024. The main one, without a doubt, was the approval of the Hydrogen Legal Framework, in August.
Another fundamental item was the approval of Law 14.990/24, which institutes the PHBC (Low Carbon Hydrogen Development and Investment Program).
This was another important milestone for the development of hydrogen and sustainable fuels in Brazil, especially due to the granting of tax credits worth R$18,3 billion to producers and buyers of low-carbon hydrogen between 2028 and 2032.
If we look at the current scenario of green hydrogen and its derivatives, and thinking about 2025, we see a sector that is better prepared from a regulatory point of view.
The definition of the legal framework, for example, was awaited by all players related to the sector and will allow, from now on, companies and investors to have greater legal security when making investments in the country.
Furthermore, there are currently a large number of national and international companies with green hydrogen and derivative projects, such as ammonia, e-methanol, sustainable aviation fuel and others, underway in Brazil or with the intention of developing projects in the country.
There are several projects underway on a commercial scale, in addition to pilot projects, and this number is expected to increase considerably from 2025 onwards.
It is worth noting that some of our associates are already developing projects in the order of GWs, for the production of green ammonia and e-methanol, including carbon capture projects. However, they are still in the feasibility study phase.
With the growing number of memorandums of understanding (MoUs) signed with European and Asian companies this year, how does the industry intend to transform these agreements into concrete projects? What are the main challenges to consolidate Brazil as a global hub for green hydrogen and green ammonia?
Brazil's potential and expectations for the country are great, but we need to act rationally so that we can develop this sector. We are only at the beginning, and we still have a long way to go.
It is necessary to understand that, to unlock hydrogen production in Brazil, a coordinated effort is necessary that involves the creation of a favorable regulatory environment, investments in infrastructure and technology, training of the workforce and incentives for demand.
Stimulating demand for hydrogen and derivatives in key sectors such as industry and transport by implementing policies that encourage its use is fundamental for the development and sustainability of the domestic market.
The combination of these strategies can help overcome structural bottlenecks and position Brazil as a leader in green hydrogen production.
There is no point in announcing a large number of MoUs without taking the necessary care to assess whether the project is viable and what the real demand expectation is for it.
From a market perspective, it is important to highlight that the green derivatives market is currently not very liquid, which means that there is not yet a large volume of transactions and price discovery mechanisms are under development.
European regulators are aware of this and advocate decarbonization measures that do not impose additional financial burdens on industries.
Instead of raising prices, the European Union favors mechanisms such as CFDs (Contracts for Difference) and auctions to the transition to green fuels.
CFDs offer a way to stabilize prices by compensating producers if the price of green derivatives falls below an agreed level, ensuring the financial viability of projects.
Globally speaking, is reducing the cost of producing green hydrogen still a major challenge?
Reducing production costs is undoubtedly one of the main challenges. Today, green hydrogen costs between US$5,00 and US$6,00 per kilo, while gray hydrogen, produced from natural gas, costs around US$1,50 to US$2,00 per kilo.
To compete, it is necessary to achieve costs similar to grey hydrogen or compensate for the difference with incentives, such as a or revenue from environmental compensation, such as carbon credits. In other words, there is still a lot to reduce in production costs, as well as improve the performance of electrolyzers in the production of Green H2 for each USD 1 invested.
Currently, there are three main technologies for Green H2 production: alkaline, proton exchange membrane (PEM) and Solid Oxide Electrolyzer Cell (SOFC) electrolyzers.
It is a new technology, a new industry, therefore it needs financial and fiscal (tax) incentives to develop (reduction of CAPEX and OPEX and increase in performance).
In practice, which green hydrogen projects are becoming viable in Brazil? What are the challenges to making them viable?
There are currently a number of projects underway, some on a commercial scale and others in the pilot phase. Some of the projects will be for exclusive export, and others will serve the local market and for export, thus creating a mix. The first projects are expected to come into operation from 2028 onwards.
The main challenge is to reduce production costs, in addition to overcoming issues related to infrastructure, technology and incentives.
In the medium term, we believe that SAF (sustainable aviation fuel) will be the first derivative to gain scale, given the global commitment of aviation to decarbonization. Therefore, even out of necessity, we believe that this will be the first hydrogen-derived fuel to be used on a large scale in Brazil and worldwide.
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