By Frederico Freitas and Carlos Peixoto
Since the beginning of 2020, Brazil has experienced significant growth in interest and development in the hydrogen market. This movement is driven mainly by our abundance of natural energy resources, which position our country as a potential leader in the production of low-emission energy.
With ambitious goals to reduce greenhouse gas emissions and achieve carbon neutrality by 2050, the European Union understood that investing in low-carbon hydrogen produced in Brazil helps the old continent to guarantee a stable and sustainable supply of this fuel, contributing to the energy transition and reducing dependence on fossil fuels.
However, almost five years after what some have called “the hydrogen hype”, some projects in Brazil remain in the pre-final investment decision stages, showing that the implementation of this industry is a complex challenge and that it does not depend solely on a large supply and low cost of renewable energy.
If, at the beginning of this journey, the lack of a Brazilian regulatory framework was pointed out as the major “obstacle” to boosting the market, this issue was overcome with the enactment of Law 14,948/2024 , at the beginning of August.
The National Congress is also working on Bill 3027/2024 , which seeks to establish the “Low-Carbon Hydrogen Development Program – PHBC”, establishing a series of tax credits for this new industry. In amounts that initially fit into the tight federal budget.
However, the existence of a regulatory framework in itself will not immediately guarantee a product capable of competing commercially with fossil-based hydrogen. Let us look at some aspects that are intertwined with this issue.
The production of this energy carrier at a competitive price, such as USD1.50/kg, is one of the biggest challenges of the hydrogen economy. This value is considered by some experts as a milestone in making hydrogen viable as a fuel on a large scale, competing with conventional fossil energy sources, acquiring attractiveness and making hydrogen a commercial product, that is, no longer having its production aimed at direct consumption by the producer, at the place of use or exploitation, and becoming traded as a global commodity like Natural Gas.
In addition to the necessary expansion of its application market to include heating and cooling in buildings; heat generation for heavy industry such as steel, glass and cement; heavy and long-distance mobility; replacement of fossil-based inputs in the paper and pulp, plastics, chemical and food sectors; reserve energy storage, among others.
However, achieving this price requires significant advances in technology and reductions in production costs. Currently, most hydrogen is produced from natural gas through the relatively cheap but highly carbon-intensive steam methane reforming process. In addition, almost all consumption is directed to refineries or the production of nitrogen fertilizers.
Alternatively, hydrogen produced by electrolysis - one of the most promising technologies for low-carbon production using renewable energy, faces substantial challenges due to its high energy consumption.
Renewable energy sources such as solar and wind can be intermittent and less efficient compared to other forms of electricity. The efficiency of electrolysis currently ranges between 60% and 80%, meaning that a significant amount of energy is lost in the process.
This high energy consumption contributes to the high cost of hydrogen and is a barrier to achieving competitive prices. In addition to the cost of Capex and the energy required for the storage and transportation of hydrogen, which present technical and economic challenges to overcome. Possible competition for the use of water in some regions may also represent an additional barrier to public acceptance that must be addressed.
It is clear that the challenges associated with hydrogen production, storage and transportation require technological innovations and advances in materials to overcome them. In addition, public policies and significant investments in infrastructure are essential to reduce costs and make hydrogen a viable and sustainable alternative.
Scientific knowledge about hydrogen as an energy vector and its potential for decarbonizing economic activities is not new. The issue is that with the worsening of the climate crisis, there has been great regulatory pressure to advance its implementation. European countries have established internal requirements for adapting their economies with a view to meeting decarbonization targets, in accordance with their technological constraints and the availability of natural resources. Knowing that it is a net importer of energy and taking into account its technological park and industrial experience, it has set requirements that prioritize its industry, while ensuring a sufficient supply of low-emission energy.
Brazil has great potential for generating electricity from renewable sources, so we are the target of a major European effort to become suppliers of hydrogen (i.e. subsidized electricity, plus sun, wind and water) using its technologies, despite our vocations related to agriculture, a large producer of biomass and the potential for adding value to our export products. Brazilian public policies, however, (see PNH2, EPE, MME, CNPE, National Congress, etc.) have been clear in their aim to take advantage of the specificities of the country's supply of sources, as well as their intention to take advantage of international efforts to invest in the neo-industrialization of Brazil based on decarbonization technologies with a view to increasing the supply of energy and at the same time achieving a substantial reduction in social inequalities, while respecting the limits of the environment.
In line with these efforts, solutions such as the use of Low Carbon Hydrogen to produce derivatives such as Synthetic Methanol and Sustainable Aviation Fuel (SAF) and Navigation are some of the paths that can make this energy vector economically viable more quickly. Initiatives aimed at developing multiple production and use options can create the demand needed to increase the attractiveness of investments in production, complementing international efforts to commoditize this energy vector for decarbonization.
FINEP and BNDES Public Call for Investments in the Production and Technological Development of Low-Carbon Aviation and Navigation Fuels
It was with these issues in mind that BNDES and FINEP launched a Public Call aimed at developing business models for sustainable fuels. This is a very assertive strategy, the Selection of Innovative Business Plans.
This initiative aims to promote Business Plans that include investments in the production and technological development of strategic sustainable fuels for aviation (Sustainable Aviation Fuel – SAF) or navigation.
The resources are linked within the scope of the New Industry Brazil Policy, which seeks to promote national reindustrialization through six priority missions, among which the following stand out:
“Mission 5: Bioeconomy, decarbonization and energy transition and security to guarantee resources for future generations”.
Brazilian companies that produce fuels or carry out research, technological development and innovation activities with the explicit objective of developing the technologies covered by the Program and undertaking production and/or commercialization activities of the final products resulting from these technologies, in sustainable fuels, may participate in the selection process.
The launch of this joint call signals the firm commitment of BNDES and FINEP and their respective institutional missions to guarantee the viability and sustainability of the project in its initial phase of development.
By relying on government support, ventures can focus more on innovation and scalability, minimizing the risks of technical or market failures that are common in disruptive business models.
If you or your company have a vocation and interest in entering this sustainable and innovative market, this could be a good opportunity. Access more information about the public call HERE
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The text above is the sole responsibility of the authors and does not necessarily reflect the position of the companies or entities to which they may be associated.
Frederico Freitas is an Electrical Engineer and a Master's student in Bioenergy at the Federal University of Paraná - UFPR, with an emphasis on Hydrogen production through biological routes. He is also a founding partner of Inforedes Green Technologies, a consultancy specialized in technological solutions for BioEnergy and Renewable Hydrogen.
Carlos Peixoto is the co-founder and CEO of H2helium, a consultancy in business development and project management in the Renewable Energy and Low Carbon Hydrogen markets. He is currently associated with the British Chamber of Commerce and Industry in Brazil – Britcham, the Brazil-Germany Chamber of Commerce and Industry – AHK-Rio, the Rio de Janeiro Commercial Association – ACRJ, the Brazilian Hydrogen Association – ABH2 and the CCS Brazil Association.
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