Brazil could be a major market for green hydrogen — but where would its low-cost H2 be used?

Brazil could produce green hydrogen for as little as $2.70/kg by 2030, even if it only draws from new wind and solar rather than its huge hydropower reserves, according to a new report by German think-tank Agora Energiewende.

This does not include power from the 176GW of additional hydropower (108GW under construction and 68GW yet to be developed) or 29GW of biomass that could be on line by 2050.

Agora Energiewende notes that half of Brazil’s fossil gas extracted today is used for enhanced oil recovery, with another 10% used to power oil platforms — meaning the country imports pipeline gas from Bolivia and LNG (liquefied natural gas) from global markets.

Producing blue hydrogen would necessarily mean tapping more of Brazil’s gas reserves, which Agora Energiewende notes could increase the risk of fugitive methane emissions.

Use within Brazil

Fertilisers are expected to be the biggest domestic market for green hydrogen produced in Brazil. The country is one of the world’s largest importers of fertilisers, worth around $16bn in 2021. In particular, the country imported 11 million tonnes of nitrogen-based fertilisers in 2022, which accounted for 31% of consumption the previous year.

Agora Energiewende also notes that global fertiliser prices have tripled since mid-2020 due to high natural gas prices, which in 2022 prompted Brazil’s government to launch a National Fertilisers Plan aimed at increasing domestic production and reducing dependence on imports.

As such, green ammonia could present a way to both reduce emissions and decrease Brazil’s import bill. But despite Brazil’s potential production, Agora Energiewende cautions that in the short- to medium-term, the country will be unlikely to meet all of its demand domestically.

“Given the high demand for fertilisers in the country, Brazil will not be able to meet demand for fertilisers domestically in the short to medium term, but it could explore trade agreements with other Latin American countries willing to produce green fertilisers, as many countries in the region are interested in developing green ammonia and fertilisers from low-emission hydrogen,” the report explains.

Agora Energiewende expects hydrogen could play a role in balancing the energy system. While Brazil boasts an almost entirely renewable grid, this mainly comes from hydropower, which can vary significantly in output depending on wet and dry periods throughout the year. Today, this difference in power generation is filled in with thermal power, which the analyst notes bumps up system costs.

“Higher system costs also affect electricity prices for final users, so alternatives aimed at reducing the dependency on thermal generation need to be suggested, as the risk of longer dry seasons will increase as climate change progresses,” Agora Energiewende points out.

As such, hydrogen or its derivatives could present a way to store huge amounts of excess power and balance the grid as more variable renewables are installed.

“Hydrogen and PtX [Power-to-X, another term for hydrogen-based derivatives] as a flexibility measure do not necessarily require the use of these molecules for power generation, but they can help mitigate the curtailment of variable renewable generation during periods of high generation, thus providing a reliable feedstock for the industrial sector,” the think-tank continues.

However, Brazil is unlikely to use hydrogen directly in fuel cell electric vehicles (FCEVs) for its transport sector. While in most cases, this is because battery-electric vehicles (BEVs) — which have higher well-to-wheel efficiency — outcompete fuel-cell cars, Brazil has seen neither vehicle type take off.

Instead, 20% of its transport sector uses biofuels, with ethanol made from sugar cane used directly as a road transport fuel, and new, more efficient technologies such as direct ethanol fuel cells expected to be rolled out in the coming years.

However, depending on the type of fuel, biofuel refining can require hydrogen, such as for use as a chemical reagent during production of hydrotreated esters and fatty acids (HEFA) and hydrotreated vegetable oils (HVO).

“For others, hydrogen is an option when it comes to exploring synergies between BtL [biomass-to-liquids] and PtX in hybrid systems for bio- and electro-based production of jet kerosene, diesel and naphtha,” the report adds.

Export market

Meanwhile, transporting green ammonia for direct use in Europe would cost $1.40/kg, with green methanol at $2.10/kg, and e-fuels at $2.30/kg, and hot briquetted iron — produced when using hydrogen-fuelled direct iron reduction to separate iron from ore — at only $0.30/kg.

Since Brazil already exports more than a fifth of the world’s iron ore, Agora Energiewende notes. “Exploring the export of green iron, rather than low emission hydrogen and iron ore separately, could be a cost-effective way to transport embedded hydrogen… and bring significant benefits to Brazil,” it says.

The report estimates that Brazil could export green steel for $528 per tonne to Japan by 2030, which is “more competitive than other countries in Asia, Latin America and North Africa”. The analyst also calculates that the country could export green ammonia to Japan for $128 per tonne, green methanol for $138 per tonne, and e-fuels for $139 per tonne.

Similarly, the analyst warns that the EU’s definition of a “renewable fuel of non-biological origin” could be difficult to apply to hydrogen produced in Brazil — hindering trade between the two.

“The diversity of energy resources, including biomass, as well as certain specificities of the Brazilian grid due to the country’s vast territory, such as the division of sub-markets and the operational process, may not meet some of the specifications of the ‘additionality’, ‘geographical correlation’ and ‘temporal correlation’ criteria,” the report notes.

This could lead to Brazil — which already has its own certification system for green hydrogen that considers renewable energy consumption on a monthly or quarterly basis, with no requirements for additionality or geographical correlation — to set up its own regulations and campaign for more technologically neutral certification for international trade.