• EU expected to be dependent on green hydrogen imports
• Various green hydrogen hubs in feasibility studies in Brazil

Diana Kinch, Platts S & P Global

RIO
EnergiesNet.com 06 23 2023

Green hydrogen produced in Brazil may in the future be exported competitively to the EU and US to make low-carbon steel in decarbonized installations, according to speakers at the Hydrogen Expo event in Rio de Janeiro.

From 2030 onwards, the cost of producing green hydrogen in Brazil is expected to fall significantly from new projects’ startup levels. In addition, by 2026 the EU’s Carbon Border Adjustment Mechanism should be fully in place, potentially making Brazilian steel exports to the EU more costly, speakers from consultancy McKinsey & Co., Fortescue Metals Group’s energy transition division FFI and Brazil’s state oil and gas company Petrobras said during a panel on use of green hydrogen in industry.

The Hydrogen Expo is organized by the Brazil-Germany Chamber of Commerce and Industry.

Brazil and Chile are both viewed as having highly-competitive conditions for green hydrogen production due to their high proportion of renewable energy and clean power matrices, with Brazil’s infrastructure better developed, according to the speakers.

Brazil currently produces small quantities of certified green hydrogen at a plant in Pernambuco state, in the country’s Northeast. However, major green hydrogen production and export hubs are in feasibility studies at Pecem port, Ceara state; Acu port, Rio de Janeiro state; and Rio Grande do Sul state. All are being supported by their respective state governments. FFI also has its own project, also in Pecem, with first phase output to be directed at Europe and second-phase output to Brazilian mining, steel and fertilizers sector.

“Europe should import more or less 40%-50% of its green hydrogen needs and Brazil is extremely well positioned to be a competitive exporter to the EU and US, but less competitive for Asian markets,” said McKinsey & Co consultant Henrique Ceotto.

Green hydrogen is typically transported in the form of ammonia.

A study presented by McKinsey shows that low- or zero-carbon, higher-value steel products using Brazilian green hydrogen could be produced in the EU for virtually the same cost as producing steel in Brazil, but with potential logistics and market advantages to the production in Europe.

However, Brazil is still expected to continue to be a significant exporter of commercial steel grades, according to Ceotto.

ArcelorMittal and Voestalpine are among companies in Brazil investing heavily in low-carbon steelmaking installations which could use green hydrogen in both the EU and North America.

Daniel Pedroso, executive manager, renewable energy at Petrobras, currently Brazil’s biggest producer and consumer of grey hydrogen, said he had “an optimistic vision on the opportunities for green hydrogen” in Brazil.

Legal framework

A Brazil government working group will start discussions June 27 on a regulatory framework for the production and commercialization of green hydrogen, federal deputy Arnaldo Jardim told S&P Global Commodity Insights on the sidelines of the event.

The working group is set to complete its discussions in October, prior to presenting a proposal for a Hydrogen Law for consideration by congress in November, Jardim said.

Two law projects to regulate a carbon market including carbon credits issuance in Brazil are also working their way through the country’s congress, he said. Carbon market regulation in Brazil could help establish a market for green hydrogen, according to McKinsey.

Luis Viga, FFI’s Brazil operations director, stressed the need for a legislative framework to be in place within two years to ensure the drawing up of financing and offtake agreements for Brazil’s existing green hydrogen projects.

Equipment and services providers are also preparing for emergence of Brazil’s green hydrogen hubs.

Germany-based MAN Energy Solutions is ‘”confident” its H-Tec subsidiary will supply PEM electrolyzers to a Brazil green hydrogen hub from 2025, while Brazilian industrial gases supplier White Martins has already signed five memorandums of understanding to work on the projects, company representatives said at the event.

spglobal.com 06 22 2023