Brazil

GH2 Country Portal – Brazil

Green Hydrogen Vision

Brazil will be a key player in the global hydrogen market. Brazil has great opportunities to harness its huge clean energy potential in order to foster a low carbon hydrogen industry, catalyzing a low-carbon economy in the country, particularly in hard-to-abate sectors. Green hydrogen will have a relevant role in achieving the Brazilian vision for energy transition and net zero economy. Focusing on low carbon hydrogen in Brazil will also allow the development of projects with hybrid technological approaches and business models, providing additional pathways to market green hydrogen. Moreover, Brazil has a significant domestic market potential for low carbon hydrogen and it has robust logistics for export it to the main international markets. In this context, the vision of Brazil is to develop a competitive low carbon hydrogen economy.

National Strategy/ Policy

The development of a robust and competitive low carbon hydrogen market involves an overarching approach, covering aspects related to technology, economics, legal and regulatory framework and capacity building. To be a key player in the low carbon hydrogen economy, Brazil has to establish a competitive market place and an attractive business environment, overcoming challenges. This will bring huge opportunities to the country by fostering untapped potentials for the entire low carbon hydrogen value chain.

By recognizing challenges and opportunities, Brazilian Government launched the Guidelines for National H2 Program (PNH2) in August 2021 and related actions are under development and coordination of the Brazilian Ministry of Mines and Energy (MME).

The PNH2 comprehends six priority axes: 1. Reinforce R&DI and technological bases; 2. Capacity building and human capital formation; 3. Energy planning; 4. Legal and regulatory framework; 5. Market development and competitiveness; 6. International Partnership and cooperation. The concepts and design proposed were discussed with stakeholders in order to collect their impressions and suggestions. Such participative process has included meetings with stakeholders from hydrogen value chain, energy and energy related companies, potential consumers and investors, energy consultants, lawyers, academia and civil society organizations.

This Program aims to contribute significantly to increase competitiveness and participation of hydrogen in the Brazilian energy matrix, recognizing the relevant role that the production and use of low carbon hydrogen can play on a net zero economy up to 2050.

The Brazilian government commitment to build a low carbon hydrogen economy includes: (i) 20 years supporting R&DI in low carbon hydrogen; (ii) 2021 National Energy Policy Council – CNPE Resolution defines hydrogen as a priority area for public and publicly-oriented investment on energy R&DI, reinforcing R&DI support; (iii) Brazilian Energy Compact on Hydrogen established at UN High Level Dialogue on Energy in 2021; (iv) Hydrogen National Program (PNH2), launched in 2021, aims at structuring stakeholders’ governance in order to foster the development of a low carbon hydrogen economy.

In addition, there are public policies for renewables in Brazil, which will contribute to boost low carbon hydrogen economy. Policies such as tax reliefs or taxes differentials for renewables and/or in Export Processing Zone (EPZ) and infrastructure, green finance and specific funds to renewables and infrastructure investments. There are also new programs under discussions, for instance, the Fuel for the Future (Fuel Cell, Advanced biofuels, e-fuels, etc.) and carbon pricing, which will reinforce exiting programs such as Route 2030 and RenovaBio.

Yet, Brazil has been engaged in international cooperation on low carbon hydrogen under the “German - Brazilian Energy Partnership” (the “H2 Brazil” in the “German – Brazilian Power-to-X Partnership Program”), the “US-Brazil Energy Forum for World Commerce and Development”, the “UK Brazil Energy Program”, “India and Brazil on Bio-energy Cooperation”, “BRICS – Energy Research Cooperation Platform”, “Brazilian Energy Compact on Hydrogen established at UN High-Level Dialogue on Energy”, among others.

To sum up, the main strategy to support low carbon hydrogen projects in Brazil will be to remove barriers and to reinforce market design, low carbon energy policies, R&DI, capacity building, skills and international cooperation in order to assure the competitiveness of hydrogen placed in the domestic and global markets.

Capacity and Price

Brazilian approach for low carbon hydrogen development focus on improving and building up legal and regulatory framework (including certification of carbon intensity and norms for new technologies for supply and end-use) and barriers removal to foster market development. Such approach will level the playing field in the market allowing competition with current dominant energy sources, as well as hydrogen-hydrogen competition, i.e., among hydrogen produced from different routes.

Therefore, this approach does not define specific capacity targets. Market penetration will be a result of the low carbon hydrogen competitiveness in the market place, taking in account energy and climate policies in Brazil. Particularly, carbon pricing mechanisms (currently under discussion in Brazil) will also provide price signals to the stakeholders, contributing to market shift toward low carbon hydrogen, such as green hydrogen.

Furthermore, efforts to promote innovation and cost-efficient projects together with attractive and competitive market design mean, implicitly, that low carbon hydrogen price has to be competitive with their relevant substitute fuel (including grey hydrogen), taking in consideration the carbon price adjustment. In the appropriated market design, low carbon hydrogen will receive a premium price based on their lower carbon intensity.

It is worth noting that fast growth of variable renewables, such as wind and solar PV, in the last years in Brazil were based on a fair and attractive market design, balanced policy incentives and competition in energy auctions in the power sector, not on capacity and price targets.

Impact Targets

The Brazilian approach for low carbon hydrogen development does not established impact targets for production and using hydrogen in end-use consumers. Otherwise, those impacts will be results from the market dynamics, taking in consideration energy and climate policies.

Notwithstanding, the Brazilian Government expects a significant impact on mitigating carbon emissions of the country, since roughly 2/3 of GHG emissions associated to energy is in hard to abate sectors with relevant potential for low carbon hydrogen use.

Policy Spotlight

  • National Determined Contribution – NDC of Brazil: Brazil established not only an ambitious NDC, but also a long-term objective of net zero in 2050 (updated NDC in April 2022). Low carbon hydrogen will have a key role in the decarbonization of hard to abate sectors. Carbon pricing mechanisms (under discussion) will contribute to reinforce business environment for low carbon hydrogen investments and market development.

  • R&DI Policy for Energy priorities (CNPE Resolution no 2, Feb, 10, 2021) Brazil has a long-term Government’s commitment to hydrogen. Government provides support to Hydrogen R&DI for more than 20 years, which created favorable environment for innovation with effective results in technological & skills capacity building, pilot-plants, equipment/vehicles, laboratories & research centers, domestic supply chain and start-ups related to hydrogen. CNPE Resolution # 2/2021 established hydrogen as a priority area for R&DI;

  • Brazil’s National Hydrogen Program – PNH2 (CNPE Resolution no 6, April, 20, 2021): Designed to mobilize public and private sectors, as well as academia, together with international cooperation, to accelerate the development of a comprehensive and competitive hydrogen market. As mentioned before, the PNH2 comprehends six priority axes: 1. Reinforce R&DI and technological bases; 2. Capacity building and human capital formation; 3. Energy planning; 4. Legal and regulatory framework; 5. Market development and competitiveness; 6. International Partnership and cooperation;

  • Special financial conditions for renewables and low carbon technologies & Special Tax Regimes for energy and ports infrastructures: In addition to multilateral Development Banks and private funds (both domestic and international), The Brazilian National Development Bank – BNDES offers special financing conditions for renewables and low carbon technologies, including low carbon hydrogen. Exports Zones in Brazil are eligible to Special Tax Regime. Pecém/Ceará State (implemented), Açu/Rio de Janeiro State (in process) and Suape/Pernambuco State (in process) ports are among the 14 exports zones authorized by the Brazilian Government. Green hydrogen projects in the Brazilian Ports (Pecém, Suape and Açu) will take advance of this Special Tax Regime for Exports Zone. The Ministry of Mines and Energy applies Special Tax Regime for Energy Infrastructure Development, so-called REIDI (Acronyms, in Portuguese), which improves the economics of energy projects in Brazil.

Currently, main initiatives related to hydrogen large projects in Brazil can be mentioned as follows:

  • Pecém Port (Ceará State): Signed several individual MoU ́s for green hydrogen production involving companies as Fortescue, Qair, Enegix, EDP and White Martins;

  • SUAPE Port (Pernambuco State): MoU with Qair Company, to develop hybrid hydrogen projects (green and blue ones);

  • Açu Port (Rio de Janeiro State): green hydrogen MoU with Fortescue;

  • Raizen Group announced a five-year contract with Yara to acquire biogas to green hydrogen and ammonia production;

  • Unigel retrofit of installations in Camaçari (Bahia State) at the end of 2022, enabling it to produce green ammonia.

Additionally to these, it is worthwhile to cite some R&D&I projects under development in Brazil:

  • Itaipu Technological Park (PTI) is supporting building capacity at hydrogen for PECEM Port;

  • Furnas (Electricity generation public enterprise) is supporting a R&DI project aiming do produce green hydrogen from a hybrid scheme considering their hydropower plant and Solar PV facility;

  • Current studies of Eletronuclear (Nuclear generation public enterprise) aiming to produce high purity hydrogen from Angra I & II power plants.

Financing

  • CNPE Resolution # 2/2021 established hydrogen as a priority area for R&DI in order to increase the share allocated in hydrogen projects, which is 1% of total Energy R&DI from 1999 to 2018. Several new projects announced and implemented such as Furnas (Electricity generation public enterprise) is supporting a R&DI project aiming do produce green hydrogen from a hybrid scheme considering their hydropower plant and Solar PV facility;

  • The Brazilian National Development Bank – BNDES offers special financing conditions for renewables and low carbon technologies, including low carbon hydrogen. Brazilian Climate Fund; Sustainability Bond Framework (SBF), in cooperation with BID; Green Bonds; BNDES Sustainable and Infrastructure Debentures;

  • In addition to several R&DI projects and pilot-plants, high scale green hydrogen projects have been announced (under feasibility studies) in Ports of Brazil (Pecém, Suape and Açu), amounting investments of US$ 20 billion.

  • Currently, main initiatives related to hydrogen large projects in Brazil can be mentioned as follows:

    • Pecém Port (Ceará State): Signed several individual MoU ́s for green hydrogen production involving companies as Fortescue, Qair, Enegix, EDP and White Martins;

    • SUAPE Port (Pernambuco State): MoU with Qair Company, to develop hybrid hydrogen projects (green and blue ones);

    • Açu Port (Rio de Janeiro State): green hydrogen MoU with Fortescue;

    • Raizen Group announced a five-year contract with Yara to acquire biogas to green hydrogen and ammonia production;

    • Unigel retrofit of installations in Camaçari (Bahia State) at the end of 2022, enabling it to produce green ammonia.

Additionally to these, it is worthwhile to cite some R&DI and skills projects under development in Brazil:

  • Itaipu Technological Park (PTI) is supporting capacity building at hydrogen for Pecem Port;

  • Furnas (Electricity generation public enterprise) is supporting a R&DI project aiming do produce green hydrogen from a hybrid scheme considering their hydropower plant and Solar PV facility;

  • Current studies of Eletronuclear (Nuclear generation public enterprise) aiming to produce high purity hydrogen from Angra I & II power plants.

  • The Ministry of Mines and Energy (MME), Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) and the National Service for Industrial Learning (Senai) signed a cooperation agreement for the creation of the first Center of Excellence in Green Hydrogen, in the city of Natal (RN). In addition to five regional education and training hubs in the field of green hydrogen (H2V) in Brazil.

Government Green Hydrogen Lead