Brazil-Germany relationship and Green hydrogen

Germany, a leader in the green hydrogen economy, views Brazil as a vital fuel supplier and a significant gamble to replace coal, oil, and gas while still meeting climate goals.

Germany is working to resolve the present energy crisis and achieve its climate goals as Brazil tries to reclaim its environmental leadership. Given this, the leaders of the largest economies in Mercosur and the European Union (EU), President Luiz Inácio Lula da Silva and German Federal Chancellor Olaf Scholz met this week to discuss the transformation agenda for their economies, with a focus on the protection of the Amazon, renewable energies, and the EU-Mercosur trade agreement.

At the meeting, Scholz emphasized the promise of green hydrogen (H2V), a fuel made from renewable sources that are emerging as the primary commitment of industrialized economies to decarbonize CO2-intensive sectors like agriculture, transportation, industry, and electricity generation. energy

The German head of government stated, “You [Brazil] have a lot of expertise with renewable energies and huge potential, including through the manufacture and export of green hydrogen and its associated goods.

Germany leading the way

Germany is about to jump-start the green hydrogen economy in response to criticism of the increase of coal burning as well as limits on access to Russian energy owing to the conflict in Ukraine. The H2Global policy’s first auction, which promotes the importation of fuel designated as a tactical replacement for oil, gas, and coal in order to get sustainable energy, is set for February 7. Contracts for green ammonia, a by-product of H2V, will be the subject of the first tender.

On the 21st, a fresh round should be organized to purchase methanol and sustainable aviation fuel from H2V. The European nation is taking this action in an effort to reclaim the lead in the energy transformation process and, more importantly, to stop its reliance on Russian gas and oil.

At the opposite end of the spectrum is Brazil, which may establish itself as one of the major H2V exporters to Europe and reclaim its status as “green energy” internationally.

Nivalde de Castro, professor at the Institute of Economics of the Federal University of Rio de Janeiro (UFRJ) and coordinator of the Electricity Sector Study Group, claims that Germany is in a leading position due to its exposure to the crucial issue of energy security and its launch of the first tender for the purchase of green H2V inputs in ten-year contracts (Gesel).
Brazil, why?

According to research released in January by the German strategic consultancy Roland Berger, if the Paris Agreement is followed, green hydrogen would replace fossil fuels as the world’s primary energy source. Under this scenario, the direct sales of fuels or derivatives on the global H2V market should total more than $1 trillion dollars.

Brazil will take the lead in this race and emerge as a significant global exporter, claims the German consultancy. According to Roland Berger, the Brazilian H2V sector would eventually generate R$150 billion in yearly revenue, of which R$100 billion will come from exports.

The International Energy Agency (IEA) estimates that the cost of producing one kilogram of hydrogen peroxide (H2V) on the global market utilizing renewable sources ranges between three and eight dollars. If one were to use the energy produced in the wind or solar power plants in Brazil for the electrolysis process, the price would range from 2.2 to 5.2 dollars.

The high availability of renewable resources in Brazil mostly accounts for the low cost of manufacturing H2V there. Nivalde de Castro cites the nation’s ability to generate 1.3 million megawatts (MW) of electricity from solar and wind sources. Renewable energy sources are still producing less than 200,000 MW.

The economist believes, referring to the importance of the Arab nation in oil production, “Brazil has everything to be the Saudi Arabia of hydrogen as of 2030.” The difficulty, he claims, is making potential a reality.

The Northeast

In order to install H2V factories in the ports of Suape (PE) and Pecém (CE), the latter of which has as a partner the port of Rotterdam, the largest in Europe, which may be the gateway for H2V on the continent, several companies have already expressed interest. The Northeast is one of the regions of the world with the highest incidence of sun and wind, in addition to being closer to Europe than the rest of the country. Shell intends to launch a unit to produce gasoline in the Southeast port of Açu (RJ) in 2025.

The first H2V molecule was created in Brazil toward the end of 2022 by the Portuguese company EDP at Porto do Pecém. A technological research study that resulted in the Pecém H2V pilot project received R$ 42 million in funding. The largest producer of nitrogen fertilizers in the nation and one of Latin America’s leading chemical corporations, Unigel, invested US$ 120 million to construct a factory in Polo Camaçari (BA), which is expected to begin operations by the end of 2023.

By 2025, output at Unigel’s industrial facility, which initially has the capacity to manufacture 10,000 tons/year of H2V and 60,000 tons/year of green ammonia, will have quadrupled. Three electrolyzers totaling 60 MW were installed by the German company Thyssenkrupp Nucera for the first phase, which will be powered by wind energy sources.

Brazil in a crowded market

Brazil will have to share this market even if it achieves the extremely favorable requirements to grow into a significant global producer of green hydrogen. However, Monica Saraiva Panik, director of institutional relations for the Brazilian Hydrogen Association (ABH2), argues that international competition with nations like Australia and Morocco lowers the price of H2V production, which is advantageous for all nations that produce it, including Brazil.

The production of oil and gas has historically been concentrated in a small number of countries, which is problematic as evidenced by Germany’s reliance on Russian gas today. The H2V scenario involves a lot more diversification. According to Panik, the projects Brazil is currently working on will propel the nation into a prominent position.

The national strategy

The National Hydrogen Program (PNH2), whose parameters include international collaboration as one of the subject axes, was introduced by the Ministry of Mines and Energy (MME) in July 2021. The MME and the Energy Research Company (EPE), the organization in charge of creating studies to support national energy planning, took engaged in a number of technical cooperation projects with Germany to expand the H2V market throughout that year.

The H2 Brasil program (German/Brazilian Power-to-X Partnership Program) and the H2V Production, Logistics, and Application Task Force were the two primary projects. The second gathered together businesses and institutions with experience in H2V-related initiatives to foster scientific and political discussion between Brazil and Germany, whilst the first contributed 34 million euros to support the development of a green hydrogen economy in Brazil.

The Ministry of Mines and Energy developed the paper Mapping the Brazilian hydrogen sector: existing and potential opportunities for green hydrogen based on the efforts of the two nations to cooperate. The study’s conclusion is that Brazil must adopt a national hydrogen strategy with a clear action plan in order to seize the chance for long-term economic growth.

The document, after mapping the sector with the key academic and institutional actors, established a perception of lag in the nation and states that “the strengthening of the technical, regulatory, and technological framework is vital for the formation of a favorable business climate.” in relation to H2V.
The Lula government’s mission

The new administration has stated that it will give the fuel special attention, despite the fact that it has not yet provided a detailed plan for its development in the nation. Fernando Haddad, the minister of finance, stated in a meeting with executives of the Federation of Industries of the State of So Paulo (Fiesp), that the provision of renewable energy may be the route to the nation’s reindustrialization.

The nation that is best positioned to develop green energy from biomass, wind, sun, and hydrogen is Brazil. We have a competitive advantage in everything technologically feasible, and this can be a key factor in luring foreign investment to Brazil and reindustrialization, if we take some fundamental steps to consider repositioning industry in our economy, according to Haddad.

After this week’s meeting with Svenja Schulze, Germany’s minister for economic cooperation and development, the environment minister Marina Silva emphasized how the partnership with Germany in this field may spur technical advancement in Brazil.

Brazil is working very hard to increase technological cooperation. Due to our ability to manufacture green hydrogen, Brazil has the potential to become a significant energy provider for Europe. The minister also stated that we are looking to form partnerships with German and other European businesses so that we may have investments in Brazil as part of this agenda.

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