Green hydrogen, touted as the key to a sustainable energy future, might become significantly more affordable in Brazil. The cost of producing this renewable fuel could potentially drop by up to half, thanks to a combination of technical enhancements in projects and potential government incentives, according to a recent analysis by Clean Energy Latin America (CELA).
CELA, a consultancy and financial assistance provider in the renewable energy sector, unveiled the first edition of LCOH Brasil, an index designed to gauge the cost of producing green hydrogen. The index considers data related to investments in plants, operational expenses, and the cost of capital in various Brazilian states.
The findings are promising. The index reveals that it’s already feasible to produce green hydrogen in Brazil at a levelized cost ranging from US$2.87/kg to US$3.56/kg in strategically significant locations, although these locations haven’t been disclosed.
However, the exciting prospect arises when considering potential improvements. With technical optimizations, operational streamlining, reduced project investment costs (Capex), tax incentives, and more favorable financing rates, CELA estimates that the cost could significantly decrease, falling within the range of $1.69 to $1.86 per kilogram.
In some states, this could translate to a remarkable 51% cost reduction, dropping from $3.56/kg to just $1.75/kg. This transformation could bring the cost of green hydrogen closer to that of gray hydrogen, which is produced from fossil fuels like natural gas and is widely used by industries.
If these optimizations materialize, Brazil’s green hydrogen market could align more closely with countries at the forefront of the green hydrogen race, such as the United States. According to a study by Lazard, the levelized cost of green hydrogen in the USA varies from $0.5 to $3 per kilogram, depending on the electrolysis technology employed and accounting for subsidies.
However, despite the promising outlook, Brazil faces a critical decision. The government has yet to finalize the possibility of offering tax incentives for green hydrogen production, a move viewed as essential by the industry to make large-scale renewable fuel projects economically viable and position Brazil as a global leader in the energy transition.
Other countries, including the United States, the European Union, Saudi Arabia, India, Chile, and Colombia, have already implemented programs for green hydrogen. These programs include state investment and tax benefits, propelling their positions in the global green energy race.
According to government reports, Brazil has approximately $30 billion in announced projects for low-carbon hydrogen, encompassing production from both renewable and fossil sources with carbon capture capabilities.
The green hydrogen industry is garnering substantial attention from major companies, including Petrobras and Eletrobras, as well as other energy sector giants. Their aim is to supply this innovative fuel for local industry decarbonization and export it to global markets.
As Brazil stands at the precipice of a potential green hydrogen revolution, the decisions made in the coming months regarding incentives and optimizations could reshape the country’s energy landscape and elevate it as a key player in the global transition towards sustainable energy solutions.