Brazil is positioning itself as a future leader in the global hydrogen economy with an expansive pipeline of 111 green hydrogen and derivative projects, collectively valued at 454 billion reais (US$81 billion). Spread across 15 states, the projects span hydrogen, green ammonia, e-methanol, and green steel production, with an estimated demand for 90 gigawatts of new renewable energy capacity. That figure alone represents more than half of Brazil’s current installed electrical capacity and underscores the sheer scale of ambition.
Despite this momentum, the hydrogen transition remains fragile. Like in other emerging hydrogen markets, Brazil faces structural challenges that threaten to delay or derail its decarbonization agenda. These include gaps in regulation, limited offtake agreements, uncertain export pathways, and unresolved technical hurdles around storage, grid integration, and transport. These issues are not peripheral—they strike at the operational core of what it takes to build a viable hydrogen economy.
A Legal Framework Without Implementation
Brazil has approved a legal framework to support low-carbon hydrogen development. On paper, the structure is in place. But the absence of implementing details is creating a vacuum. The special incentive regime known as Rehidro, which promises tax relief to hydrogen producers, lacks precise definitions on eligibility, timelines, and certification processes. Without these operational details, investors are wary of committing capital to long-gestation infrastructure projects that still float in legal ambiguity.
This regulatory incompleteness is not merely a bureaucratic delay—it is a drag on economic viability. Project developers face uncertainty about what qualifies for support, what standards they must meet, and whether they can bank on long-term fiscal incentives. Without clear implementation guidelines, there is little basis for structured project financing or off-balance sheet investments.
No Contracts, No Projects
Beyond regulation, a more fundamental challenge exists: the lack of long-term purchase agreements. In traditional fossil-based fertilizer production, for example, Brazil operates with a short-term purchasing mindset. Companies tend to buy ammonia or urea on a spot or seasonal basis. But green hydrogen, by contrast, requires a drastically different commercial structure—one that supports multi-decade investments in electrolyzers, renewables, and infrastructure.
There is no existing model for long-term contracts in this space. Developers must invent entirely new frameworks for offtake. Without them, banks and investors are unlikely to support multi-billion-dollar real facilities, especially when project revenues remain speculative. The absence of contract-backed demand creates a mismatch between supply potential and bankable market signals.
European Exports Hang in the Balance
For many developers, the ultimate customer lies overseas—specifically in the European Union, which is expected to drive the bulk of global demand for low-carbon hydrogen imports. But here, too, uncertainty reigns. The EU has not finalized the certification rules that will determine whether hydrogen produced outside its borders qualifies as “renewable” or “low-carbon” under its climate legislation.
Brazilian projects targeting Europe are effectively in limbo. Without clear rules, developers cannot align their production pathways or certification processes with EU expectations. This uncertainty has already delayed several high-profile initiatives. Decisions expected later this year in Brussels could either unlock a wave of export-oriented investments—or leave Brazil’s export strategy rudderless.
Cost Competitiveness—But Only in Theory
Brazil’s natural advantage lies in its renewable energy resources. The country boasts some of the world’s highest solar irradiation levels and favorable wind conditions, particularly in the northeast. As a result, it can produce green hydrogen at a competitive levelized cost—ranging between US$2.83 and US$6.16 per kilogram, depending on location, scale, and technology.
Green ammonia, a key derivative, is also increasingly cost-competitive. In Brazil, it can be produced at a cost between US$539 and US$1,103 per ton, potentially rivaling gray ammonia produced from fossil fuels, which ranges between US$361 and US$1,300 per ton. On paper, the numbers work.
But these figures assume ideal conditions—continuous electrolyzer operation, stable power supply, and efficient logistics. In reality, variability in wind and solar output, limitations in storage, and bottlenecks in hydrogen transport can dramatically shift the cost curve. Green hydrogen production costs are hypersensitive to utilization rates. If an electrolyzer operates at just 30–40% capacity due to intermittent power, costs can quickly spiral beyond competitive thresholds.
Logistics, Storage, and Grid: The Physical Constraints
Even if regulatory clarity and commercial models were in place, physical infrastructure presents a new layer of complexity. Hydrogen is not easy to store or transport. Unlike natural gas, it has a lower energy density and requires compression or liquefaction for distribution. Brazil lacks the specialized pipelines, terminals, and ports necessary to move large volumes of hydrogen or its derivatives to domestic or export markets.
Moreover, many of the planned renewable energy projects that will feed electrolyzers are located in remote regions far from existing grid infrastructure. Connecting 90 GW of new renewables to the national grid is not a trivial task. It requires coordinated investment in transmission lines, substations, and balancing mechanisms. Without this backbone, green hydrogen projects could be forced to operate in isolation—cut off from reliable power and market access.
Unlocking the Pipeline
Brazil’s hydrogen future is far from assured. The country has done well to assemble a project pipeline and attract global attention. But that pipeline must now be translated into buildable, bankable assets. This requires a synchronized approach—clear regulation, market-making offtake models, aligned certification with international standards, and investments in physical infrastructure.
Developers are pushing forward. States like Ceará, Bahia, and Rio Grande do Norte are already staking claims as hydrogen hubs, offering land, port access, and regional incentives. New financing structures are also being explored, from consortia-led models to blended finance instruments.
But time is limited. The global hydrogen economy is not waiting. Countries in the Middle East, Australia, and North Africa are racing ahead with clearer regulatory regimes and faster timelines. For Brazil to maintain its competitive edge, it must act swiftly—not just with bold visions, but with grounded, executable policy and infrastructure plans. The potential is enormous, but without structural alignment, potential will remain just that—unrealized.
