Brazil's abundant renewable energy source make it a hot spot for hydrogen-producing companies. Gas producer Air Products' general manager in Brazil and Argentina Marcus Silva spoke to Argus about the global firm's investments in hydrogen generation in Brazil, as well as the final cost of the commodity. Edited highlights follow.
What are Air Product's plans in Brazil?
We already have gray hydrogen production in Sao Paulo, Rio Grande do Sul and Santa Catarina states and we've been looking at opportunities for green hydrogen production.
We see opportunities in Pernambuco, Bahia and Ceara states. The latter has a geographical advantage as it has the shortest distance from Europe and the US. It takes around seven days to reach Rotterdam from the Pecem port.
We already have a partnership to analyze these investment possibilities with Thyssen Krupp, which produces electrolyzers, and with energy generator AES. There is an appetite from us and our partners to get into these projects. Today, the investment for a hydrogen production plant is $1mn/MW installed. Also, it is still necessary to invest in electricity generation, which is equivalent in cost.
What is the company's plan for the hydrogen to be produced in Brazil?
We think that just exporting hydrogen is not the best option for Brazil. Instead, we must consume part of this fuel domestically. We can liquefy it or combine it with ammonia, but the best way to transport gases still is through pipelines.
But until there is a domestic demand that anchors investments, exports are a path. Germany has the most advanced domestic market. They already have public auctions and a sense of urgency because of the Russian conflict that reduces access to natural gas.
Germany will at first be the great offtaker of green hydrogen, buying the gas from all over the world. Japan will come next. These two countries will lead the way for big offtakers and justify the investment in world-class hydrogen plants.
Hydrogen will be exported through blending with either ammonia or methanol. Ammonia is the front-runner for hydrogen carriers, as there is already a transportation chain, ships for for transport and even marine engines that are being built to run on ammonia. The logistics chain is ready.
Can hydrogen replace other fuels in Brazil?
Yes, but as green ammonia.
We know how to use it and it can be cracked on the buyer's side to separate hydrogen and use it in ship engines. But there is also use in fuel cells present in heavy transport. We see hydrogen as an important fuel for freight and passenger mobility. Trucks, buses, mining trucks, locomotives are all using hydrogen. I don't see passenger vehicles using hydrogen because electrification is moving faster in this segment and the infrastructure to supply vehicles would be more complex.
Adding hydrogen to natural gas will be another path. Studies show that adding up to 12pc of hydrogen to natural gas does not affect thermal or heat generating equipment.
Is the price of hydrogen competitive?
International experience shows that gray hydrogen can be generated from natural gas reforming at a cost of $2/kg.
Green hydrogen is highly dependent on the cost of electricity consumed in the process. But with renewable electricity costing $25-30/MWh, we were able to have green hydrogen inside the generating plant, without transport and distribution costs, at $3.50/kg. This renewable energy generating cost is achievable in Brazil.
In the Brazilian northeast, with this electricity price range, we can manage to have a reasonably competitive green hydrogen. For comparison, in Argentina, where the cost of generating electricity is more expensive, green hydrogen would cost around $9/kg. Europe has been thinking about using electricity from offshore wind generators, which is more expensive, which in turn also makes hydrogen more expensive.
We think that hydrogen production costs are likely to fall by 2023. According to a study we conducted with consulting firm McKinsey, green hydrogen will become more competitive, costing from $2.50-3/kg, depending on the electricity price.
Today, the cost of electrolyzers is still high, but we also see a downward trend as more competitors enter the market. By 2050, we estimate that investments of $350,000 will be required for every 1MW of installed hydrogen processing capacity.
