Green Hydrogen in Brazil: From Promise to Economic and Industrial Reality

By Prof. Fernando Caneppele (University of São Paulo) - July 2025

Hidrogênio Verde no Brasil: Da Promessa à Realidade Econômica e Industrial

We are at a defining moment for Brazil’s energy and industrial agenda. In a global landscape marked by an urgent search for energy security and resilient supply chains, the transition to clean energy sources has evolved from a purely environmental concern into a pillar of modern geopolitics. With COP30 in Belém fast approaching, the world is turning its attention to Brazil—not only as a guardian of critical biomes, but as a potential leader in the emerging decarbonized economy.

This context places Brazil under dual pressure: external pressure, from the growing international demand for decarbonization, and internal pressure, stemming from the country’s need for reindustrialization, innovation, and energy security.

In this scenario, no topic better symbolizes both our potential and our challenges than green hydrogen (H2V). For years, we’ve highlighted Brazil’s comparative advantages: a low-carbon electricity matrix, abundant solar and wind resources, and vast territorial extension. The promise of transforming these natural assets into global leadership in green hydrogen production has fueled memoranda of understanding and countless conferences. Today, the question is no longer whether Brazil can lead, but rather how we will transition from promise to industrial and economic reality.

Green hydrogen must not be treated as a simple commodity, but as a “platform molecule” a foundation on which to build a sophisticated, future-ready industrial ecosystem. The era of potential studies is giving way to the urgency of execution. Success will depend on a pragmatic approach focused on scaling challenges, cost structure, market development, infrastructure, and critically the construction of a competitive value chain.

The Challenge of Scale and Cost Competitiveness

The viability of green hydrogen hinges above all on scale and cost structure.

The key metric is the Levelized Cost of Hydrogen (LCOH), which includes the cost of renewable electricity, capital expenditure on electrolyzers (CAPEX), operating and maintenance costs (OPEX), and, fundamentally, the plant’s capacity factor.

This is where Brazil holds a dual competitive edge: not only is our renewable energy affordable, but the capacity factor of our wind farms especially in the Northeast is among the highest in the world. This allows expensive electrolyzers to operate for more hours annually, spreading fixed costs over more kilograms of hydrogen produced.

However, the high CAPEX of electrolyzers remains a major obstacle. The choice of technology be it the more mature Alkaline (ALK), the more flexible Proton Exchange Membrane (PEM), or the emerging Solid Oxide Electrolysis Cell (SOEC) implies different costs, efficiencies, and dependencies on critical minerals like platinum and iridium.

Currently, the global supply chain for these systems is concentrated in China and Europe, exposing Brazil’s nascent hydrogen program to price volatility and logistical bottlenecks.

The approval of the Hydrogen Legal Framework (Law No. 14.948/2024) was a crucial step, providing legal certainty to unlock tens of billions of reais in planned investments. Now, the role of the BNDES must go beyond direct financing, acting as a catalyst through blended finance mechanisms and guarantees to attract cautious domestic and international private capital. 2025 is shaping up to be the year when the first large-scale projects in port complexes such as Pecém (CE) and Açu (RJ) finally move forward toward final investment decisions.

Market Development: Domestic Anchoring and Global Showcasing

A successful market strategy for green hydrogen must be dual in nature balancing export ambitions with the development of a strong, resilient domestic demand.

The export market is the showcase that attracts major investment. The European Union, under its new stringent regulations, is not simply purchasing hydrogen it is acquiring Renewable Fuels of Non-Biological Origin (RFNBOs), which must meet strict criteria for additionality, as well as temporal and geographic correlation.

This means our production must be backed by a robust certification system to prove its green credentials a bureaucratic and technical challenge in itself. Converting H2V into more easily transported derivatives like green ammonia or green methanol is the most pragmatic path to this market, although it adds costs and efficiency losses. In this context, we face strong competition from countries like Chile, Australia, and nations in the Middle East making speed and competitiveness critical.

However, it is the domestic market that will serve as the true anchor for our H2V industry. Anchoring production to a predictable local demand is a matter of strategic intelligence, reducing exposure to currency and geopolitical fluctuations. The real prize is using green hydrogen to decarbonize our own industrial base. For agribusiness, which imports billions of dollars in nitrogen fertilizers, producing green ammonia locally is a food security strategy shielding us from natural gas price volatility.

For the steel industry, using H2V in Direct Reduced Iron (DRI) processes can produce green steel, a high-value product with increasing global demand. The recently established Low-Carbon Hydrogen Development Program (PHBC), with its tax incentives, is the right tool to stimulate this transition, also enabling future applications in synthetic fuels for aviation and maritime transport.

The Logistics of a New Energy Paradigm

Hydrogen is a small, energy-dense molecule, but notoriously difficult to store and transport. Infrastructure may be the Achilles’ heel of a continent-scale hydrogen economy. Transporting H2V from production hubs in the Northeast to industrial centers in the Southeast—or to export ports—requires a monumental logistical overhaul.

Repurposing existing gas pipelines faces significant technical hurdles, such as hydrogen embrittlement of steel and the need for new compression stations. Building an entirely new network of hydrogen pipelines (hydrogenoducts) is the ideal long-term solution, but it entails colossal investment and decades of planning.

This strengthens the case for an initial development model based on hubs or clusters. Ports like Pecém and Açu are positioning themselves not only as export terminals but as integrated ecosystems where offshore renewable energy generation, H2V production, derivative synthesis (e.g. ammonia), and industrial consumption (steel, cement, chemicals) coexist within a limited geographic radius.

This co-location model minimizes the need for long-distance transport and creates economies of scale and scope, optimizing the entire value chain in a single location. Geological storage solutions such as salt caverns must also be explored to ensure supply stability.

Value Chain: From Commodity to Technological Sovereignty

Brazil’s greatest risk is settling for a neo-colonial role as a mere exporter of a low-value green molecule. The hard lesson learned from the solar panel industry where Brazil became a massive importer of foreign technology must not be repeated. The true strategic opportunity, the core of a 21st-century industrial policy, lies in deepening the H2V value chain.

This means actively promoting local manufacturing of high-value components such as electrolyzers, fuel cells, storage tanks, and control systems. The government must leverage its purchasing power and incentive programs such as PHBC to enforce local content requirements and technology transfer conditions, attracting global manufacturers to produce locally while empowering Brazilian companies to compete globally.

Mastering the technology will not only lower the final cost of hydrogen and shield us from external shocks, but also generate high-skilled jobs and position Brazil as an exporter of equipment and engineering services. At the same time, a national mobilization to develop human capital is essential. We need a new generation of engineers, chemists, safety experts, and technicians who are “hydrogen-ready” a collective effort that demands unprecedented collaboration between industry, government, and academic and research institutions.

Conclusion

In mid-2025, Brazil stands at the threshold of a new energy and industrial era. The essential foundations are in place: a regulatory framework, large-scale projects under financing, and a market-oriented strategy.

The time is now for relentless execution, coordination, and long-term vision. Turning Brazil’s green hydrogen potential into an industrial and economic reality is the imperative of our time a once-in-a-generation opportunity to reindustrialize the country on sustainable grounds and secure a lasting leadership role in the new geopolitics of energy.

The road ahead is complex, demanding in both technical and financial terms. Yet, inaction would be a historic mistake of immeasurable magnitude. Building this future requires national consensus and unwavering determination to finally turn our potential into prosperity and global influence.

Green Hydrogen in Brazil: From Promise to Economic and Industrial Reality