Dr. Ricardo José Ferracin

Abstract:

The global energy transition, essential for decarbonizing the production of goods and services, positions hydrogen (H₂) as a strategic energy vector. Energy vectors, such as gasoline, diesel, biomethane, and electricity, are substances or devices that store energy for later use [1]. Among the various production routes, green hydrogen – produced via water electrolysis using electricity from renewable sources – stands out for its potential for neutral carbon dioxide (CO₂) emissions.

In this context, South America, particularly Brazil and Paraguay, possess unique potential due to their predominantly renewable electricity matrices [2, 3]. This comparative advantage allows to produce green hydrogen via water electrolysis at an estimated cost that is competitive when compared to conventional hydrogen (produced by steam methane reforming of natural gas) [4]. However, the implementation of projects on an industrial scale faces significant challenges.

This work was based on a literature review, drawing on articles indexed in the Web of Science (WoS), ScienceDirect, and Scopus databases published in the last three years. Additionally, due to the commercial secrecy surrounding many developing projects, this analysis used information available in specialized media, both digital and print, and data on the official government portals of Brazil and Paraguay.

One of the main obstacles is economic competitiveness. Although the cost of green hydrogen has been falling rapidly, it is still generally higher than that of hydrogen derived from fossil fuels [5, 6]. However, it is important to note that many cost projections published in the literature are based on the geo-economic realities of developed countries, particularly European ones, which do not fully reflect the low-cost potential for green hydrogen production in South America.

Economic viability, however, becomes more tangible in specific applications. Projects that integrate green hydrogen production with the synthesis of nitrogen fertilizers have shown promise. In Brazil, some projects aim to produce green ammonia and urea [7], while in Paraguay, the production of calcium ammonium nitrate is being studied [8]. The economic viability of these projects is driven by two central factors:

*Renewable Electricity Matrix: Brazil has a matrix with about 90% renewable sources, comprised of hydropower (55.3%), wind (14.1%), and solar (9.3%) [2]. Paraguay has a virtually 100% renewable matrix, supported mainly by generation from the Itaipu Binacional Hydroelectric Plant [3]._

*Competitive Energy Costs: Data from the Electric Energy Commercialization Chamber (CCEE) [9] and ANDE [10] indicate that electricity in Brazil can already be negotiated in the range of US$ 30/MWh to US$ 40/MWh, a level that reaches economic viability for green ammonia production, where electricity represents approximately 58% of the operational cost (OPEX) [11, 12, 13, 14].

Furthermore, the aggressive entry of Chinese electrolyzer manufacturers into the global market has significantly pressured the decrease in the capital costs (CAPEX) of this equipment, contributing to the improvement of the overall economics of electrolysis projects [15, 16].

Despite the potential, the abundance of renewable energy does not automatically translate into availability for new projects. A critical challenge in Brazil is the limitation of the transmission infrastructure. There are currently eleven hydrogen projects under study, which total a demand of 45 GW of installed capacity forecast by 2038. Connecting these projects to the grid requires robust expansions in the National Interconnected System, a fact that has already motivated the inclusion of specific studies in the official transmission planning [17]. This bottleneck is one of the factors that has delayed the implementation of emblematic projects, such as those planned for the Port of Pecém, in Ceará [18].

Another challenge has been regulatory uncertainty. The lack of specific regulation and clear legal frameworks created environments of insecurity for investors, making it difficult to define guarantees of origin, certification, and safety standards. As a positive sign of progress, both Brazil [19] and Paraguay [20] have recently approved their legal frameworks for hydrogen, a fundamental step to attract investments and structure the production chain.

In conclusion, the potential of Brazil and Paraguay in the emerging global hydrogen economy is unquestionable, anchored in their abundant renewable resources and competitive energy costs. Overcoming the remaining challenges – such as transmission infrastructure and the detailing of regulatory norms – will require a coordinated approach between the public and private sectors. Clear public policies, fiscal incentives, partnerships for financing critical infrastructure, and the development of anchor markets (domestic and export) are essential. Success will depend on the ability to transform this comparative natural advantage into a viable, competitive, and sustainable economic project, as indicated by the green fertilizer projects already in an advanced planning stage.