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1、Brazil Climate Report 2023Brazil Climate SummitSeptember 13-14th,2023Unleashing Brazils Low-Carbon Hydrogen potential2 2Copyright 2023 by Boston Consulting Group.All rights reserved.Authors,co-authors and participantsIn partnership withLucianaRibeiroJorgeHargraveCatarinaCaricatiMariana JudiceArthurR
2、amosRicardo PierozziCarlos AzevedoGuilherme MartinsMarcos DuarteMarinaCanadoPedro CavalcantiRodrigo AndradeRaquel LemosThais EstevesMatias FerreiraHenrique Dantas3 3Copyright 2023 by Boston Consulting Group.All rights reserved.The Boston Consulting Group,Inc.2023.All Rights Reserved.This document ha
3、s been prepared in good faith on the basis of information available at the date of publication without any independent verification.BCG does not guarantee or make any representation or warranty as to the accuracy,reliability,completeness,or currency of the information in this document nor its useful
4、ness in achieving any purpose.Recipients are responsible for assessing the relevance and accuracy of the content of this document.It is unreasonable for any party to rely on this document for any purpose and BCG will not be liable for any loss,damage,cost,or expense incurred or arising by reason of
5、any person using or relying on information in this document.To the fullest extent permitted by law(and except to the extent otherwise agreed in a signed writing by BCG),BCG shall have no liability whatsoever to any party,and any person using this document hereby waives any rights and claims it may h
6、ave at any time against BCG with regard to the document.Receipt and review of this document shall be deemed agreement with and consideration for the foregoing.This document is based on a primary qualitative and quantitative research executed by BCG.BCG does not provide legal,accounting,or tax advice
7、.Parties responsible for obtaining independent advice concerning these matters.This advice may affect the guidance in the document.Further,BCG has made no undertaking to update the document after the date hereof,notwithstanding that such information may become outdated or inaccurate.BCG does not pro
8、vide fairness opinions or valuations of market transactions,and this document should not be relied on or construed as such.Further,any financial evaluations,projected market and financial information,and conclusions contained in this document are based upon standard valuation methodologies,are not d
9、efinitive forecasts,and are not guaranteed by BCG.BCG has used data from various sources and assumptions provided to BCG from other sources.BCG has not independently verified the data and assumptions from these sources used in these analyses.Changes in the underlying data or operating assumptions wi
10、ll clearly impact the analyses and conclusions.This document does not purport to represent the views of the companies mentioned in the document.Reference herein to any specific commercial product,process,or service by trade name,trademark,manufacturer,or otherwise,does not necessarily constitute or
11、imply its endorsement,recommendation,or favoring by BCG.Apart from any use as permitted under the applicable copyright laws,no part may be reproduced in any form.Disclaimer4 4Copyright 2023 by Boston Consulting Group.All rights reserved.About this reportObjectiveThis report is a BCG vision for Brazi
12、lian leaders,decision-makers and citizens to catalyze efforts,tackle challenges&maximize value from opportunities intrinsic to BR during the transition of Worlds economy to Net-Zero(2020-50).AudienceDataSpecial thanksThis report was built for all those willing to drive actions against Climate Change
13、(e.g.,investors,board members,executives,entrepreneurs,academia,etc.),with the focus of leveraging Brazils green agenda and potentialThis document is a compilation of public information and BCG expertise,carefully selected,to bring numbers and facts to Climate discussions and decision-making.Its ana
14、lysis are subject to rapidly evolving technologies and business models and should be revisited and updated accordingly.BCG is thankful to the support received by the entire organizing team of Brazil Climate Summit,especially to all Brazilian students at Columbia University who contributed to acceler
15、ating the path to Net-Zero()5 5Copyright 2023 by Boston Consulting Group.All rights reserved.How to navigate this report?Click to return to home pageClick to returnto previous page(same level of depth)Click to proceed tothe following page(same level of depth)+Click to deep-dive on more detailed cont
16、ent on topic+Copyright 2023 by Boston Consulting Group.All rights reserved.6Why the hype around Low Carbon Hydrogen(LC H2)?IndustryTransportBuildingand PowerHard-to-abate sectors mostly impacted by LC H2LC H2is a breakthrough alternative to decarbonize hard to abate sectors Note:Low Carbon refers pr
17、eferably to production of H2with renewable sources but also includes other alternatives with lower emissions when compared with current technology+7Copyright 2023 by Boston Consulting Group.All rights reserved.Hard-to-abate sectors Net Zero pathways will rely on Low Carbon H2AvoidCaptureReplaceFocus
18、 of this reportCircularity Material&process efficiencyElectrificationBiobased solutionProcess electrificationPower to XLow Carbon H2Feedstock switchCarbon Capture,Usage and StorageEnergyReduce use of material and feedstockImprove energy efficiency using state-of-the-art technologies Capture process-
19、related carbon byproduct and store or use them to prevent emissions+Ethanol to H2Biomethane to H28Copyright 2023 by Boston Consulting Group.All rights reserved.LC H2Production|Low carbon pathways allow lower emissions for H2productionNote:CCS:Carbon capture and storage;SMR:Steam methane reforming;AT
20、R:Autothermal reformingSource:BCG analysisXCO2emission from the process(Kg CO2eq/kg H2)Energy sourceKey technologiesFossil fuelsFor example,natural gas or crude oil used as a raw material for the production of H2Reforming(SMR)For example,Steam methane reforming(SMR)or Autothermal reforming(ATR)Refor
21、mingSMR or ATRCCSCarbon capture and storageRenewable powerNuclearElectrolysisElectrochemical process that produces H2from water and electricity using different technologiesH2ReformingEthanol Steam Reforming(ESR)BiofuelsGrey H2Steam reforming production with non-renewable sources and with no CCSSteam
22、 reforming production,with CCS to reduce contamination of the processBlue H2Green H2Electrolysis with electricity from renewable energiesElectrolysis with nuclear powered electricityPink H200110Steam reforming production with biobased feedstocks(e.g.ethanol)Orange H20Emission level+Backup9Copyright
23、2023 by Boston Consulting Group.All rights reserved.LC H2Usages|Many hard to abate sector could be impacted by hydrogen and its derivatives1.Methanol as a path to produce E-KeroseneSource:BCG analysisMethanol Synthesis&refiningDirect usageHydrocarbon Synthesis&refiningAmmonia synthesisIron&SteelBuil
24、dingsUsageMain applicationsRoad transportationShippingShippingAviationAviationPowerPowerIndustrial applicationsIndustrial applicationsIndustrial applicationsIndustrial applicationsH2BuildingsRail+Backup10Copyright 2023 by Boston Consulting Group.All rights reserved.What differentiates Brazil on the
25、LC Hydrogen race?How to unlock this potential?12+11Copyright 2023 by Boston Consulting Group.All rights reserved.Local demand to boost export journeyRenewable power gridCompetitive energy costsWhat differentiates Brazilon the LC Hydrogen race?1Interconnected grid allowing higher utilization in compl
26、iance with EU rulesHard to abate industries kick-starting large export-led journey Low-cost and available clean energy with scale-up potential Extremely favorable starting point to lead low Carbon Hydrogen supply+12Copyright 2023 by Boston Consulting Group.All rights reserved.Competitive power|Low-c
27、ost and available clean energy with scale-up potential Countries comparison considering renewable scalability and LCOE(2030)+38040042044004602048040500605208004500260280300320340360South AfricaLCOE(USD/MWh)IndiaSaudi ArabiaCanadaFranceBelgiumItalyBrazilPolandBrazilGe
28、rmanyChileUnited StatesAustraliaCurrent capacityto kickstart projectsAdditional capacity for scaling up17Mt H234Mt H252Mt H286Mt H269Mt H2Renewable expected available capacity3(Average GW)Equivalent hydrogen productionExpected global demand range for 20301.Levelized Cost of Energy 2.Considering 24/7
29、 supply,all other LCOE figures considering power availability when produced 3.Projected added renewable generation capacity until 2030Note:LCOE doesnt consider any taxes,charges and tariffs.|Source:EnerData;BCG analysis13Copyright 2023 by Boston Consulting Group.All rights reserved.Renewable power m
30、atrix|Interconnected grid allowing higher utilization in compliance with EU rulesNote:Countries shown were prioritized as key potential low carbon H2hubs for having lowest production costsSource:EnerData,Irena;IEA World Energy Outlook 2022,BCG analysis Interconnected grid with 90%+renewable supply a
31、llowing 24x7 operationsShare of renewables on electricity(%GWh,2022)69%55%34%31%22%17%92%BrazilCanadaChileMoroccoAustraliaUSUAE1%KSA90%Europe target for grid use on LC H2production+10pp in electrolyzerutilization reduces 3-6%LC H2total production costs+14Copyright 2023 by Boston Consulting Group.All
32、 rights reserved.Local demand to boost exports|Hard to abateindustries kick-starting the journey+Up to 3000Up to 150Up to 50Up to 220Up to 220Up to 350Up to 120Up to 125Up to 20Heavy RoadPower generation usesAviationRailShippingIndustry HeatSteelFertilizersRefineryMethanolTransports usesIndustry use
33、sDomestic usesPotential LC H2demand(kt,2030)1.Include Ammonia for industrial useSource:EPE,IEA,CRU Group,BCG analysisExpected local demand of 0.5-1.5 Mt in 2030Ammonia and methanol use for long haul transportGreen fertilizer production of low carbon ammonia driving industry usesLC H2boosting green s
34、teel alternatives throughout the value chain(e.g.DRI)15Copyright 2023 by Boston Consulting Group.All rights reserved.Sustainable Development Scenario(2 path)Net Zero Emissions by 2050(1.5 path)Local Demand for H2in Brazil could represent 0.5-1.5 Mt in 2030 and be a base load for kickstarting1.Includ
35、e Ammonia for industrial use;FC:Fuel CellSource:EPE,IEA,CRU Group,BCG analysis-15010-5030--35040-12050-1250-20Total550-1,500Potential LC H2demand(2030,kt)Value poolApplicationCompetitivenessHeavy RoadPower generationBEV,biofuelsHydro,wind and solarvs.other low-carbon techFCH2NH
36、3MeOHCxHyAviationBiofuelsH2NH3MeOHCxHyCombustionRailElectrificationH2NH3MeOHCxHyFCShippingBiofuelsH2NH3MeOHCxHyFC/Comb.Industry HeatBiogasCombustionH2NH3MeOHCxHySteelCCUS,biofuelsFC/Comb.H2NH3MeOHCxHyFertilizersFewFeedstockH2NH3MeOHCxHyRefineryBiofuelsH2NH3MeOHCxHyFeedstockMethanolBiomethanolFeedsto
37、ckH2NH3MeOHCxHyH2NH3MeOHCxHyFC/Comb.Key configurationH2/derived product useTransports usesPowergeneration usesIndustry usesNon-exhaustiveTotal H2equivalent market(2030,Mt)16.81.00.70.810.53.11.10.40.45.0Total39.8H2NH3MeOHCxHyHydrogenAmmoniaMethanolHydrocarbon+BackupCopyright 2023 by Boston Consultin
38、g Group.All rights reserved.16Transports|Sustainable fuels are a key lever for net zero rail and shipping with most favorable perspective+Source:IEA,Sustainable Aviation Jet Fuel Report 2020,BCG analysisShippingHeavy RoadH2and Ammonia(higher energy density than electric batteries,allowing long range
39、 applications)Significant space requirements for H2storage and Hydrogen Refueling Station(HRS)needed in train stationsSafety concerns(H2transport)Ammonia as emerging competitive alternativeE-Methanol(similarity to gasoline in handling)E-Ammonia(fully carbon-free and no harmful emissions)Matured and
40、cost proven technologyVessel design adjustments(e.g.,storage spaces)Conversion of enginesHigh safety standardsFuel cell vehicle with green hydrogen as energy carrier(zero direct emissions,allows long range applications and less refuel time)Tough competition with other more mature green alternatives(
41、e.g.biofuels and electric vehicles)EVs more efficient for short distances and(emissions related to grid)Uncertainty on economic viability vis-vis current solutionsTransport segmentApplicationMain challengesMaturityRailAviationE-Kerosene(combination of green hydrogen and carbon dioxide captured from
42、atmosphere)E-Kerosene production technically feasible but yet immatureMajor security concernsPower density of fuel cells to be increased to reduce weightBackup17Copyright 2023 by Boston Consulting Group.All rights reserved.Industry Heat|Steel,Chemical and Cement industries represent 50%of heat from
43、non-renewable sources+Source:EPE,PDE,BEN,BCG analysis23.45.04.43.12.61.81.71.51.10.20.11.8TotalSteel(only heat)ChemicalCementMetallurgy(except iron)PotteryPulp and PaperMiningFood and BeverageTextileOtherFerroalloyNatural GasCoalOil derivativesNatural GasCoalOil derivativesNatural GasCoalOil derivat
44、ivesNatural GasCoalOil derivativesNatural GasCoalOil derivativesNatural GasCoalOil derivativesNatural GasCoalOil derivativesNatural GasCoalOil derivativesNatural GasCoalOil derivativesNatural GasCoalOil derivativesNatural GasCoalOil derivativesNatural GasCoalOil derivativesMain fuels usedEnergy cons
45、umption from non-renewable sources of energy(in Mt of oil equivalent,2022)IndustryBackup18Copyright 2023 by Boston Consulting Group.All rights reserved.Steel|Decarbonization will require significant green H2as input H2-DRI the most promising de-carbonisation optionfor steel production Significant gr
46、een H2will be requiredto meet long-term demand Green hydrogen could replace coal on the process to reduce the iron pellets into metallic iron+1.Estimates suggest that it is possible to capture 60-80%of the CO2 emissions produced during BF-BOF steelmaking 2.Emissions may be non-zero due to the CO2 em
47、issions of upstream processes such as iron ore mining,as well as CO2 emissions from carbon&lime use,as well as graphite consumption in electrodesSource:IEA,Eurofer,Vogl&hman“Towards a strategic decision tool for decarbonising EU steel”Emissions intensity of crude steel production routeskg CO2e/tonne
48、 crude steelBF-BOF routeBF-BOF(current)BF-BOF(Biofuel)BF-BOF(CCS)1DRI-EAF(natural gas)DRI-EAF(H2-DRI)Scrap-EAF(green elec.)1,6821,009336-6731,0200-10020-1002DRI-EAF routeH2required in processH2supplied through SMR of Natural GasGreen-H2supplied from electrolysisNo primary steel made,relies on meltin
49、g scrapNot possible to supply growing steel demand through scrap steelre-meltingBackup19Copyright 2023 by Boston Consulting Group.All rights reserved.Fertilizers|Low carbon ammonia as pathway to reduce footprint of growing fertilizer demand+75-80%of ammonia demand is related to fertilizersUreaIndust
50、rialOther N fertilizersAmmonium nitrate fertilizersAmmonium phosphate fertilizersDirect application fertilizer56%21%8%7%6%3%Source:Nexant,IEA,BCG analysisAmmonia applications 2019(%of total global demand)Fertilizer relatedand increasing fertilizer demand call for decarbonization of ammonia productio
51、nGrowing global population coupled with limited land growth will drive fertilizer demand as key for sustainable production of food Enable 50%of global food production Enhance agricultural productivity,avoiding GHG from land use change Stimulate CO2uptake by cropGreen ammonia is currently the most fe
52、asible green alternative to substitute fossil fuels Primarily H2 derived from natural gas and coal is used for the ammonia synthesis,emitting 1.5-2.5 tonnes of CO2/t of ammonia produced Green ammonia can substitute fossil fuels in H2 production without CO2 emissionsBackupCopyright 2023 by Boston Con
53、sulting Group.All rights reserved.20Fertilizers|Brazil is a major importer of fertilizers LC H2could contribute to revert the trend+85%of total fertilizers used in Brazil are imported from other countries-prices are on peak in 2022Green ammonia may have a significant role on developing competitive l
54、ocal fertilizer industry303525200212022Imports Volume(kt)Imports Value(US$)Russia-Ukraine war drove strong price growth between 2021-2022(2x more expensive)as Russia accounts for 25%of total imports volumeCurrently,Brazil not a leading fertilizer producerICMS taxes results in l
55、ow competitiveness vs.importsLimited natural resources in Brazil to produce key fertilizers(NPK fertilizers)which require natural gas,sulphur and other mineral raw materialsAlthough not self sufficient,Brazil plans to strengthen local fertilizer industry by 2050Brazils National Plan for Fertilizers
56、expect investment incentives to support a 35%growth for local production by 2050 to reduce imports dependency,but still not enough given agribusiness market size and expected growth in BrazilGreen ammonia production through renewable energy as alternative to traditional natural gas pathway better le
57、veraging Brazilian natural resources and competitivenessSource:Ministry of Development,Industry and Foreign Trade,Anda,ComexStat,BCG analysisBackup21Copyright 2023 by Boston Consulting Group.All rights reserved.while Brazils advantages could address 15%of LC H2global trade flows,mostly to Europe+Pro
58、ductionExpected global trade flows of LC H2 in 2030(Mt,2oC path scenario)Japan/KoreaJapan/Korea First wave focused on exporting H2derivatives to Europe for chemical industries,fertilizers and ocean shipping Post 2030,new technology allowing,could tackle direct H2transportNet importerNet exporter1.4
59、1.00.30.11.00.11.01.5Note:High uncertainty on potential for China,Russia and Argentina also becoming net exporters by 2030.Other countries are neutral/unclearSource:BCG analysisBrazils export trajectory3.93.83.7Production(USD/kg)Logistic(USD/kg)22Copyright 2023 by Boston Consulting Group.All rights
60、reserved.Different scenarios indicate 340-530 Mt low-carbon hydrogen market by 20501.H2derivatives are normalized to H2input requiredSource:IEA World Energy Balances,IEA WEO 2021,GlobalData,Nexant,BCG analysis13%13%12%7%9%5%6%3%4%22%0%Off-highwayAviation1%Coastal shipping4%Heavy Road2%Light roadOcea
61、n shipping0%RailHeatSteelAmmoniaMethanol2%OtherPetrochemicalsRefineriesBuildings-HeatPower Generation2050 total global demand share(Mt1,%)Low-carbon H2demand by application2025E 2030E 2035E 2040E 2045E5085285225727281973202050E6298325-2050 total global demand(Mt1)Low-carbon H2demand by re
62、gion2025-2050 total global demand(Mt1)Low-carbon H2demand by scenario52834302002503003504004505005502025E2030E2035E2040E2045E2050EStated PoliciesStated Policies1.5C Path1.5C Path3433432C Path2C PathTransportIndustryEnergy2C Path2C PathNorth AmericaSouth AmericaAfricaMiddle EastOceaniaIndi
63、aChinaJapanKoreaRest of AsiaWestern EuropeRest of Europe2C Path2C Path+BackupCopyright 2023 by Boston Consulting Group.All rights reserved.23Brazil could capture 10-15%of global exports;+10Mt by 20502030204020501.2-1.45.0-5.410.9-13.1Expected Brazils international demand for low carbon hydrogen(Mt,U
64、SD)Notes:Considering 2.6$/Kg H2in 2030,2.0$/Kg H2in 2040 and 1.7$/Kg H2in 2050;Demands ranging from scenarios for climate change:2 path and 1.5 pathSource:BCG analysisExports demand is the most relevant market for Brazil(107 Mt and$180B global tradable hydrogen market by 2050)Brazil potentially well
65、 positioned to supply Europe(60%of global imports by 2050)with low production cost,low shipping distance and high capacityAdditionally to capturing share in Europe,Brazil could also seek to approach Japan and Korea as alternativeTough competition with other regions with more mature incentives(e.g.Mi
66、ddle East,US,North Africa,Australia)$3-4B$10-11B$18-22BXX15%10%15%LC H2revenue in USD billionsX%of total global tradable LC H2(in Mt)+Backup24Copyright 2023 by Boston Consulting Group.All rights reserved.How to unlock this potential?2Off grid best caseCurrent Brazils taxes,system charges and wheelin
67、g tariffsOn grid greenfield base case2.601.404.00On grid breakdown of production cost of LC H2in Brazil(2030,USD/kg)Optimal isolated solution,yet lacks Brazils grid benefitsThe advantages do not translate into cost competitivenessSource:BCG analysisbut to leverage grid advantages,significant cost af
68、fect LCOH reducing competitivenessof the on grid alternative+25Copyright 2023 by Boston Consulting Group.All rights reserved.requiring six levers to enhance attractiveness of Brazilian Low Carbon H2Levers to enhance competitiveness of LC H2in Brazil(2030,USD/kg)On grid greenfield base caseOn grid le
69、veraged case4.000.5-0.70.2-0.30.1-0.20.1-0.20.1-0.20.1-0.22.20Source:BCG analysisSystem charges symmetric to self production incentivesICMS/PIS/COFINSexemption on electricity used for H2production90%electrolyzer utilization(24/7 supply)Funding and mechanisms to mitigate project risksIncentives in li
70、ne with international programs for H2investmentsReduction of system chargesHigher electrolyzer utilization Exemption of VAT taxesDiminish cost of capital gapInvestment incentivesLong term contract of surplus powerPPA for existing power+26Copyright 2023 by Boston Consulting Group.All rights reserved.
71、Although neighboring countries cheaper on direct H2supply,Brazil has cost effective ammonia delivered to Europe Note:1.Includes H2derivatives(e.g.ammonia and methanol).Blue H2as 15%of total LC H2demand in Western Europe(2030)Source:BCG analysisCost of supply LC H2and derivates in Germany(USD/kg,2030
72、)ProductionLogistic and shipping(including conversion to ammonia)Conversion to ammoniaAmmonia Cracking to H2Retrofitted pipelineNew pipeline2.32.2Chile2.80.80.61.3Morocco3.21.7KSA3.11.9Namibia3.51.9Oman3.60.80.51.2Spain3.71.9US(pre IRA)2.92.7Australia4.02.0UAE2.81.81.9US(post IRA)0.62.41.3Morocco3.6
73、1.4Canada2.20.51.71.2Brazil2.21.71.3Brazil3.73.83.94.54.2-5.5Spain5.05.45.0-6.25.65.66.03.4-4.74.1-5.35.24.9Ammonia(35%of EU demand)LC H2(50%of EU Demand)+27Copyright 2023 by Boston Consulting Group.All rights reserved.North America and Middle East likely leading blue H2production as cheaper alterna
74、tive to green H2Brazil and Chile with relative high cost of supply of natural gasNatural gas cost of supply affects Brazil competitiveness for blue hydrogen productionProduction cost of blue hydrogen by country(2030,USD/kg)CanadaKSAUAEUSMoroccoAustraliaChileBrazil2.11.81.81.91.91.92.02.43.0IRA incen
75、tives could drivelocal price to$1.3Note:Countries shown were prioritized as key potential low carbon H2hubs for having lowest production costs;Considering region with lowest local production cost on each countrySource:BCG analysis+BackupCopyright 2023 by Boston Consulting Group.All rights reserved.2
76、8Orange H2can be produced from biomass such as EthanolSource:CGTI,WWF-Brasil,BCG analysisSchematic process flow diagram of the Ethanol Steam Reforming process to produce green hydrogenEthanolSteamCatalytic EthanolSteam Reformingbut production technology and infrastructure are still immature and in d
77、evelopment phase with partnerships between bioenergy companies and universitiesIllustrativeCOH2Ethanol is a biomass with high hydrogen content and the synthesis process has an efficiency of 80%and hydrogen produced from ethanol is competitive both in cost and carbon footprint vs.electrolysis via sol
78、ar energy(-28%production costs and-43%carbon footprint)Other Brazilian biofuels(e.g.biomethane)could also be used as feedstock to produce orange hydrogen+Backup29Copyright 2023 by Boston Consulting Group.All rights reserved.Direct H2export likely in the long term,but green ammonia and methanol alrea
79、dy mature alternativesMethanolproductAmmonia productKerosene productLiquid H2transportAmmonia transportDirect Hydrogen exportDerivatives exportExpensive liquefaction and pilot-stage H2shippingAmmonia to hydrogen cracking power intensive and expensiveAmmonia shipping mature,cost effective for some ap
80、plicationsMethanol shipping mature,cost effective for some applications Biogenic CO2 as Brazils advantageFuel transport mature,synthetic fuel still small market due to costWindSolarElectrolysisN2N2CO2CO2LiquefactionAmmonia synthesisAmmonia synthesisFischer-Tropsch SynthesisMethanol synthesisRefinery
81、RefineryH2flowH2derivative flowN2,CH4,CO2&Toluene flowValue chain step in progressH2shippingAmmonia shippingAmmonia shippingSyntheticfuel shippingMethanol shippingAmmonia Cracking2Direct ammonia useSynthetic fuel useDirect methanol useH2productionOther inputsConversionStorage and TransportRe-convers
82、ion/processingEconomics/maturity1.Focus on long distance transportation paths.2.Other methods exist,but also challenged by energy consumptionSource:BCG analysisSimplified overview1Hydro+Backup30Copyright 2023 by Boston Consulting Group.All rights reserved.H2choice of carrier dependent on end-user fe
83、asibility and costsOverallCapacity(t H2)Distance(km)DistributionUsage typesCompressed H2tankLiquefied H2tankPipeline network(gas or hydrogen)H2ShippingOn-road delivery of compressed H2in gaseous form,limited to small capacity and distancesOn-road delivery of liquid H2,but high costs to continuously
84、cool below-253CBulk delivery similar to transporting any other gas,but dedicated network to H2requiredDelivery as ammonia-bound H2in semi-refrigerated ships better suited for international distribution1.Considering a network of pipelines of a diameter of 16 inches;2.Common flow rates of created hydr
85、ogen pipelines starting in year 1995;3.current typical usage patterns Source:Shell-Energy of the future(2017),Lindes website(2019),IEA-The Future of Hydrogen(2018),Hydrogen Europe;NREL(2014),Gardiner(2009),IEA(2019),BCG analysisH2trade export to selected countries Industrial manufacturers,chemicals&
86、fuel stationsLabs,chemicals,electronics,backup supply,fuel stationsSpace,electronics,backup supply,fuel stationsLarge(1-10 tons)Large scale(0.39 tons/h)Medium(4 tons)Small(1 ton)International long-haulRegional network(100 km)More than 100-200 kmLess than 100-200 kmGaseous H2Liquefied H2AmmoniaNH3Hig
87、h capacity/distanceLow capacity/distance+Backup31Copyright 2023 by Boston Consulting Group.All rights reserved.Growth aspiration to position Brazil in the leading league of global LC H2marketBrazils low carbon H2journeyLocal demand boosting early mover advantage in LC H2projectsMature demand and tec
88、h development accelerate exports globallyAdvanced experience curve driving competitive cost to supply LC H2at large scaleKick start(2030)Ramp up(2040)Scale(2050)1.2-1.40.5-1.52-35.0-5.41.8-4.17-1010.9-13.13.7-6.615-205-8B USD14-20B USD25-35B USDInternational demand(Mt)Local demand(Mt)LC H2revenue(US
89、D)Source:BCG analysis+32Copyright 2023 by Boston Consulting Group.All rights reserved.32Cost of capitalLogistics and infrastructureCarbon marketTaxes and chargesInvestments and incentivesMachinery renewalBusiness environmentGlobal tradeUnlocking LC H2opportunity requires urgent and assertive governm
90、ent action to assure global competitivenessNudge companies Net Zero pathways by establishing compliance targets for critical sectors Reduce spreads and risks mechanisms for investments in new greener technologiesExempt taxes on LC H2projects and guarantee affordable power system chargesExplore alter
91、natives to match global incentives on large scale investments(e.g.tax credits)as well as to overcome supply chain bottlenecksEnsure adequate access to infrastructure to flow LC H2to its main destinationsDesign reliable and comprehensive LC H2regulatory framework(e.g.exploring advantages such as Biog
92、enic CO2)Lead trade agreements to guarantee LC H2demand and avoid competitive pitfallsPromote machinery adaptation to boost demand for LC H2Demand side Supply sideCompetitiveness EnhancementProgramSource:BCG analysisBrazils position on the topic+33Copyright 2023 by Boston Consulting Group.All rights
93、 reserved.Governments action with significant impact on low carbon hydrogen business framework in the coming yearsRest of worldStill immature incentives established worldwide Likely importers(Japan and South Korea)with demand-side policies still under discussion China and India already have some man
94、dates but high uncertainty regarding wider incentives and ramp up Australia has trade agreements already signed with importers(Japan,South Korea and Germany),but needs to ensure exports competitivenessUnited StatesStrong recent incentives to accelerate low carbon hydrogen deployment Infrastructure I
95、nvestment&Jobs Act(IIJA)and Inflation Reduction Act(IRA)include$17.5B in funding and tax credit dedicated to low carbon hydrogen US market is more favorable for blue H2in near-term,but production tax credit(up to USD 3/kg H2)may improve greencost competitiveness until 2030European UnionLeading regio
96、n on policy making maturity related to H2 Ambitious goals to reach hydrogen development both in electrolysis capacity(8GW in 2024)and demand(20Mt in 2030)Mature policy making in entire value chain(production,imports,midstream and demand)with incentives already agreed on and some national regulations
97、Source:Press releases,BCG analysis+Backup34Copyright 2023 by Boston Consulting Group.All rights reserved.National H2Program was created in 2022 with initial guidelines+BackupSource:Press releases,Ministry of Mines and Energy,BCG analysisBrazil government began to establish guidelines for H2industry6
98、key topics are the basis for the action plan under discussion for the National Hydrogen ProgramMarket development understanding sources of production,technologies required and both internal and external demand potentialInclusion of H2as a priority theme for investments in research and development&in
99、novationLeadership of Brazil in diplomacy on energy transition at UN Resolution No 6Published 23/Jun/2022National Hydrogen ProgramEnergy planningRegulatory FrameworkInternational cooperationGrowth and competitiveness of the marketSkills and Human ResourcesStrengthening of technology35Copyright 2023
100、by Boston Consulting Group.All rights reserved.while a three stage workplan set ambitions for Brazils role in the LC H2+Implement pilot plantsthroughout all regions of the countryConsolidate Brazil as the most competitive low carbon playerConsolidate LC H2hubs in Brazil202520302035MME-2023-2025 Thre
101、e year workplan PN H21.Ministry of Mining and EnergyBackup36Copyright 2023 by Boston Consulting Group.All rights reserved.36Brazils Low Carbon H2potential:The 2030 pay-off+15%Share of LC H2global tradeTop 3Low cost of supplyBrazil highly competitive on shipping LC H2derivatives to Europe3-5LC H2indu
102、strial hubsIndustrial clusters to explore economies of scale and scopeRevenue pool3-5BUSD/yearBoth local and export potential totaling 2-3Mt per yearBrazil as a leading LC H2derivatives exporter37Copyright 2023 by Boston Consulting Group.All rights reserved.Brazil has several industrial hubs candida
103、tes for LC H2production-early movers potential for 3-5 until 2030+Source:BCG analysisH2and Derivatives Export:Privileged position to access shipping route for exports marketMaritime Transport Fuel:Easy access to the Brazilian coast and shipping industryRailway Transport Fuel:Proximity to the Brazili
104、an railway networkIndustrial Ammonia&Fertilizers:Well connected to agribusiness and chemical industryAgro-industrial H2:Potential to extract benefits for biomass,waste and capture of biogenic CO2Main drivers for LC H2hubs in BrazilBackup38Copyright 2023 by Boston Consulting Group.All rights reserved
105、.Key players in early-stage projects development of green H2in Brazil+BackupRio Grande do NortePorto de Rio Grande,RSPorto doAu,RJSolarWindOnshoreWindOffshoreEnergy source:H2AmmoniaEnd product:1.The number of industrial hubs that will be built,their location and production capacity will be defined f
106、ollowing feasibility studies to be developed jointly by Vale and H2Green SteelSource:Press releases;BCG analysisPorto de Pecm,CENon-exhaustivePorto de Suape,PECamaari,BATBC39Copyright 2023 by Boston Consulting Group.All rights reserved.Low Carbon Hydrogen could drive a new green industrial cycle in
107、BrazilCompetitive boost to low cost/low emissionsrelated industriesIncreased scale anddash for innovation inBrazils energy solutionsSustainable decarbonization pathways of industrial and transport sectorsAttractive and renewable power and energy Export and attraction of FDIand local investment for capacity expansion of green industrial productsCompetitive LC H2/PtXBrazils unique virtuous cycle opportunity+Thank You+