Renewables and Recycling
The acquired green
When it comes to the energy transition, Latam countries have not been at pains to commit to net zero targets in the manner of their counterparts in the northern hemisphere. If anything, they have under-committed given many can boast using the cleanest energy mixes out there, with Paraguay heading the list at 100% clean power, Uruguay at 91%, and Brazil in the top 10 with an 80% green grid. In fact, KPMG ranked Chile and Brazil in the top 20 globally in its “Net Zero Readiness Index.” With vast lands, year-round sun, and huge windy coastlines, Latin America is the ideal spot for green electricity generation. Brazil leads the way with the most investments in the energy transition, with US$12 billion worth of investments in 2021, the ninth largest in the world, according to the Visual Capitalist.
“Last year, consulting firm Whey Carbon conducted a study that measured the levels of GHG within the industry, with a focus on carbon dioxide, and found that the Brazilian chemical industry emits between 5% to 35% lower emissions compared to Europe, and between 15% and 51% compared to the US and Asia. But this is a double-edged sword: on one side, it shows a superior environmental standing, but, on the other side, our industry incurs higher costs, using more expensive energy sources. China, for instance, produces ammonia from coal, which is cheaper but much dirtier,” commented André Passos Cordeiro, president at ABIQUIM (Associação Brasileira da Indústria Química).
Many companies in the region have signed power purchase agreements (PPAs) and invested in renewables in recent years, including Braskem, Ecopetrol, Profertil, Unipar, Unigel, PR3, and Air Liquide. But their focus goes beyond cleaning their footprint, targeting explicitly the production of hydrogen, ammonia, methanol, and chemicals, which become “green” when produced from renewables. Electricity, in such examples, becomes a feedstock. For example, Argentinian player Petroquimica Rio Tercero (PR3) signed a PPA with energy supplier YPF Luz for 30% of its energy needs from solar power, which will also help it produce green chlorine and caustic soda. Similarly, Brazilian company Unipar, a leader in the production of chlorine and soda, and the second largest PVC producer in South America, has signed two JVs to produce renewable energy from two wind farms in Bahia and Rio Grande do Norte and a solar park in Minas Gerais, all to be ready by the end of 2023. Together, these will generate 600 MW/y, or 80% of the company’s total energy needs: “To produce chlorine and caustic soda, we start from a mixture of salt and water (called brine), apply electricity to break the molecule into different inorganic compounds, and obtain hydrogen. By using green electricity, we therefore obtain green hydrogen,” said Mauricio Russomanno, CEO, Unipar.
One company that is going all the way to attain 100% renewable energy at its operations is Argentinian urea producer Profertil, which will power its Bahía Blanca site from wind power. This will allow Profertil, which supplies 50% of the country’s urea needs, to bring its Scope 2 emissions to zero, something few players globally have achieved. “Roughly 40 million t/y of crops will be nourished with urea generated with renewable energy. To put it into perspective, our consumption that will be coming from wind sources is the equivalent of 78,000 homes,” said Marcos Sabelli, Profertil’s CEO.
Similarly in Brazil, Unigel, one of the biggest players in the region, with plants in Brazil and Mexico, is investing US$1.5 billion in the first industrial-scale green hydrogen and ammonia plant in Camaçari, Brazil. Due to be ready in 2024, the plant will initially produce 10,000 t/y of hydrogen and 60,000 t/y of ammonia. “This is a very important investment not just from a Latin American perspective, but also worldwide. By the time we launch our first phase of production, our plant will be the largest green hydrogen and green ammonia facility in the world. There will soon be bigger plants in China and the Middle East, but it is certainly an important milestone. We are the first project of such a kind in Brazil, and the only one already under construction,” said Marina Mattar, director of corporate affairs at Unigel.
The gamechanger for the region will be in the large-scale production of green fuels like hydrogen, ammonia, methanol, as well as bio-based fuels. Regulations that impose cleaner fuels on the roads and the sea have become common, causing a drastic shift in the transportation sector. Besides the fast growth in EV markets, especially in Europe, the maritime industry is on a path to transform, with companies like Maersk, one of the largest container shipping companies in the world, continuing to invest heavily in a methanol-powered vessel fleet. Now, new laws are starting to regulate air transport too. France, for instance, is introducing a compulsory SAF (sustainable aviation fuel) admixture requirement, while the rest of Europe is evaluating a proposal to achieve a compulsory SAF percentage of 2% by 2025 for all flights within the continent. The global aviation fuel market is estimated at a gargantuan US$252.39 billion (2022), presenting immense opportunities for green fuel providers.
In Latin America, industrial and medical gases supplier Air Liquide has recently signed an MoU to supply the airport of Santiago, in Chile, with green hydrogen. Albert Correa, CEO for Latin America, told us about the progress made so far: “Last year, Air Liquide and Nuevo Pudahuel signed an MoU to study the use of hydrogen as a fuel to decarbonize the Santiago de Chile Arturo-Merino-Benítez Airport. The feasibility studies assessed the development and deployment of what I would call a complete hydrogen ecosystem, which includes renewable hydrogen production and fuel infrastructure to address, as a start, the needs of the airport’s ground vehicles, before moving to aviation fuels. The airport aims to reduce its GHG emissions by 40% by 2040 and reach carbon neutrality by 2050. It is very exciting to think that hydrogen may be the next fuel used by airports in the future. Though Air Liquide has a history of over 120 years and six decades of experience in hydrogen, our experience is now shifting to a new way of thinking about hydrogen, which marks a generational shift.”
“Each company has different sustainability objectives, but what is interesting is that all big industry players have a sustainability agenda, which is significantly driving demand for bio-based products and recycled content plastics.”
Ricardo Cuetos, VP Americas Polymers Sales Management, Ineos Styrolution
Brazil is best positioned for the production of hydrogen. EDF Renewables has a portfolio of 1.4 GW of installed capacity, as well as a big pipeline of another 5 GW of solar and wind on- shore opportunities and almost 7 GW of wind offshore projects. Brazil and the Netherlands are also looking to develop a green hydrogen corridor between the Pecém Port (Brazil) and the Port of Rotterdam. The two ports have already established an ammonia corridor; ammonia producers currently use gray hydrogen, but if they plug into renewable sources, they could produce green hydrogen, which is highly demanded in Europe. In Brazil, Stolthaven Terminals has signed an MoU with the Pecém Port to study the development of a new storage terminal for green hydrogen and associated products. Also, TotalEnergies, Brazilian state-owned petroleum company Petrobras, and Casa dos Ventos, the leader in the supply of wind and solar energy in the country (with a 12 GW in the pipeline), also signed a JV to investigate opportunities in low-carbon hydrogen.
The transportation of green hydrogen from Brazil to end-markets like Europe, the US, or Asia, however, could be challenging and capital intensive, though solutions exist, according to José Fernandes, president for the performance materials & technologies business in Latin America at Honeywell, a technology licensor: “Transporting hydrogen, which is a very volatile gas, is dangerous and costly, therefore most hydrogen users will typically have a hydrogen production plant at their operations. We looked at a molecule that could saturate the hydrogen in a liquid form so that it can be transported just like any other product and identified this carrier in toluene (methylbenzene), which we saturate with green hydrogen, transforming it to methylcyclohexane (MCH), a more stable product similar to gasoline. The technology, called Liquid Organic Hydrogen Carrier (LOHC) allows us to transport hydrogen safely from Latin America to Asia. When hydrogen (in MCH form) arrives at its destination, the MCH needs to be broken back into toluene and green hydrogen, both products having commercial use.”
While the importance of green energy is an opportunity for some countries like Brazil or Chile, for others is a challenge. Mexico, the region’s second largest economy, lacks not only a renewable energy mix, but also the policy tools and incentives to address it: “Our customers may soon be demanding that part of our electricity be generated from renewables before purchasing our products. When that happens, the country will have a lot of catching up to do,” Patricio Gutiérrez, chairman and CEO at Grupo Idesa, a diversified Mexican petrochemical company strong in ethanolamines, phthalic anhydride, and expansible polystyrene, told GBR.
“Latam can be a world leader in sustainable energy like hydrogen, with countries like Brazil, Chile, or Uruguay showing immense amounts of natural resources and a very green energy mix – for instance, 97% of Uruguay’s natural grid comes from renewables.”
Albert Correa, CEO, Air Liquide Latin America
Recycling
About 50% of all petrochemicals go into the plastics value chain. Only 7% of high-volume plastics are currently recycled, according to OPIS, a Dow Jones company. By 2050, this number can either go to 15%, on a base case scenario, or to about 23%, in a green case scenario, calculates Opis. Most readers will agree, neither scenario sounds good, especially when, in theory, up to 90% of plastics are in fact recyclable.
As opposed to bio-based feedstocks and renewables, Latam does not possess any immediate advantages in plastics recycling. In fact, the region is one of the worst at recycling, with poor collection set-ups characterized by high levels of informality, few facilities, and generally lenient legislation. A report by Research and Markets found that recycling rates do not exceed 10% on average (for all waste) across the region. Exceptions and improvements are noted, however. Mexico has the largest PET recycling rate in the world (75%), and an elevated 35% for other resins, according to ANIQ (Chemical Industry Association of Mexico). Local sources report that Brazil reached its best yet recycling rate in 2022, with 25.6%, according to data compiled by MaxiQuim. The growth in recycling across the region will be determined by regulations, technology, and improvements in the collection of waste, linked to changes in waste disposal behaviors.
Regulations in the region are starting to look a lot more like in Europe. Modeled after similar legislation in Italy and Spain, two new legislations have entered into force in Colombia: a ban on single-use plastics and a tax of around 20% on single-use plastic packaging, but they both come with various exceptions, explained Daniel Mitchell, executive president at Acoplásticos, the association representing the plastics value chain: “A ban sounds alarming, but it does come with many exceptions, including on bags, cutlery, disposables, or straws, as well as products that meet certain circularity conditions. The tax also allows many exceptions, for example for vital products using plastic packaging as well as products that represent an HSE risk. If, after a lifecycle analysis, it can be proven that the substitutes for those plastic materials have a worse environmental impact, then both the ban and the tax do not apply. Different from what we see in Italy or in Spain, the Colombian government is also developing a circular economy certificate that, once granted, exempts companies from paying the tax.”
Collection is the weakest link in recycling. It is because of poor collection that plastics like polystyrene (PS) have one of the lowest recycling rates globally, informed Ricardo Cuetos, VP Americas polymers sales management, Ineos Styrolution, who is defending PS’s unjustified bad reputation. Styrenics are 100% recyclable, if only the collection is done properly. Ineos Syrolution has developed a network of partners to collect PS waste and convert it back into styrene monomer using a depolymerization process. In another difficult to aggregate waste, low-density PE bags, which have little commercial value for collectors and recyclers, Ecopetrol developed a modified low-carbon asphalt made with recycled low-density PE – using the equivalent of 5 million plastic bags to produce 1,000 tons of asphalt. While multinationals do not have recycling facilities in the region, they have become more invested in the collection part. BASF, for instance, runs a reverse logistics program to collect leftover paints and packaging – to date, it has collected 11 tons of waste. Dow, which is one of the biggest players in the region, with 15 manufacturing locations across four countries, has established various partnerships with collectors in both Brazil and Argentina.
“We have started assembling our mechanical recycling plant in Tocancipá, near Bogotá, where we will produce superior quality recycled resins from post-consumer polypropylene and polyethylene in Q1 2024.”
Juan Diego Mejía, President, Esenttia
Finally, the third constraint is technology. Opis tracks 100 different recycling technologies under development globally. José Fernandes, VP performance materials technologies Latin America at Honeywell, thinks there is no perfect solution for the recycling of most plastics, but if mechanical and advanced recycling can be combined, most plastics are recyclable. Whereas only a small fraction of plastics can be currently recycled using mechanical recycling, advanced recycling will allows plastics like PE, PS, PP, and even PVC to be endlessly reconverted into new plastics: “With mechanical recycling, the material is shredded and then discarded in other materials (usually asphalt, concrete, steel mills), rather than being converted into new material. For rigid plastics, typically those used in electronics, this works perfectly fine, since these plastics can be remelted into a different shape, but for most plastics, chemical treatment is the best solution. Nevertheless, chemical recycling is a newly developed technology, which is why it has not been scaled up majorly.”
As it is becoming more popular for brand owners to offer products with recycled content as part of their value proposition, multinationals like Eastman or Dow continue to add to their recycled products portfolios, bringing these into the region. For example, Ben & Frank, a Mexican eyewear brand is to use Eastman’s Acetate Renew, obtained from 40% recycled content and 60% biobased content, for a fifth of their products. Eastman announced investments worth of US$2.5 billion in three new molecular recycling facilities, two in the US, and one in France. Dow has a global goal to commercialize 3 MT of circular and renewable solutions globally, using both mechanical and advanced recycling.
However, multinationals rarely choose Latam to invest in large recycling facilities, prioritizing bigger markets like the US and Europe. The task to invest in local recycling goes to leading local players. Braskem has invested in its first fully owned mechanical recycling facility in Indaiatuba, where 250 million packaging units will be converted into 14,000 tons of PE and PP. Braskem also acquired a majority stake in Wise Plásticos, a Brazilian mechanical recycler, where it wants to double its capacity to 50,000 t/y by 2026. Braskem wants to sell 1MT of products with recycled content by 2030.
In Argentina, YPF is pivoting in advanced recycling, with two flagship projects: a modular pyrolysis plant with a capacity of 300-700 t/y and an industrial one, with a capacity of 30,000 t/y equivalent of crude yearly. Using a process called pyrolysis, YPF aims to obtain pyrolysis oil, a feedstock from which it can make petrochemicals. “One may wonder why a petrochemical company is focusing on plastics recycling when we are not producing plastics. This is intentional: while there are many uses for pyrolysis oil, there are few offtakers with the capacity to transform it into petrochemical products. We treat the CYQLO OIL (which is our registered trademark for pyrolysis oil) as a conventional fuel, going to the very beginning of the value chain to make petrochemicals," said Martina Azcurra, Executive Manager, Chemicals, YPF Química.