The decision regarding industrial decarbonization routes has moved from the realm of technological preference to that of capital allocation. With contracted emission targets and high capital costs, industrial managers need to answer a concrete question: in which processes is it worthwhile to invest in electrolysis, and in which is the electrical grid already sufficient? Recent regional mapping studies and techno-economic analyses converge on a reasonably stable decision criterion.
The technical criterion that separates the two routes.
The most useful distinction lies in the function that hydrogen performs in the process. When it enters as a chemical input, participating in the reaction, no amount of electricity replaces it. When it enters only as an energy carrier to generate heat, it competes for space with electricity under unfavorable conditions, because each additional conversion between electricity, molecule, and heat consumes part of the original input.
This logic explains why the same technology appears indispensable in one sector and uneconomical in another. As Drielli Peyerl, a researcher at RCGI/USP, summarizes, energy transition is diversification: in some sectors hydrogen fits like a glove, and in others direct electrification is more efficient and cheaper.
Sectors where hydrogen is the right route.
The technical consensus focuses on applications classified as "hard-to-abate," where the barrier is chemical or temperature-related, not energy cost-related.
- Ammonia and nitrogen fertilizers. Hydrogen is a raw material for synthesis. Ammonia production accounts for almost half of the global hydrogen demand.
- Petroleum refining. Hydrotreating processes are structurally dependent on the molecule.
- Methanol and petrochemicals. Same input logic, with an already established logistics chain.
- Direct reduction iron and steelmaking. Hydrogen replaces carbon as the reducing agent in iron ore, something that furnace electrification alone does not provide.
- Marine fuels. Green ammonia and methanol serve long-haul routes where batteries do not achieve sufficient energy density.
The global pattern confirms this concentration. Demand still comes almost exclusively from established sectors, with refining, ammonia, methanol, and DRI dominating consumption, while new applications account for less than 1% of the total.
Where direct electrification has already won the debate.
For low- and medium-temperature process heat, recent evidence is robust and unfavorable to hydrogen. Analysis by Agora Industry with cases in Germany, Italy, and Poland shows that direct electrification cuts more emissions and more primary energy than alternative routes, reducing the cost of industrial heat by about 20% when heat pumps are adopted where feasible, while hydrogen reduces emissions later and at a significantly higher cost.
The technical limitations of electric technologies already cover a large part of the manufacturing industry. Large-scale industrial heat pumps are consolidated to deliver heat up to 150 °C, and electric boilers generate steam up to 350 °C at around 70 bar. From an economic standpoint, scenarios for 2030 indicate that high-temperature heat pumps utilizing waste heat achieve a levelized cost of heat between 30% and 60% lower than hydrogen boilers.
The trend is also reflected in sectoral merit rankings. In the Hydrogen Ladder review, medium and low-temperature industrial heating was downgraded precisely because of the advancement of high-temperature heat pumps. In practical terms, food and beverage, textiles, paper, fine chemicals, and a large part of light metallurgy find electrification to be the route to the lowest total cost.
What does Brazilian mapping add to the decision?
The work of Cachola and Peyerl brought geographical granularity to the debate. The analysis cross-referenced data from 5,569 municipalities for production potential and 2,569 for industrial consumption, considering location, proximity to energy infrastructure, industrial CO₂ emissions, water security, solar incidence, and wind speed. The result pointed to seven production clusters, concentrated in the Northeast, and ten consumption clusters, located mainly in the South and Southeast.
This territorial asymmetry alters the viability calculation. An industrial plant in the Southeast that considers hydrogen for process heat faces, in addition to the conversion penalty, the cost of transportation from another region. Among the solutions discussed are industrial hubs that bring production and consumption closer together, adapted pipelines, and conversion to green ammonia for long distances, taking advantage of existing port know-how.
There is also a Brazilian factor that reinforces electrification where it is technically feasible: more than 80% of the country's electricity comes from renewable sources. Electrifying the process in Brazil immediately decarbonizes the economy, without depending on the maturation of a new logistics chain.
Four questions before defining the route.
- Would hydrogen be used as a chemical input in the reaction or only as a heat source?
- What temperature and pressure are required by the process, and do they fit within the casing of heat pumps or electric boilers?
- What is the plant's geographical location in relation to renewable energy production clusters and grid infrastructure?
- Is there firm demand and a long-term contract capable of sustaining investment in electrolysis?
Conclusion
The map emerging from recent studies is less contested than public debate suggests. Green hydrogen easily occupies chemical and very high-temperature processes, where the molecule is irreplaceable. Direct electrification dominates process heat below the threshold where heat pumps and electric boilers operate. Companies that make this distinction before committing capital reduce stranded asset risk and accelerate their own decarbonization curve.
