What experts think of Brazil’s hydrogen potential

The Brazilian renewable energy generation market has grown over the past six months through a series of deals involving new green hydrogen plants.

One forerunner was Fortescue Future Industries (FFI), which in March signed a memorandum of understanding with Porto do Açu Operações to build a 300MW green hydrogen plant at the port of Açu, in Rio de Janeiro state.

However, most of the agreements were signed with states in the northeast of the country that, in addition to having many wind and solar farms, are relatively close to the European and North American markets.

The Australian Enegix, the Brazilian White Martins and the French Qair also signed memorandums of understanding with the port of Pecém, in Ceará. And the latter sealed an agreement with the port of Suape, in Pernambuco. Total capex is at least $ 22 billion.

BNamericas spoke with White Martins LNG and hydrogen director Guilherme Ricci (pictured left) and Enegix COO Marco Stacke (pictured right) about plans and prospects.

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BNamericas: Why did White Martins sign a memorandum of understanding with the state of Ceará?

Ricci: We belong to Linde, which is a pioneer in the production and distribution of hydrogen. We have been in Brazil for 109 years, with a strong local industrial presence.

We have an air and gas plant [oxígeno, nitrógeno para uso médico y petroquímico, por ejemplo] in Pecém. So we have nitrogen available there, which [en combinación con hidrógeno] It is an important component for making green ammonia.

Our project foresees the production of green hydrogen, its transformation into green ammonia and the export of this product to Europe, which already has more advanced protocols and laws for decarbonization objectives.

And in addition, Ceará is a privileged region, with high solar irradiation and wind availability, which allows access to a productive chain with affordable costs.

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BNamericas: Is White Martins also considering sourcing locally?

Ricci: The port requires that the project have a large percentage dedicated to export. However, something can be released for the national market and there are clients in the region that will be able to use hydrogen.

As we already have several applications for the use of conventional gray hydrogen, it would be very productive, at some point, to migrate to the decarbonization of gray hydrogen to green. There is already a demand in the country from some potential customers to understand the green hydrogen mechanism.

BNamericas: Could you provide some details about Pecém?

Ricci: We are evaluating the Earth’s capacity, distance to utilities, potential for solar and wind power, and cost of energy, which will determine how much is manufactured.

Some equipment will be imported and we are studying how we will internalize it in Brazil using free zones. So talking about the size or value of investments would be premature.

Editor’s note: A legal framework for Export Processing Zones (EPZs) was recently approved to boost the industrialization port.

BNamericas: Where would you get the renewable energy for the hydrogen plant?

Ricci: Hydrogen will always be an ecosystem of companies. A [fuente] She will not be able to master the chain alone. Since we signed the memorandum in May, we have been contacted by the largest renewable energy producers in the country, which already operate large parks in Ceará. So this will not be a problem for us.

BNamericas: Would power supply contracts look like PPAs?

Ricci: We understand that it would be through PPA. We had a round of conversations with him [Ministerio de Minas y Energía] MME a few weeks ago. The portfolio is already beginning to write green hydrogen policies, looking at the potential benefits, whether or not there will be carbon taxes.

This will be very important to incentivize these projects. The contractual model will depend on the eventual benefits, the fiscal and tax model. In the world this varies.

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BNamericas: Which are the main challenges for the development of the hydrogen market in Brazil?

Ricci: We hope that throughout this year, no later than early 2022, following the example of what was done in Chile, legislators will be able to effectively define the regulatory framework to give more stability to companies that are willing to invest. This will determine the speed of implementation of the projects.

BNamericas: Does the signing of memorandums of understanding accelerate this regulatory work?

Ricci : Yes, the authorities already feel pressured. And there is pressure coming from the US, from Europe. Apparently the state of São Paulo is also defining decarbonization targets.

It is an unavoidable path. Brazil has great renewable potential and we have industry to absorb it. We are importers of ammonia, of fertilizers, we have a very large consumer base. Brazil has everything to be an actor in this new fuel market of the future.

MARCO STACKE AND ENEGIX

BNamericas: Why did Enegix sign a memorandum of understanding with the state of Ceará?

Stacke: Ceará offers a unique combination of location, government support, port infrastructure, renewable energy potential, and water availability.

To start Base One, a 3.4GW base load green hydrogen production facility, in 2023, Enegix decided to start early with the feasibility study and permitting to secure a first-mover advantage.

BNamericas: Where will the hydrogen from Base One?

Stacke: Some 99% of the 615,000t of hydrogen produced annually will be exported. Enegix will provide hydrogen for the local market to displace diesel base load generation in isolated areas.

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Hydrogen can generate energy 30% cheaper than diesel and only emits water. Hydrogen can also be provided for mobility (ships, trains, trucks) very competitively and will soon be competitive for cars, airplanes, helicopters, motorcycles.

BNamericas:Where will the energy for plant? Has the company already closed supply?

Stacke: Enegix signed a pre-agreement to buy 8GW of solar and onshore wind power. With the high capacity factor, we expect 3.35GW of equivalent base load power.

BNamericas: Is Enegix considering other agreements to build hydrogen plants in Brazil? For example, near the ports of Suape or Açu?

Stacke: Enegix will focus on Base One in Pecém for now. The company studies the location of Base Two based on the availability of water and renewable energy close to the existing port infrastructure.

BNamericas: What are the main challenges for the development of the hydrogen market in Brazil?

Stacke: There are four main challenges. First, the lack of port infrastructure: Brazil has the potential to become one of the largest hydrogen exporters, but there are a relatively low number of ports with large export capacity. Second, the availability of water: although there is a lot of fresh water in the country, the infrastructure necessary for the production of hydrogen demands a lot of water in the port. Third, the lack of local demand for mobility, industry, and power generation; and finally, high taxes and duties: Brazil is known for its complicated tax system and its cumulative taxes and duties that end up being among the highest in the world.