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'It will be difficult to compete with Ceará', says CEO of the green hydrogen plant; check interview

Diálogo Econômico: In an exclusive interview, the CEO and operations director of Enegix, an Australian company that will invest US$ 5.4 billion in Ceará to build a green hydrogen plant, give more details of the project and point out the prospect of having the plant with 100 % of operation in 2025

The newest private investment in Ceará, announced by the State Government two weeks ago, should boost the local renewable energy market. According to executives at Enegix, an Australian company that will contribute US$ 5.4 billion, the project has the potential to transform the State into the largest producer of green hydrogen in the world.

In an exclusive interview with Sistema Verdes Mares, Wesley Cooke, CEO of Enegix, and Marco Stacke, director of operations at the company, stated that the new investment has the potential to guarantee a financial return to Ceará, in the future, similar to the earnings of Saudi Arabia from the exploration and production of oil.

Despite being a relatively new company, entering a market that is still little explored in the world, Enegix has already defined possible expansion strategies in Brazil, which should have Ceará as its main base. According to the executives' perspectives, the plant should be fully functional by the end of 2025, but the operation could start by the end of 2022.

In detail, Cooke and Stacke highlighted the importance of the business environment in Ceará and the infrastructure established by the State Government in Porto do Pecém as defining points for the decision to implement a green hydrogen plant.

O mais novo investimento privado no Ceará, anunciado pelo Governo do Estado há duas semanas, deverá impulsionar o mercado de energias renováveis local. Segundo os executivos da Enegix, empresa australiana que irá aportar US$ 5,4 bilhões, o empreendimento tem o potencial de transformar o Estado no maior produtor de hidrogênio verde do mundo.

Check out the full interview with Wesley Cooke and Marco Stacke

What caught EnegiX's attention to make an investment in Ceará?

Wesley Cooke: This project has been in the works for over 2.5 years and, from a hydrogen and renewable energy perspective, we did a global search to find the best place to make this investment. Specifically on hydrogen, we were looking for a place with high energy capacity with high efficiencies, and we needed all of that on a large scale to do what we intended.

Several countries have a capacity to produce renewable energy, but when we talk about wind and solar energy not all countries are the same, and Ceará had several things we needed: large-scale access to energy potential; and a deep water port, like Pecém, where we could build a large structure for the plant. This location is very important to focus on the export market.

We are looking at several important markets in Asia, Europe, Africa, and the Americas, and in Ceará, what we believe is that it will be very difficult to compete with this location in the future of the global market, because we believe that we will be able to produce green hydrogen with the best cost-effectiveness in the world here.

We have already contracted 3.5 gigawatts of renewable energy power, from 8 GW projects that we can access here in Ceará, but in addition, in the Porto do Pecém region, there is another 100 GW of capacity that had not been identified until not long ago. One of our team members was fantastic in this process of identifying this wind generation capacity, which is unmatched anywhere in the world.

For green hydrogen, you need renewable energy to show the world that it helps to reduce carbon dioxide emissions, but you also need that high energy potential and a strategic place for the export market and we believe we do, in Ceará, the best in the world.

Marco Stacke: Our team calculated that Ceará has a potential of 100 GW of offshore wind power and the solar capacity factor is very large as well. And even when you don't have solar or wind energy, you have the grid (energy) in Brazil, which is practically water, based on hydroelectric plants, so we can have a very high capacity factor and this gives us the chance to scale a project for up to 100 GW, which the entire capacity of Brazil is 124 GW, then we would be practically doubling the capacity of the entire country in Ceará alone. But what's the problem with all this? When you have so much energy you need a transmission line to the consumers, but we don't need transmission lines because we're going to export hydrogen, so we're going to have a virtual transmission line.

We're going to take the energy, turn it into hydrogen, take it to Europe and there it can be turned back into energy, then we'll have a virtual transmission line to Europe.

Our consumer is not only in Brazil, it is in Europe, the United States, Japan. And the location of Ceará is spectacular, apart from the fact that it has an excellent port, which is operated with Rotterdam. Ceará is one of the few places in the world where we fill "all the necessary boxes".

About Pecém, what is the weight of the structures already erected in Porto for the definition of bringing the plant's investments to Ceará?

W: When we were looking for a location to invest in the Plant, we found all the best conditions in Ceará, also considering a deep water port, which is Pecém, which still has a partnership with the Port of Rotterdam. We believe there is fantastic work in this location, which is perfect, as well as strategic for the export market.

M: We have a very large port in Ceará, where 500 hectares have already been set aside for us, which is great, and we have the ZPE (Export Processing Zone), where we have several tax incentives, in addition to having a strategic location.

How has EnegiX's relationship with the State Government been and what is the company's assessment in relation to the business environment in Ceará?

W: Our dialogue with the State started last year, and this has been a challenging period for any government in the world because of the Covid-19 pandemic, and in Brazil we believe that recovery after the pandemic will be very important. One thing we discovered right at the beginning of the project was that the Secretary of Economic Development of the State, Maia Júnior, and his team, whom we approached first, were always very open.

Ceará has always been very open to the innovation and renewable energy sector, so as we enter a new economy and reduce carbon emissions in the world, clearly, the State Government has a great vision of the country's potential and what Ceará can represent in the international market. We are very happy with the talks from the State, and I think we have the perfect project to match their enthusiasm for the future of the renewable energy market in Ceará.

When we started the conversation with the State, we said: "you have enormous potential, but what if we integrated this potential into our business model?" We can turn that energy potential into hydrogen, which is a great way to store energy, and which we can efficiently transform by exporting to the world.

On the other hand, we have an expanding market where we can apply our zero carbon emissions concept, which is based on re-energizing hydrogen behind gas turbines. All I can say is that we are very happy with the partnership with the State Government and this can consolidate Ceará in the renewable energy market and as a technological center in the green hydrogen sector.

Caption: CEO of Enegix signs memorandum of understanding with the State Government

Photo: Disclosure

What is the assessment of the business environment in Ceará compared to Brazil?

W: We haven't explored other states much to make a precise comparison, but about Ceará, we can say that the state is open to business, for sure.

M: Being born in Rio de Janeiro, we can see that Ceará has a very large potential for renewable energy, as do other states. You could build the same investment in Rio Grande do Norte, but there we wouldn't have a deep water port, we wouldn't have the ZPE with business incentives, and we wouldn't have Maia Júnior and the Sedet team.

We could build in Rio Grande do Norte, but we would not be able to export from there. What we are planning is that, if we expand as much as we want in the future here in Ceará, we may, in 10 years, maybe expand to Rio Grande do Norte, to Piauí, but the port will still be in Pecém. Ceará will be our base for hydrogen in northeastern Brazil.

W: There is a very big global incentive in the renewable energy market, with governments and companies looking at how the market will develop. Nobody wants to be the last to join the party, after all the chains have been organized and the technology providers have been secured. And what we're seeing is a lot of governments looking at hydrogen production plants and trying to look for supply options and where to buy this fuel from.

It all depends on price and scale, and you can produce hydrogen from anywhere in the world using solar or wind energy, other energy sources. But given the global scenario, producing green hydrogen, with no carbon emissions, is essential, and in Ceará we could already start producing now. I think our project will start very quickly and this is very important because we will be able to meet global demand as it evolves at any level.

In the next 12 months, we are looking to close energy purchase contracts around the world, mainly in locations where diesel is used as a base, even though it is an expensive and polluting fuel.

M: Our project could become the world's largest carbon emission reduction project. Base One, as we call it, will prevent 10.8 million tons of CO2 from being emitted into the atmosphere each year.

Caption: Hydrogen can be used for different purposes in everyday life

Photo: Shutterstock

What is the forecast for the start of operation of the ENEGIX project in Ceará?

W: At this moment, we can say that we have already signed memorandums of understanding with international partners and we are finalizing processes. We signed a memorandum with a global engineering consultancy and what we need to do now is start our feasibility study focused on our business model, which we will start later this year and which should take around 8 months. The objective is to look at the entire project and organize all the suppliers and markets, which should be fundamental for us to close partnerships and deals for the sale of hydrogen and the purchase of energy.

In parallel, we will work on state licenses while our global headquarters is being transferred to Switzerland. We are registered in Australia, we have an arm in Singapore and we will now be in Switzerland, and with the help of an international firm, which has an arm in Brazil, we are going to register our company in Ceará. All of this will take place in parallel with the feasibility study and our search for markets based on our business model, which can generate plants with up to 100 GW of power without any carbon emissions.

We should complete the feasibility study in the fourth quarter of this year and during this period we will talk to the market for the purchase of energy for the initial 3.5 GW that we need. After that, we can technically start thinking about the financing project, and then start the construction phase. But the technology will come from major international companies, and we'll be making important announcements about it in the coming months. This technology will be modular, so we will be able to start production very quickly, scaling up as we produce.

M: This equipment comes ready to produce. So we can scale production very quickly. It's not like a steel mill, where you have to build everything to start producing. If we have energy and water, we're going to start making hydrogen and scale from there. We already have an independent energy supplier in Brazil, which has 8 GW of solar and wind energy to be supplied in 12 months. So, just get in touch with them, and they will offer energy to our plant in up to a year, which can scale very quickly.

W: 40% of the project will be built in the first year, 70% in the second year, and in 3 years we should have 100% of the project completed and operational. So, realistically, by the end of 2022 we will already start producing. And the initial phase of production with 3.5 GW should start at the end of 2025. The hydrogen market is growing fast and if we think of hydrogen as a commodity, we can close contracts for 1 to 2 years, but if we think of it re-energized, as a project energy, we can think of 20-year contracts, something that is integrated into our business model, betting on developing markets that still use diesel-based energy sources, for example.

The government of Germany is looking to expand the hydrogen market in the world to import the product to change the energy matrix a little bit. Is Enegix already in contact with Germany or other countries to negotiate export business?

M: When we export hydrogen, we can, yes, use it as fuel, but we may have a capacity greater than the market demand because the potential of our plant is 600 million kilograms of green hydrogen per year, the which is a lot. So, even if there is no demand, we can retransform it into energy and sell it that way.

Even if there is no demand for hydrogen, we will be independent of it, as we will re-energize this carbon-free hydrogen for use in diesel-based markets in regions of Africa or Asia, for example. Our hydrogen will be very competitive with diesel and other current forms of energy.

W: There are international discussions going on right now, with partners that will help us access the European market, but we cannot discuss that now and we will have announcements in the future.

What is Base One's energy production capacity?

W: We made a calculation based on our initial plant, which will be 3.5 GW, using our business model to re-energize hydrogen, at locations in Africa and Asia, we could supply energy 7 days a week and based on current consumption of these to more than 200 million people in these developing markets.



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