Brazil pushing forward with offshore wind, green H2 regulations

Brazilian lawmakers have approved bills to regulate the offshore wind generation and green hydrogen markets. 

Lawyers told BNamericas that the rules – which will now be reviewed by the senate – are positive for the development of these activities in the country.

The offshore wind bill states that it will be up to the federal government to define which areas are suitable for the installation of generating equipment, avoiding potential conflicts in the use of these areas.

The text also incorporates changes to the obligation to contract energy from natural gas-fired thermoelectric plants linked to the privatization of Eletrobras and determines the purchase of backup energy generated from coal.

Similarly, the sectors that will be granted permits to exploit offshore electricity can be transferred to other activities if there is compatibility for multiple use in conjunction with the use of the energy, and if the technical and environmental requirements and conditions for the intended activities are met. This would be the case with underwater mining, for example.

The right to market carbon credits or similar assets may also be included in the grant, according to the regulations.

The concessions will be granted either through authorization accompanied by a call for tenders or through a concession facilitated by a bidding process, when a public tender is involved.

The maritime area involved is the territorial sea (22km from the coast), the continental shelf (on average 70km to 80km), the exclusive economic zone (EEZ), located up to 370km from the coast. 

Other bodies of water under the government's domain are also covered, such as rivers and lakes that border more than one state or border another country.

The transfer of use of the area to generate offshore energy can take place in the form of a permanent offer (similar to oil and gas open acreage), when the public authority delimits areas for exploitation based on the request of interested parties, generating authorizations.

In the case of a planned offer, the granting public authority itself defines areas that will be put up for bidding, creating a concession.

The regulations will define in advance which sectors can be the subject of suggested exploration areas by interested parties and which will be planned by the granting authority.

It should also define the procedure for interested parties to submit suggestions for prospective areas at any time, for which a preliminary study will be required, including a definition of the location, an analysis of the energy potential and a preliminary assessment of the degree of socio-environmental impact.

If the evaluation of certain prospects concludes that it is not feasible to serve them all in a certain area or results in a spatial redefinition, the offer will have to be made through a bidding process with planned areas.

In the case of planned offers, which are dependent on a bidding process, it will be up to the granting authority to carry out the relevant environmental studies to define and delimit the sectors to be bid on.

Although the grant confers the right to exploit energy generation in the sea, the grantee must also seek authorization from Aneel.

"The approved text will, to a large extent, ensure legal certainty for agents," Eduardo Evangelista, a partner in the regulatory and energy areas at law firm Souto Correa, told BNamericas. 

He highlighted several positive aspects of the bill, noting that that it explicitly requires expressions of interest in offshore wind generation areas to be accompanied by socio-environmental, technical, and economic feasibility studies.

"The inclusion of solar power generation on bodies of water in the regulatory framework was also interesting," added Evangelista.

According to Bruno Perman, a partner at Perman Advogados Associados, the offshore wind project aligns well with international benchmarks, citing regulations in Spain, the UK and Scandinavian countries.

"It doesn't restrict activities in terms of rates and bonuses. It's very favorable to the sector," he told BNamericas.

Brazil’s petroleum and gas institute IBP, which supports the federal bill, says that offshore wind has great potential in the country and is an opportunity for Brazil to consolidate its position as a major player on the global renewable energy scene. 

"The possibility of developing projects using existing infrastructure, such as [oil] platforms, is just one example of the competitive advantages that the oil and gas industry can offer for the implementation of offshore wind activities," IBP said in a statement. 

Brazil’s energy consumers association Abrace criticized the extension of subsidies for coal-fired power plants, which it says will force Brazilian society to foot a of 40bn reais (US$8bn) a year.

"And so the electricity sector moves further and further away from its potential to offer clean, cheap and safe energy," it said in a statement.

Rio de Janeiro’s industrial association Firjan said that, as proposed, the bill burdens the economy as a whole to fund projects that have nothing to do with offshore wind farms.

Firjan said that the revision of the ceiling price for natural gas-fired power plants is a measure that will artificially promote the generation of energy from gas in places that have no vocation for it and which are far from centers of consumption. 

“Taking gas to remote locations and then returning this input – in the form of electricity through transmission lines – makes no sense. Raising the price will generate a substantial increase in the cost of generation, which will be paid unnecessarily by the consumer,” the association said in a statement. 

GREEN HYDROGEN

According to the approved text, low-carbon hydrogen will be considered to be that which, in the life cycle of the production process, results in an initial value less than or equal to 4kg of carbon dioxide equivalent per kilogram of hydrogen produced (4kgCO2eq/kgH2). 

This figure represents the intensity of greenhouse gas emissions, but should be adopted by December 31, 2030, and should be regressive from that date onwards.

The text – which has been submitted for the review of the senate – also defines renewable hydrogen as that obtained using renewable sources, including solar, wind, hydraulic, biomass, biogas, biomethane, landfill gas, geothermal, tidal and oceanic power. 

Despite making it clear that adherence to the certification system will be voluntary on the part of producers of hydrogen or its derivatives, the text creates the "Brazilian hydrogen certification system” (SBCH2).

The certification will attest to the intensity of greenhouse gas emissions in the production of hydrogen, and agents who join must comply with the rules and governance.

The bill creates a "Brazilian standard" for certifying low-carbon hydrogen. The regulation should specify which types of greenhouse gas emissions should be considered, which stages of the production process should be covered by the certification system, the criteria for suspending or canceling certificates, information on negative emissions, if any, and flexibility instruments that can be adopted in cases of temporary loss of hydrogen specification.

On the other hand, the regulatory authority should provide for harmonization mechanisms with international hydrogen certification standards, and may provide rules for recognizing certificates issued abroad.

The bill also determines that the national hydrogen program (PNH2) should incorporate the national low carbon hydrogen policy.

Meanwhile, the activity of producing low-carbon hydrogen and other associated activities, such as processing, treatment, import, export, storage, packaging, transport, transfer, resale and marketing, will depend on authorization issued by the local oil and gas watchdog ANP. 

Another source of funds to encourage the sector will be through the low-carbon hydrogen development program (PHBC), established by the approved text.

Evangelista considers the text to be quite complete, specifying terminology and making life easier for entrepreneurs. He also applauded the establishment of a "Brazilian standard" certification. 

"This puts Brazil on a firm footing, respecting national particularities, which will probably mean less bureaucracy," he said.

Bruno Perman, who is also a consultant for the parliamentary energy committee and the energy transition institute, says the green hydrogen bill is a step in the right direction. 

"The main point against the bill was the issue of subsidies, which were eventually removed from the text because they were challenged by other sectors, so it was possible to reach an agreement for its approval," he said.

Luiz Piauhylino Filho, secretary for green hydrogen at the national clean energy institute (Inel), regretted that the approved text did not make any progress on the issues of incentives and funding from the federal government, "unlike what has been done and proposed by other regions such as the European Community and the US," he told BNamericas.