Voltalia targets green hydrogen in Brazil as it ups renewable generation capacity

Voltalia and Brazil's Rio Grande do Norte state recently signed an MoU to study the development of a plant to produce green hydrogen and its derivatives, green ammonia and e-methanol. 

The company plans to use renewable energy generated in a 2.4GW cluster it is implementing to supply the undertaking, Voltalia's CEO in Brazil, Robert Klein, tells BNamericas in this interview. 

The executive discusses Voltalia's ongoing projects and investments in the country and analyzes the outlook for the energy market amid the current inflation and hydrological conditions.

BNamericas: Why the decision to sign the green hydrogen MoU with the government of Rio Grande do Norte?

Klein: Today we have more than 1GW in operation in Rio Grande do Norte. We went into operation last year with [solar park] Serra do Mel, whose installed capacity is 320MWp and which is part of a wind and solar cluster called Serra Branca with potential of 2.4GW. 

We’re now building a solar park with 260MWp, so we’re close to reaching this potential, forming one of the biggest wind and solar clusters in the world. 

The government of Rio Grande do Norte is studying the creation of a port, something that this state lacks. We import a lot of equipment through Pecém port, in Ceará. Apparently, the government has already defined a place, near Caiçara do Norte. And they want to create an industrial port, focused on sustainability and not only for imports and exports. They intend to attract green industries. 

The agreement we signed is aimed at studying the best conditions for the installation of a green hydrogen plant, in order to optimize the operations of the port. 

But we’re also analyzing other locations. The goal is to generate the greenest and cheapest hydrogen possible.

BNamericas: Are you already considering a capex range and a date to start operating?

Klein: Not yet, we’re at a very preliminary stage and this will also depend on the implementation schedule of the port in Rio Grande do Norte.

BNamericas: What will be the destination of the products, namely green hydrogen, green ammonia and e-methanol?

Klein: We believe that there is a domestic and international demand. To reach a scale effect to have a competitive price, it’s necessary to think about both the domestic and foreign markets. That's why investors have been looking at ports. There’s a demand for diversification of energy sources, especially after the war in Ukraine. 

Most of the green hydrogen projects that have been approved in Brazil have between 1GW and 3GW of equivalent energy capacity. And we have the necessary raw material [energy]: 70% of the cost of green hydrogen is in our hands. We have energy, we know how to take advantage of complementarities between wind and solar sources, and we know how to operate the plants.

BNamericas: How are the projects going for the Canudos wind farm in Bahia and the Cambuí and Cafezoca small hydro plants in Minas Gerais and Amapá?

Klein: Canudos is in the final stages of implementation and we expect to start generating in the coming months. Cafezoca, which is part of a solar, thermal and hydroelectric complex, is under construction. As for Cambuí, we expect to start construction soon. 

The Serra do Mel 1 and 2 solar parks will go into operation in 2022. And, also last year, we started the expansion of Serra do Mel 3 to 6, which should go into operation in the second half of this year.

BNamericas: What other developments are in the company's portfolio?

Klein: We have some gigawatts at more or less advanced stages under development. But getting PPAs [power purchase agreements] today is a little more difficult, given the rising costs of the projects and the reduced PLD [difference settlement price, the basic reference for energy prices in the short-term market]. 

There are also distributed generation [DG] projects through Helexia. We started generating the first GWh last week for Vivo. We’re going full steam ahead with a number of other DG projects that should come on stream this year. 

We started our energy commercialization operation in 2021 and we’re doing well, getting closer to the clients, selling our own energy and also third-party energy. 

Meanwhile, we build and operate other companies' plants. We’ve achieved more and more success, especially in the area of operation and maintenance of wind farms.

BNamericas: How do you see the competitiveness of wind and solar sources in Brazil, given the rise in input costs and the current financing conditions?

Klein: The current cost, in comparison to the pre-pandemic period, is significantly higher. Capex, opex, transportation cost from China to here, the high demand for solar panels worldwide .... In addition, there’s been a devaluation of the real and, more recently, interest rate growth. So it’s more difficult for the final consumer to contract energy in the long term. 

But this is a momentary thing. The PLD is quite low because of the increase in rainfall. We’ve experienced several periods with these characteristics. The last one was from 2015 to 2018. But the cycle of strong investments will return. The new demand is being supplied partly by DG, so this doesn’t favor centralized energy for the time being. However, a new water crisis, higher-than-expected growth and/or a strong demand for green hydrogen energy, as well as transmission bottlenecks, could change this outlook.

BNamericas: What is Voltalia's forecast for investments and expansion of installed capacity in 2023?

Klein: We plan to start operating 367MW in 2023, between wind, solar and hydro power. A few hundred million reais will be invested for sure. We have 1.5bn reais [US$280mn] for the 367MW, and there's at least half to invest, considering about 5mn reais per MW installed. The wind farm is the one that requires the most investment and that's where we’ve spent the least so far.

BNamericas: Any additional comments?

Klein: Our projects are structural, from a social, environmental and economic point of view for Rio Grande do Norte and the northeast region in general. Not only do we generate lots of jobs and taxes, but we train people, hire local labor and provide scholarships for local students. 

I also want to point out that Brazil is in a moment of possible historic change from the point of view of industrial policy. We have the chance to have the cheapest renewable energy and green hydrogen, ammonia and e-methanol in the world. So this could not only allow us to export more raw materials, but to import industries into Brazil and thus export finished products with energy. 

We have to find a way to encourage local industries. For example, in the case of fertilizers, it doesn't make sense to export green ammonia and then import the fertilizers.