Hydrogen is at the center of the global energy transition, and Brazil has the potential to become one of the leading producers and exporters of this fuel. However, turning this potential into a profitable business requires strategic planning, technical knowledge, and a well-defined corporate structure. Entrepreneurs looking to enter this market must evaluate aspects such as production costs, infrastructure, legal feasibility, and contractual security. This article discusses practical challenges and strategies for structuring a hydrogen enterprise in Brazil.
1. Corporate structure: Ltda. or S.A.?
Choosing the corporate structure is one of the first steps in setting up a hydrogen business. There are two main options:
- Limited Liability Company (Ltda.): offers management flexibility and fewer regulatory requirements, making it ideal for startups or companies that do not yet need to raise large external investments.
- Corporation (S.A.): allows for greater corporate governance and capital raising through stock issuance. This structure is recommended for large-scale projects that require high investments and need to attract foreign capital.
The choice will depend on the size of the project and the financing strategy. If the goal is to attract institutional investors, an S.A. may be more appropriate. On the other hand, if the focus is on an initial development with less bureaucracy, an Ltda. may be the best option.
2. Financing and investment raising
The hydrogen sector requires significant investments in infrastructure, technology, and certification. The cost of an electrolysis plant, for example, can range from US$ 500,000 to US$ 1.5 million per megawatt of installed capacity.
Companies interested in this market should explore different sources of financing, such as:
- Private investment: venture capital and private equity funds are increasingly paying attention to clean energy projects.
- Strategic partnerships and Joint Ventures (JVs): large projects can be made viable through partnerships between companies that share risks and investments.
- Credit lines and government incentives: programs like ReHIDRO (Special Incentive Regime for Low-Carbon Hydrogen Production) should be considered to reduce operational costs.
The economic viability of the project will depend on structuring long-term supply contracts, ensuring revenue predictability and reducing risks for investors.
3. Infrastructure and Logistics: what to consider?
Hydrogen storage and transportation are critical challenges. Unlike conventional fuels, hydrogen requires specific storage conditions and can be compressed, liquefied, or converted into ammonia. Each method has a cost and impact on project feasibility:
- Compression (gaseous H2): requires high-pressure tanks (350-700 bar), with an average cost of US$ 1-2 million per large-scale storage unit.
- Liquefaction (liquid H2): requires temperatures below -253°C, increasing the process’s energy cost by up to 30%.
- Use of chemical carriers (ammonia, methanol): can reduce transportation costs but requires additional infrastructure for hydrogen conversion.
Brazil does not yet have a network of pipelines adapted for hydrogen transportation, making road transport the primary short-term alternative. This increases logistics costs and requires detailed planning to ensure competitiveness in the final product price.
4. Certification and regulation
The hydrogen market is subject to certification standards that ensure product traceability and classification as green, blue, or low-carbon hydrogen. In Brazil, the Brazilian Hydrogen Certification System (SBCH2) should establish clear criteria for product validation in domestic and international markets.
Companies planning to export hydrogen must be aware of the requirements of the European Union and other regulated markets, which may demand rigorous proof of origin and environmental impact of the produced hydrogen.
5. Contractual security and business structuring
Hydrogen projects depend on well-structured agreements with consumers and partners. The lack of demand predictability can make investment highly risky. Some strategies to mitigate this risk include:
- Power Purchase Agreements (PPAs) for hydrogen: long-term contracts that guarantee hydrogen purchase at a fixed price, providing security for investors.
- Memoranda of Understanding (MoUs): used to align expectations and initial commitments between companies before formalizing definitive partnerships.
- Clear governance in JVs: joint ventures need to define shareholding, governance, and exit mechanisms to avoid future conflicts.
Legal security and clarity in contracts are fundamental to attracting investments and ensuring project viability.
In summary, Brazil has clear competitive advantages to become a global player in the hydrogen sector, but the challenges are significant. Structuring a business in this market requires detailed planning in governance, financing, logistics, regulation, and contractual security.
Companies that can overcome these barriers will be well-positioned to capture opportunities in a market expected to move trillions by 2050. The question for investors and entrepreneurs is not just when to invest but how to structure a business model that minimizes risks and maximizes returns in the hydrogen sector.
