Q&A: Enegix Energy on hydrogen, net-zero and energy poverty

Enegix Energy is readying the Base One project in Brazil, a 3.4GW green hydrogen facility expected to be worth US$5.4 billion (£3.86bn €4.45bn). inspiratia caught up with Wesley Cooke, founder and CEO of Enegix about the company's vision, the green hydrogen demand market, and how hydrogen is not only a way to achieve net-zero, but also to tackle energy poverty

In March [2021], the hydrogen energy company announced the Base One project. The 3.4GW project aims to produce 600 million kg of green hydrogen per year through a combination of onshore wind and solar capacity.

Enegix is currently running a series A funding round to get the project off the ground and has signed a memorandum with engineering firm Black & Veatch to carry out a feasibility study. 

inspiratia delved into the ambitious company's story to find out more. 

How did Enegix get started?

Two and a half years ago I started putting the groundwork together for Enegix. I met Marco Stacke, our COO, over a decade ago and a lot of what we are doing comes out of his experience on the ground; he is an engineer with a real passion for renewables, like myself.

I come from a tech background and have travelled extensively to developing markets. From quite early on, I knew that unlocking energy poverty is basically unlocking poverty. Marco and I had an allied vision to do something significant that can actually turn the tide on people left in the dark.

What we came across when we were doing our research was hydrogen, and this is really where the company started. For the last two and a half years, we have been accruing great minds and likeminded individuals into the company to help us achieve our vision.

Where did the idea of the Base One project come from?

In late 2018 we started developing a business model specific to Enegix and looking at hydrogen. We then started to build a substantial financial model to support this. One thing that was very important to us early on was making sure that the project was going to be bankable, not just a good idea.

We built a whole sensitivity analysis with this as well and we started looking at inputs from many different suppliers all over the world.

We knew that to make hydrogen work we really wanted to be able to do something at scale. Today, there is just not enough of it, and 99% of today's hydrogen is used for industrial purposes. If we are going to decarbonise industry, economies, both from an electricity perspective and a mobility perspective, we need to move past talking about the future of hydrogen and start to build it.

We found out very quickly that there were a few key sensitivities that made all the difference with a large-scale green hydrogen project; access to baseload renewables; access to water and access to markets.

I mentioned baseload because when you look at the efficiencies of PEM (Polymer Electrolyte Membrane) electrolysers, for example, it is always better to run these systems full time.

Access to water is not so much about costs, although water is becoming scarcer globally, but really around the quantities required. We are talking about producing 600-700 million kg of hydrogen when the site is fully built in 2025. At 9 litres of water per kg we would need billions of litres of water, which is not readily available everywhere.

A good port infrastructure gives you access to key markets. There is a local market in Brazil for hydrogen, but a deep-sea port is really an important piece of the puzzle that needs to be there with our business vision specifically. We found that the Port of Pecém in the State of Ceará in the north east of Brazil has those very specific components that will allow us to make hydrogen at the lowest cost globally, indefinitely.

Were there any problems dealing with government bodies in Brazil?

The state of Ceará had a very developed roadmap for hydrogen which they had been working on for quite some time. When we took our proposal to them, the conversations moved very well, and we worked towards the signing of the MOU which happened in February [2021].

I think that you need a few things to make hydrogen work. First, you need the location, the right assets, the resources locally. Secondly, you need an enormous amount of collaboration across all sorts of industry partners to pull off a project of this size.

Hydrogen has this huge potential as an energy vector of the future to liberate renewables. When we spoke to the Government in Ceará about this they did not just catch our vision, they already had it.

What does the funding plan look like?

Enegix is in the middle of a series A fundraise. The series A is quite small in the grand scheme of things, but this is a very sizable project, US$5.4 billion (£3.86bn €4.45bn) in total. We expect to be very oversubscribed on the series A – we have had over 60 requests for data room access in just the last four weeks and we are finalising a lot of NDAs now and we are sending out terms sheets.

We have signed a few very significant MOUs; one with Ceará, and another with engineering firm Black & Veatch to run our feasibility study later this year. We have been inundated with requests from all manner of global parties.

We are currently registering Enegix as a company in Brazil, to be headquartered in Ceará. We are moving forward with our engineering designs so that we can apply for our environmental licences and look at all the social aspects of the project.

Finally, we are thinking very strategically about what the timeline is going to be before we can break ground. The biggest thing that needs to happen between now and then is securing contracts for the offtake of hydrogen.

We are hoping to get the feasibility study finished by the end of this year and then we will be able to start timing the PPAs for offtake and for fuel supply contracts. By Q1 2022, we want to have the PPAs signed and locked in so that we can, by the end of Q2 2022, move to financial close.

What is the demand for green hydrogen looking like?

One thing that we are totally obsessed with at Enegix is the fact that renewables are fantastic, and we believe in them 100%, but they have not been liberated yet. Hydrogen is the energy vector that can allow renewables to be accessible and baseload everywhere.

We are expecting the PEM technology to have a significant curve regarding green hydrogen costs over time. Our financial models are based on numbers that we have received from global suppliers today, none of our models are based on future efficiencies or cost benefits. When those happen, we believe that the addressable market for hydrogen will significantly increase in size.

We are focused on being able to transport that hydrogen internationally and sell it as a power product to compete with high emission hydrocarbons, like diesel. You would be able to replace the PPAs of diesel with a completely new product which would emit zero emissions and be 20-30% cheaper than diesel today.

We see this initial project as a small part of a much larger picture. The 3.4GW Base One project is going to give us roughly 2GW of sellable contracts. We have estimated the global diesel market at around 30-60GW of potential. If we then move over to the coal market, we are talking at about 2000GW, with another 500GW in the pipeline. So, this market is very substantial.

If we could do diesel replacement with this initial 3.4GW, then the Base One project will singlehandedly become the world's largest carbon emissions reduction programme, removing over 10 million tonnes of carbon from the atmosphere every year.

In which storage technique are you basing your export model?  

For the last two years, we have been focusing on a LOHC (liquid organic hydrogen carrier), a technology that has been commercialised already. It is a molecule which allows you to bind hydrogen, as a gas, to a stable liquid at ambient temperature. It will allow us to transport hydrogen in a non-toxic, non-flammable, and non-explosive way, which solves a huge number of problems with the current transportation of hydrogen across the world. The best part about it is that it's going to be at least 10-12 times more efficient than transporting hydrogen through compression over water and 50-60 times more energy dense per litre than transporting hydrogen as ammonia.

LOHC uses a hydrogenation and dehydrogenation process to bind and extract the hydrogen from the liquid and is also cyclical, meaning we can reuse the liquid many times by sending it back to Brazil to continue the process with minimal losses in the transportation supply chain.  

How is Enegix going to achieve its goal to reduce energy poverty?

Energy poverty is something that is very close to our hearts at Enegix. Coming out of Covid-19, there has been some recession of global development goals; it is going to take a lot of will to move that needle forward again against enormous odds.

We are going to have another 1 billion people born between now and 2050 and the vast majority of these are going to be in Africa and Asia. If we do not find those solutions today, then this next billion people are going to be using hydrocarbons for their energy needs. Hydrogen gives us the ability to transport energy very cost effectively. We are already working on patents for two unique products that are specifically designed to solve problems in emerging markets with regards to power generation using hydrogen.

It costs governments tens of billions to subsidise 50-60GW of diesel power in hard-to-reach locations. We are confident that we can supply hydrogen to displace this diesel at a lower cost.

We are also setting up the Enegix Foundation, where 10% of our profit will be going into. The foundation will provide subsidies and energy grants for developing nations where net-zero grids, even at those reduced rates, would not be able to be adopted. We can combine a very streamlined commercial model with a very strong international foundation to make sure that we can start solving this problem in the short term.