Bahia: Strategic vision for the development of the low-carbon hydrogen economy

The state of Bahia has stood out on the national and international scene as a pioneer in the energy transition based on low-carbon hydrogen. With political initiatives, strategic partnerships and technological advances, Bahia is consolidating its position as a hub of excellence in the sector. In this exclusive interview, Roberto Fortuna , PhD in Applied Sciences in Energy and Environment from UFBA , Special Advisor to the Office of the Secretary of Environment of the State of Bahia and expert in energy transition, shares the challenges, strategies and trends that shape the future of hydrogen in the region.

Integration between research, infrastructure and public-private partnerships

Since 2021, Bahia has been structuring a political model for energy transition based on low-emission hydrogen. Comprehensive diagnoses were carried out on the role of renewable energies in hydrogen production and analyses of the strategies of countries such as Germany, the United States and China. This effort resulted in a model based on five interconnected axes: institutional regulations, scientific and technological basis, infrastructure, market development and management and governance .

Highlights include the launch of decrees exempting ICMS (Brazilian State Tax on Goods and Services) for renewable energy used in the production of low-carbon hydrogen and the creation of the State Plan for the Green Hydrogen Economy (PLEH₂V) . The partnership with Senai-Cimatec for the development of the Atlas H2V Bahia also identified strategic regions for production hubs and economic clusters. "Our focus is to act with shared management and efficient governance, promoting legal certainty and attracting private investment," says Fortuna.

Overcoming regulatory barriers and unlocking market potential

Even with the approval of the hydrogen legal framework in Brazil, challenges such as the absence of mature supplier ecosystems and the lack of qualified human resources remain . In Bahia, a significant advance was the approval of Law No. 25,437/2024, which instituted the State's Energy Transition Policy

In addition, the state is investing in decentralized regional hubs , which reduce transportation costs and encourage smaller-scale projects. Another highlight is the Bioenergy Atlas , which maps the potential of biomass in the state, from urban to agricultural waste, encouraging the integration of production chains and the generation of biogas and biomethane.

The strategic role of synthetic fuels and biomass in decarbonization

E-Fuels are crucial to decarbonizing transportation , generating jobs and boosting high-value-added exports. Bahia has competitive advantages, such as the availability of biomass and leadership in solar and wind energy. "We don't want hydrogen to be a new 'Pau Brasil'; we seek to add value through advanced technological routes, such as biomass reforming," highlights Fortuna.

Still, the country needs to invest more in technologies such as carbon capture and storage (CCUS) to consolidate its global position. "Bahia is committed to leading these innovations, integrating agriculture, industry and research," he adds.

Perspectives and trends for the hydrogen market in Brazil and Bahia

The outlook is optimistic, but there is still a long way to go. “We don’t expect an immediate revolution,” warns Fortuna. Factors such as high costs for low-emission hydrogen and disproportionate incentives for the oil and gas sector still hinder competitiveness.

However, the legal framework is an important step. In Bahia, the focus is on requalifying sectors such as the Camaçari Industrial Complex and agribusiness in the west of the state . "We need clear goals and integration between agriculture and industry to structure biomass supply chains. With regulatory and technological advances, Bahia's potential to lead this transition is enormous," he concludes.

Bahia's strategy is an example of innovation and leadership, which not only positions the state as a protagonist in the hydrogen market, but also inspires a replicable model for other regions of Brazil and the world.

Check out the full interview below:

RadarH2: How can Bahia consolidate itself as a national model of integration between research, infrastructure and public-private partnerships to lead the energy transition with a focus on low-carbon hydrogen and its derivatives?

Fortuna: Bahia began to structure its political model for transitioning to a low-carbon economy based on hydrogen and its derivatives in 2021. We carried out two internal diagnostics on the role of renewables in hydrogen production and its importance for the energy transition, such as the study Perspectives for the insertion of Green Hydrogen and its derivatives in the industrial sector of Bahia (in selected segments). We also analyzed the hydrogen strategy of more than eight countries, such as Germany, the United States, Australia, China, etc.; we carried out technical visits and meetings in several states, countries and with some major companies in the energy, chemical, petrochemical and oil and gas sectors.

Based on the results obtained, we realized that our model should be structured on transversal axes that feed into each other. We then defined five axes: Institutional Normative; Scientific and Technological Base; Infrastructure; Market Development; Management and Governance.

The regulation is transversal to all others, in which we issued Decree No. 20.970/2021, which exempts from ICMS the acquisition of electricity generated from renewable sources intended for the production of hydrogen and green ammonia in the State of Bahia. Then it was Decree No. 21.200/2022 that instituted the State Plan for the Green Hydrogen Economy - PLEH₂V and the State Program for the Green Hydrogen Economy - PREH₂V (included in the 2024-2027 Multi-Year Plan) . Additionally, and to allow for more efficient management and governance, we instituted, by Ordinance of the Governor, the Special Commission for the Implementation of the Green Hydrogen Economy in Bahia.

More recently, we took a new leap forward in consolidating this model, with the approval by the Legislative Assembly of Bahia of Bill No. 25,437/2024, which establishes the Energy Transition Policy of the State of Bahia and the State Energy Transition Program – PROTENER . It also establishes the Monitoring Committee of the State Energy Transition Plan.

To promote the market, in addition to tax incentives, we hired Senai-Cimatec to jointly develop the Atlas H2V Bahia , which mapped the production chains associated with H2V; developed mathematical models and projections that supported our planning and the identification of locations with potential for hydrogen chains in Bahia. The geospatialization of the results identified preferred regions for the implementation of hubs and the proposal of 04 Clusters in Bahia.

For the CT&I Axis , Memorandums of Understanding were signed with 10 Science and Technology Institutions (ICTs) operating in Bahia to promote and develop technology and innovation in the scope of low-carbon hydrogen and energy transition.

Please note that in addition to legal standards to ensure legal security for our actions and private investments, we always act based on shared management of transversal and intersectoral policies and efficient governance.

RadarH2: What innovations in the national and state legal system are essential to unlock the potential of the hydrogen and biomass production chains, and how is Bahia positioning itself to overcome these regulatory barriers?

Fortuna: Despite the approval of the legal framework for low-carbon hydrogen in the country and the launch of the Advanced Fuels Program, many challenges still need to be studied and regulated in more detail. Here are a few of them:

• Lack of a mature ecosystem of equipment suppliers, technology partners, investors and offtakers that support the decision to make new investments;

• Lack of qualified human resources (Operations, Engineering and Technology);

• Low maturity of the country's Basic Industrial Technology (TIB);

• There has been a lot of talk about using seawater to produce hydrogen. However, desalination consumes a lot of energy, which increases costs (it requires about 1 kWh/m3 of purified water). Will the federal government subsidize these processes so as not to burden the end consumer and to take advantage of the potential of Brazil's extensive coastline?

• Public-private partnership programs for the adaptation/implementation of specialized port terminals;

With regard to Bahia, our strategy to overcome the regulatory obstacles of the national framework and the delay in its regulation was to carry out, as already mentioned, an upgrade in our model with Law No. 25,437/2024 , which establishes the Energy Transition Policy of the State of Bahia, the State Energy Transition Program and the Monitoring Committee of the State Energy Transition Plan.

We are also focused on structuring decentralized and integrated regional hubs for low-carbon hydrogen. Decentralized production, or self-production at the point of consumption, using electricity from the grid or DG, eliminates transportation costs and tax exemptions associated with commercialization. Because commercial electrolyzers have a maximum capacity of 20 MW, we will also focus on stimulating smaller-scale and commercially complex projects (transportation, storage, distribution), due to their greater impact on integrated economic and regional development.

We are also finalizing the Bioenergy Atlas, the result of a partnership between the State Government, Senai-Cimatec and the USP Electric Energy Institute , in which we are mapping and geospatializing the entire potential of energy biomass existing in our state, from sewage treatment plant sludge, urban, agricultural and livestock solid waste.

With this, we want to develop policies and attract investments for the integration of production chains to generate biogas, biomethane and e-Fuels.

RadarH2: How can strengthening the biomass supply chain and implementing technologies such as Carbon Capture and Storage accelerate the development of synthetic fuels and Bahia's strategic role in this national and global scenario?

Fortune: E-Fuels have the power to promote greater carbon sequestration, decarbonize our transportation matrix, attract investments, generate jobs and income, and promote positive impacts on the export agenda with products such as HVO, SAF, e-Methanol, ammonia, etc. with greater added value .

That is why we have always discussed and defended in various discussion forums, lectures at events and technical meetings that Bahia does not want hydrogen to be a new “Pau Brasil”. We do not see it as a commodity, since we would basically be exporting water and renewable electricity. In addition to having water availability and being leaders in solar and wind generation, we are large producers of energy biomass. That is why we have always defended that we cannot remain exclusively restricted to the electrolysis route; we have to advance in the development of the biomass reform route , since Brazil and Bahia have the potential to lead this production route worldwide.

However, the federal government needs, in partnership with the productive sector, to provide a greater volume of resources for research in CCUS and BECCS to make the country, and Bahia, leaders in this segment.

RadarH2: In your opinion, do the regulatory issues brought about by the new legal framework, which affect market development, generate optimistic or pessimistic perspectives? What are the main trends for the coming years?

Fortuna: The outlook is very optimistic, but the new framework still requires many regulations through specific legal instruments. We are just beginning to develop these new production chains and change the consumption matrix of traditional fossil fuel-intensive sectors in the country .

Therefore, a “revolution” is not expected in the short or medium term. And although Brazil and Bahia have dynamic production activities, such as chemicals and petrochemicals; metallurgy; food production; mining; heavy freight and passenger transport; fertilizers; cement, ceramics and glass for the construction sector, among other strong consumers of thermal energy sources and industrial inputs from the oil and gas production chain, the industrial coupling possible via Power-to-X and the requalification and decarbonization of these sectors will not be immediate.

In Bahia, our bet in the medium and long term for low-carbon hydrogen and its derivatives is on its capacity to promote a significant change in the Camaçari Industrial Hub , in mining and agribusiness in Western Bahia, an integral part of the agricultural frontier of MATOPIBA.

The still very high costs of low-emission hydrogen, when compared to the O&G route, leaves offtakers waiting for investors and the market to move.

Another aspect is that the lack of adequate taxation of carbon emissions and the burden of incentives for the oil and gas sector reduce the competitiveness of low-carbon alternatives and slow down the transition of the oil and gas industry;

The Federal Government also needs to define clearer and more comprehensive long-term goals for reducing the carbon footprint and adapting the industrial sector to the new H2 energy vector . It also needs to define guidelines for greater agriculture-industry integration by structuring biomass supply chains, based on family farming and agribusiness.

But I believe that the first step has been taken, we have a legal framework for this transition, we need to advance in its implementation and subsequent improvements that are necessary.

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