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AES expects $500m of EBITDA from green hydrogen business

US utility AES expects to generate $500m of EBITDA from its ownership of green hydrogen projects by 2030, based on 1,200 metric tons per day of hydrogen production plus related renewables and tax attributes.

Anchored by one of the largest proposed projects so far in the US, Virginia-based AES is launching a green hydrogen platform where it expects to generate approximately $500m of EBITDA by 2030.

The earnings projection includes an assumption of 1,200 metric tons per day of green hydrogen along with the related renewables and tax attributes, executives said in an investor day presentation.

Reaching 1,200 MT/D of production will require $20bn of total capital needs including hydrogen plants and renewables, with equity contributions from AES expected to be 5%, or $1bn, of the capex after debt and partner equity. The presentation notes that 100 MT/D of green hydrogen requires roughly $2bn of capital for hydrogen plants and renewables.

In other words, AES plans to invest $1bn in a business that will generate $500m of EBITDA by 2030, which at, say, a 10x EV multiple, would represent a 5x return on equity. Meanwhile, AES investments in tech platforms like Fluence and Uplight have led to 8x returns on equity to date, according to the presentation.

AES and Air Products have announced a partnership to build a Texas green hydrogen project – so far the largest in the country – with $4bn of capital requirements supporting 1.4 GW of wind and solar capacity along with 200 MT/D of green hydrogen production.

The renewables supporting the Texas electrolyzer project are designed similarly to a portfolio developed for data centers, Chris Shelton, SVP and chief product officer, said during the presentation.

“We’re developing the capability to time-match and dispatch these together – there’s ongoing innovation here – to deliver that hourly matching,” Shelton said. “That results in a very high expectation that we will receive the full $3 / kg incentive for this project,” he said, referring to the emissions-tiered incentive program outlined in the Inflation Reduction Act.

AES is targeting hydrogen growth in the US, Chile, and Brazil, and has 800 MT/D of green hydrogen projects in active development, within an identified opportunity set of 3,200 MT/D.

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700 MW electrolysis capacity for H2 Green Steel plant

thyssenkrupp nucera will provide electrolysis capacity for H2 Green Steel’s plant in Sweden.

The agreement between the Germany-based specialist for high-efficient water electrolysis, thyssenkrupp nucera, and the Swedish industrial start-up H2 Green Steel, secures capacity of more than 700MW for H2 Green Steel’s electrolysis plant in Boden – making it one of the world’s largest electrolysis plants announced to date.

According to a news release, the agreement with thyssenkrupp nucera will cover alkaline water electrolysis technology (AWE) and large-scale electrolysis plant engineering. thyssenkrupp nucera has a proven track record with more than 600 installed projects and over 10 GW capacity in the chlor-alkali technology, which is the DNA for ‘scalum’, its large-scale 20 MW standard AWE module.

“This electrolyzer agreement indicates a change in market dynamics and is also a proof of our new business model for reservation of production capacity. For customers where time-to-market is critical, ensuring access to production capacity of leading electrolyzer technology becomes essential. With this bold investment, H2 Green Steel has shown a strong commitment to their timeline to decarbonize the steel industry and we look forward to working with them,” says Dr. Werner Ponikwar, CEO of thyssenkrupp nucera AG & Co. KGaA.

Through this collaboration, thyssenkrupp nucera will deliver capacity of more than 700MW to the electrolysis plant, likely making the H2 Green Steel plant one of the world’s largest AWE installation by the time its commissioned.

The giga-scale electrolysis plant, the first globally, is based on a concept where H2 Green Steel uniquely will use several complementing technologies for green hydrogen production, enabling balancing of the system for cost- optimization and operational flow as each technology’s core benefits can be harvested. To build it, H2 Green steel is teaming up with different world-leading partners and expertise in design, construction, equipment, operations and financing.

“The electrolysis plant in Boden will be many times bigger than most electrolyzer installations that exist today. Combining our own strong technical expertise with that of an experienced electrolysis supplier like thyssenkrupp nucera gives us a solid edge in the growing green hydrogen economy, which we will leverage to transform hard to abate industries. We start with steel in Boden, Sweden, but it’s only the beginning,” says Maria Persson Gulda, Chief Technology Officer H2 Green Steel.

Hydrogen produced in the electrolysis plant in Boden will be consumed on-site in a direct reduction process, reducing iron ore to sponge iron, enabling production of green steel. The electrolyzer units will be crucial to maximize the operational and economic benefits of the hydrogen in the steel mill, which also forms the foundation for new patented intellectual property assets.

The work leading up to the signing of the contract was enabled through support from Sweden’s Industrial Leap programme, led by the Swedish Energy Agency.

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California Resources considering equity investments in hydrogen, ammonia projects

California Resources management is evaluating equity investments in four California hydrogen and ammonia projects, starting with Lone Cypress, a 30-tons-per-day blue hydrogen facility.

California Resources management continues to evaluate potential equity investments in projects for which the company has signed carbon management agreements, including California hydrogen and ammonia projects, as it moves toward a separation of the carbon management business, Carbon Terravault.

Carbon Terravault, a JV with Brookfield, has so far signed four carbon dioxide management agreements, bringing the total injection rate to 610,000 MTPA of CO2, with 200,000 targeted to its Elk Hills reservoir and 410,000 MTPA targeted in the Sacramento basin area.

CEO Francisco Leon said in prepared remarks yesterday that Carbon Terravault is still in the early stages and must achieve certain milestones before initiating a separation, “such as an EPA Class VI permit approval, project FID, line of sight to first CO2 injection and first cash flow among others.”

In the meantime, the company and Brookfield have “preserved the right to invest into the equity of all four projects,” Leon said, starting with a review of the Grannus Blue Ammonia and Hydrogen Project and the Lone Cypress Hydrogen Project.

Grannus aims to be California’s first blue ammonia and hydrogen facility producing 150,000 MT per annum of blue ammonia and 10,000 MT per annum of blue hydrogen, while Lone Cypress is a 30-tons-per-day blue hydrogen facility at Elk Hills.

“We’re reviewing not only the cost profile of those businesses, but the market, in a lot of cases” – such as with hydrogen – “is not very well developed, but there’s a lot of interest. And that also requires understanding the offtake contracts and in the depth of the market, in where they best place the hydrogen and the ammonia.”

He added, “We’d like to have a decision this year on Lone Cypress in particular. That’s going to be the first project we’re reviewing the equity. We think these markets will develop nicely in California. There’s a lot of support again by IRA, hydrogen has 45V that supports it, but we’re seeing a lot of potential demand for the product. So at both Brookfield and CRC, we have retained that ability to invest in the equity and it’s something that gets us very excited about participating in these new energy verticals.”

The JV has the right to participate in the Lone Cypress blue hydrogen facility up to and including a majority equity stake, a presentation shows.

“You should expect to see over time as we do more and more of these that we’re going to have multiple models,” Chief Sustainability Officer Chris Gould said last year in an interview with ReSource, noting that a typical financial structure may emerge as the industry matures.

The company this week said it signed storage-only CDMAs with Yosemite Clean Energy and InEnTec Inc. for 40,000 and 100,000 MTPA of CO2 injection, respectively. The four combined agreements amount to 12% of the company’s pore space.

CRC also submitted Class VI permit applications for a new development area, called CTV IV, for an additional 34 million metric tons, bringing Carbon Terravault’s total potential permitted storage to 174 million metric tons or over 85% of its stated 2027 target of 200 million metric tons.

The Elk Hills complex includes a gas-fired power plant, and the company is evaluating whether the plant would move with a potential spin-off of Carbon Terravault. CRC is conducting a second FEED study in two years – the first with Flour, now with NextDecade – to evaluate the installation of a carbon capture system at the plant.

Addressing the need for a second FEED study, Leon said, “We’ve had a lot of inflationary pressures over the last two years. We want to make sure it’s the project that not only delivers that ability to reduce that CO2 emission footprint, but it’s also a profitable project.”

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Twelve enters SAF technology license agreement

The carbon transformation company has licensed technology from Emerging Fuels Technology to scale production of sustainable aviation fuel.

Carbon transformation company Twelve and fuel technology partner Emerging Fuels Technology (EFT) have signed a Master License Agreement to support Twelve’s scaleup of its E-Jet® fuel, a fossil-free sustainable aviation fuel (SAF) produced using the company’s carbon transformation technology in combination with EFT’s Fischer-Tropsch synthesis and Maxx Jet™ upgrading technology.

With aviation representing one of the most difficult-to-address sectors for emissions, Twelve is scaling E-Jet fuel manufacturing capacity to meet rapidly growing demand from customers looking to reach net zero climate goals. Twelve, in partnership with EFT, produces its E-Jet fuel using its carbon transformation technology, which uses renewable energy to transform CO2 and water into critical feedstocks conventionally made from fossil fuels. With up to 90% lower lifecycle emissions compared to conventional fuels, E-Jet fuel is a drop-in synthetic fuel that works seamlessly with existing aircraft and uses CO2 to provide a virtually limitless carbon source, offering the most viable long-term solution for addressing emissions from the rapidly growing aviation industry.

Twelve’s first E-Jet fuel partner was the US Air Force, which tested fuel produced by Twelve and EFT in August 2021. Last year, Shopify, one of the largest corporate purchasers of long-term carbon removal, announced the first purchase of E-Jet fuel through the company’s Sustainability Fund. In July 2022, Twelve, Alaska Airlines and Microsoft announced a Memorandum of Understanding (MOU) to collaborate on advancing the SAF market to include fuels derived from recaptured CO2 and renewable energy, and working toward the first commercial demonstration flight in the United States powered by Twelve’s fossil-free fuel.

“We’re excited to continue our work with Emerging Fuels Technology and use our partnership to support Twelve’s scaleup to meet customer demand for E-Jet fuel and other CO2Made® products,” said Nicholas Flanders, co-founder and CEO of Twelve. “EFT’s modular Fischer-Tropsch systems are highly compatible with our carbon transformation technology, which can be sited flexibly and scaled to any need.”

“After already proving that our technologies can come together to produce SAF, we now have the opportunity, with Twelve, to see the fully integrated commercial scale e-fuel platform deployed,” said Kenneth Agee, president at EFT. “This is an excellent demonstration of how EFT’s technology can be utilized, and we look forward to the continued collaboration with Twelve that addresses the rising and urgent global demand for sustainable aviation fuel.”

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Exclusive: Seattle biomass-to-chemical firm planning equity round

A firm with plans for a biorefinery in Washington state will raise its first large equity round early next year.

Planted Materials, a Seattle-based biomass-to-chemicals company, is in early design stages for its first biorefinery in eastern Washington state and planning to raise an equity round in early 2025, co-founders Noah Belkhous and Greg Jenson said in an interview.

The company will seek to raise between $10m and $20m ahead of FID on the biorefinery, Belkhous said. The four-year-old company has raised $500k from angel investors to date and is currently raising another $1m from high net worth individuals in the Seattle region.

Planted Materials does not have a relationship with a financial advisor but is open to one, Belkhous said.

The company’s recycling model takes municipal landfill waste and converts it to chemical materials for pharmaceutical, paper, plastic and other manufacturing industries.

The proprietary recycling process is something the company would like to license to municipalities in the US and abroad, in addition to building biorefineries in the Pacific Northwest, Belkhous said. The company’s lab is currently based in the Ballard neighborhood of Seattle.

Early design work on the first biorefinery is underway. The duo expects CapEx to cap at $50m, reaching FID in 2026 and beginning construction that year.

While the majority of the company’s feedstock will likely come from the major metropolitan regions in the western PNW, refining capacity is more attractive in the east for reasons of space and existing waste management infrastructure. Jenson noted the presence of the relevant research campus of Washington State University in Pullman, as well as the Pacific Northwest National Laboratory in Richland.

Recently, the team accompanied Washington Governor Jay Inslee and members of the Washington State Department of Commerce on a trip to Sydney and Melbourne in Australia. The company has applied to a pair of $350k grants from the state.
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Methanol-to-hydrogen firm planning capital raise

An early-stage provider of distributed methanol-to-hydrogen solutions is planning a capital raise as it scales up.

Kaizen Clean Energy, a Houston-based methanol-to-hydrogen fuel company, is planning to raise additional capital in support of upcoming projects.

The company, which uses methanol and water to produce hydrogen with modular units, recently completed a funding round led by Balcor Companies, in which Balcor took a minority interest in Kaizen.

Additional funding in the capital raise was provided by friends and family, Kaizen co-founder and chief commercial officer Eric Smith said in an interview.

But with its sights on larger project opportunities this year, the company is already targeting an additional capital raise to support continued growth, Smith said. He declined to comment further on the capital raise and potential advisors, but noted that the company’s CFO, Craig Klaasmeyer, is a former Credit Suisse banker.

Kaizen’s methanol model utilizes a generator license from Element 1 and adds in systems to produce power or hydrogen, targeting the diesel generator market, EV charging and microgrids as well as hydrogen fueling and industrial uses.

Compared to trucking in hydrogen, the model using methanol, an abundant chemical, cuts costs by around 50%, Smith said, noting that Kaizen’s containers are at cost parity with diesel.

In addition, the Kaizen container is cleaner than alternatives, producing no nitric or sulfur oxide, according to Smith. Its carbon intensity score is 45, compared to 90 for the California electric grid and 100 for diesel generators.

Smith also touts a streamlined permitting process for Kaizen’s containerized product. The company recently received a letter of exemption for the container from a California air district due to low or no emissions. The product similarly does not require a California state permit and similarly, when off grid, no city permits are required, he added.

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IPP retains banker for California plant sale

An independent power producer has retained a banker for a sale of a decades-old gas plant in California. Aging gas plants have been in the sights of clean fuels developers looking to retrofit or use facilities for clean fuel production and combustion.

GenOn, an independent power producer, has hired Solomon Partners to sell a 54 MW gas plant in California, according to sources familiar with the matter.

The plant, Ellwood, is located in Goleta, in Santa Barbara County, and was shuttered and retired by GenOn as of 2019. It reached COD in 1973 and ran two Pratt & Whitney FT4C-1 gas turbine engines.

Ellwood previously interconnected via Southern California Edison, a utility that is pursuing multiple natural gas decarbonization projects, including a hydrogen-blending initiative with Bloom Energy.

A teaser for the sale of Ellwood, which was issued last week, notes there is an opportunity to install a battery energy storage system at the site, one of the sources added.

Elsewhere in California, investment firm Climate Adaptive Infrastructure and developer Meridian Clean Energy are seeking to demonstrate decarbonization in peaker plants at the much newer gas-fired Sentinel Energy Center. Their plans include hydrogen blending.

GenOn declined to comment. Solomon Partners did not respond to requests for comment.

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