Analysis: States with hydrogen use and production incentives

The Biden administration’s pause on permits for new US liquefied natural gas facilities hasn’t hurt all unbuilt projects.

Glenfarne Energy Transition, a subsidiary of Glenfarne Group, is moving ahead with its fully permitted lower-carbon flagship LNG export facility, Texas LNG, as the project is now set up to be the only such US project to reach FID this year.

Texas LNG, a 4 million MTPA facility proposed for Brownsville, Texas, will be the lowest carbon emitting LNG facility approved in the US, largely due to its use of electric motors in refrigerated compression. 

As designed, the plant would emit .15 metric tons of CO2e per ton of LNG produced, placing it slightly lower than the much larger Freeport LNG facility, which also has electric motors and emits around .17 metric tons of CO2 per ton of LNG.

The carbon intensity measurement counts emissions at the Texas LNG plant only, and not related emissions from the electric grid, which is why Glenfarne is seeking to source power for the project from wind and solar generation in south Texas, Adam Prestidge, senior vice president at Glenfarne, said in an interview.

In fact, the lower carbon aspects of Texas LNG helps with every element of the project, Prestidge said, including conversations with European offtakers and potential debt investors.

“Having a focus on sustainability is table stakes for every conversation,” he added. “It’s the finance side, it’s the offtake side, it’s our conversations with regulatory agencies.”

LNG pause

Glenfarne is seeking to raise up to $5bn of equity and debt for the project, according to news reports, a process that could benefit from the Biden administration’s pause on issuing permits for LNG projects that export to countries without free-trade agreements with the US.

“Our confidence and our timetable for that has probably been accelerated and cemented by the fact we are fully permitted, despite the Biden LNG pause impacting the broader market,” Prestidge said.

“The market has pretty quickly recognized that if you want to invest in LNG or buy LNG from a project that’s going to FID in 2024, you really don’t have very many fully permitted options right now.”

Glenfarne’s other US LNG project, called Magnolia LNG, has not yet received the required federal approvals and is therefore on pause along with a handful of other projects.

For Magnolia, Glenfarne is proposing to use a technology for which it owns the patent: optimized single mixed refrigerant, or OSMR, which uses ammonia instead of propane for cooling, resulting in less feed gas needed to run the facility and thus about 30% lower emissions than the average gas-powered LNG facility, Prestidge said.

Hydrogen projects

Glenfarne Energy Transition last year announced the formation of its hydrogen initiative, saying that projects in Chile, Texas, and Louisiana would eventually produce 1,500 kilotons of ammonia. 

“We’ve got existing infrastructure in the US Gulf Coast, and in Chile. A lot of the infrastructure required to produce LNG is similar or can be easily adapted to the infrastructure needed to produce ammonia,” Prestidge said. “And so, we’ve looked at locating hydrogen and ammonia production at sites in or near the ports of Brownsville and Lake Charles,” where Texas LNG and Magnolia LNG are located, respectively.

“The familiarity with the sites and the infrastructure and the local elements, make those pretty good fits for us,” he added.

Vast Energy, the Australia-based and NASDAQ-listed concentrated solar power (CSP) developer and fuels producer, is in the early stages of developing a project near El Paso, Texas – the company’s first in the US – and is seeking US development partners to generate a pipeline of projects throughout the country, CEO Craig Wood said in an interview.

Vast is in process with two projects in Port Augusta, South Australia: VS1, a 30 MW solar/8 MWh storage plant, and SM1, a demonstration solar-to-methanol plant co-located with VS1, producing up to 7,500 mtpa of green methanol from VS1 electricity and heat with extra power available on the grid.

VS1 is scheduled for FID in 3Q24 with FID on SM1 coming the following quarter, Wood said.

Vast recently announced funding agreements with German partner Mabanaft for up to AUD $40m for SM1, after the SM1 project was selected last year as a part of the German-Australian Hydrogen Innovation and Technology Incubator (HyGATE).

Methanol from the $80m SM1 will in part be exported to Germany. Vast is also working with EDF to provide additional financing, Wood said.

“Essentially it’s going to be debt free and on balance sheet,” Wood said.

German container shipping company Hapag-Lloyd recently signed an MOU with Mabanaft to explore options for the supply of ammonia as bunker fuel to Hapag-Lloyd in the Port of Houston.

US opportunity

In the US, where Vast listed to be primed for opportunistic growth, the company has a shortlist of locations around El Paso, has engaged with regional economic development leaders, and held early talks with EPC providers, Wood said.

The El Paso project is being developed in conjunction with Houston-based oil and gas drilling business Nabors Industries, Wood said. Nabors backed the SPAC that took Vast public at a valuation of up to $586m in early 2023. Its current market cap is $64m.

There are ongoing discussions on whether to produce eSAF or methanol in El Paso, Wood said.

To produce eSAF, Vast would use a solid-oxide electrolyzer coupled with the Fischer-Tropsch process, Wood said. Meanwhile, the methanol distillation process lends itself well to Vast’s ability to produce low-cost heat.

CSP has a lower level of embedded carbon than any renewables technology other than wind, Wood said.

“The work that we have done to date indicated that you would most likely power an eFuels project with a CSP plant that was configured to operate in the day and night,” Wood said.

Preliminary offtake for the El Paso project is going to be critical for attracting investment, Wood said. Offtake will depend on the type of fuel produced, though conversations are ongoing with shipping companies (methanol) and airlines (eSAF).

“We’re not expecting to have any problem placing the product,” Wood said. Offtake would likely be targeted for the Port of Los Angeles, LAX airport, the ports of the Gulf Coast, or Dallas Fort Worth International Airport.

Development of CSP makes sense anywhere climate is sunny and hot, Wood said. The company could logically expand into more of West Texas, New Mexico, Arizona and southern California.

The region around Farmington, New Mexico is particularly attractive for CSP development, Wood said. As a huge amount of coal-fired capacity in that area is retired, those interconnections, workforces and resources are ripe for repowering.

The turbines that one of those coal fired power stations would have is the same turbine at the core of Vast’s technology, Wood said. One difference is that Vast’s can be turned on and off quickly.

Development partnerships 

There is an opportunity for Vast to find a development partner, or partners, to stand up a pipeline of projects in two to three years’ time, Wood said.

“Almost everyone wants to wait until our project in Port Augusta reaches COD,” Wood said. “But we don’t want to wait that long to be developing projects in the US.”

Vast is capable of building CSP plants, which can be configured to operate in the day and night, co-located with existing larger-scale solar pv to provide additional generation and, critically, storage, Wood said. By directing sunlight to receivers and heating molten salt, CSP can store energy for 12-to-20 hours overnight to alleviate solar pv’s intermittency issues.

“Coming along and essentially retrofitting complementary CSP next to those [pv plants], we think is a very sensible way to go, both in terms of shared cost but also in terms of managing incremental transmission build,” Wood said. “We’re looking for people we can have conversations with.”