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Apex’s towering green hydrogen plans

Apex Clean Energy is advancing a colossal green hydrogen hub in West Texas, powered by a planned 6.5 GW of renewable generation capacity.

Apex Clean Energy has towering ambitions for green hydrogen production in Texas.

The Charlottesville, Virginia-based renewable energy firm is developing 6.5 GW of renewable generation capacity in West Texas that would support green hydrogen production, ReSource has learned, making it one of the largest projects of its kind in development in North America.

Part of a green hydrogen production, storage, transportation, and export hub known as “Project Rio,” the renewables encompass multiple sites under development in a cluster of counties roughly 200 miles northwest of San Antonio. The planned production sites also include solar and battery storage facilities co-located with electrolyzers.

Under the plan, the green hydrogen produced on site would be transported via a new 500-mile hydrogen pipeline to Corpus Christi, for potential conversion to derivatives like ammonia or methanol and available for domestic end users or export.

If completed as conceived, the scale and complexity of the project would signify an infrastructural magnum opus for Apex and its partners, and a feather in the cap of the power and energy private equity strategy of Ares Management, the owner of both Apex and EPIC Midstream, which operates pipelines running from outside of Corpus Christi through West Texas. The new hydrogen pipeline would likely be built on EPIC’s existing right of way.

Project Rio represents a potential breakthrough in the realm of sustainability, as much for its sheer size as for its project-on-project-on-project schematics and its intention to utilize produced water from nearby oil and gas drilling operations in water-scarce West Texas.

The size and final siting for the project could still change, as some aspects of development are in early stages, a source close to Apex said. However, Apex’s development team in Texas has held meetings with local landowners, with a website for the project noting 5.8 GW of renewables across multiple projects as of October, 2023. The plan, as currently conceptualized, would call for 6.5 GW of renewables, according to several sources.

“This is a revolutionary project – the largest proposed in North America,” Apex Senior Public Engagement Manager Anna Richey said in a recent promotional video. An Apex spokesperson declined to comment for this story.

One of the Apex green hydrogen production sites, called Big Trail, is located near Eldorado, Texas, but straddles four counties – Menard, Kimball, Sutton, and Schleicher – according to an Apex public affairs campaign

The Big Trail project entails 3.3 GW of renewables, while another project, called Desert Trail, is sized at 1.5 GW, “with an additional 1,000 MW+ of renewable energy likely,” in Irion, Crockett, and Schleicher counties, according to the project website.

In announcing the green hydrogen partnerships in 2022, Apex, Ares, and EPIC noted that the project would “produce green hydrogen and other derivative green fuels in volumes not yet seen in the United States.” The more precise scope of the renewables for the hub has not been previously reported.

In addition to the West Texas hub, Apex is developing more renewables projects in the Texas Panhandle to power further green hydrogen production there, sources said.

World scale

The project’s ambitious purview would put Apex and its partners at the forefront of green hydrogen development in North America. A similarly grandiose project, advanced by Hy Stor in Mississippi, would bring on around 2.7 GW of electrolyzers in the first phase, reportedly powered by twice that capacity through a mix of onshore wind, solar and geothermal energy.

Hydrogen City, a project from Green Hydrogen International and INPEX CORPORATION, is aiming to bring on 3.75 GW of behind-the-meter renewable energy for phase 1 of the project, which is in Duval County, immediately west of Corpus. At an estimated cost of $6bn, it would power 2.2 GW of electrolysis and produce 280,000 tons per year of green hydrogen, with the project size scaling up to 60 GW depending on demand. 

Germany’s RWE, meanwhile, in partnership with Korea’s LOTTE Chemical and Japan’s Mitsubishi Corporation, is pursuing an integrated green and blue ammonia facility, also in Corpus Christi, that would ultimately produce 10 million tons of clean ammonia per year.

Pattern Energy is pursuing a $9bn green ammonia project with a production capacity estimated at 1 million tons of green ammonia per year – again, in Corpus Christi, ReSource has reported.

And elsewhere in Texas, Air Products and AES are developing a green hydrogen production facility in North Texas that would consist of a combined 1.4 GW of wind and solar generation, producing 200 metric tons per day of green hydrogen. The estimated cost of that project is $4bn.

Still, the technological readiness of electrolyzers for green hydrogen production at scale has been called into question by some in the industry. Sanjiv Lamba, the CEO of global chemical company Linde, recently re-emphasized his view that green hydrogen still has a roughly five to seven year runway to reach maturity for large-scale projects, in part because electrolyzer complexes are still unproven at gigawatt scale.

Apex would seek to bring its green hydrogen projects online later this decade, potentially in line with the technology development timeline referenced by Lamba.

Pipeline capacity

Apex, which is majority owned by Ares Management through its Infrastructure and Power strategy, plans to utilize a new dedicated hydrogen pipeline to be built by EPIC Midstream, another Ares portfolio company. 

The pipeline aspect of the green hydrogen hub could boost its cost competitiveness against other developments in the region that will depend on trucking, as gaseous hydrogen shipped via pipeline has been shown to be a more cost-effective method of transport, especially in large volumes and over longer timelines. And experts have said it would make sense to use EPIC’s existing pipeline right of way, on which it can build without having to acquire new land rights or clear trees. 

The Corpus Christi area has approximately 110 miles of existing hydrogen pipelines, while Texas’s larger hydrogen pipeline network is concentrated further east, from Freeport to Houston to Port Arthur. Thus this new pipeline proposal would open up a swath of West Texas to hydrogen transported from renewable energy facilities where, in theory, it can be made cheaply – by Apex and, potentially, by others.

​“We are evaluating overbuilding the capacity of the pipeline to support others injecting,” Apex Policy Manager Laura Merten recently told Canary Media. ​“The goal is to support and help develop this whole hydrogen economy.”

Pattern Energy has previously discussed developing a green hydrogen project in West Texas that would tie in to a hydrogen pipeline for transport to the Gulf Coast.

EPIC has not yet filed a new construction permit for the hydrogen pipeline, according to the Texas Railroad Commission. And no other hydrogen pipelines are currently under construction in the state. Representatives of Ares and EPIC did not respond to requests for comment.

Water sources

Access to water rights can be a thorny issue in West Texas, and Apex has so far found solutions that have avoided backlash from local communities.

Apex previously burnished its green hydrogen chops by developing a 345 MW wind farm under a PPA with Plug Power for a facility in Young County, Texas. The wind farm was subsequently sold to NextEra and commissioned last year, according to local news reports and Apex’s website. The electrolyzer portion of that project is still under construction, Plug Power investor materials show.

For the Young County project, Apex helped to procure water sources for the electrolysis, ultimately working with the city of Graham to help fund and build a wastewater treatment plant, with a third of the water going to the hydrogen production facility and the remaining water used by the city for irrigation.

For Big Trail, Apex has told local officials it plans to use produced water from oil and gas drilling – dodging a potential conflict with landowners over the use of groundwater. 

Another company with plans to split water via electrolysis for an e-methanol plant, ETFuels, ran into concerned local landowners at a recent meeting of the Plateau Underground Water Conservation & Supply District board of directors, which oversees water rights in the area. Instead of using groundwater, ETFuels was told by a landowner to look for alternate sources of water, “much like Apex Clean Energy proposes to do,” according to a local newspaper report.

“As we look ahead to this massive project, multiple times the scale of the previous project, we are looking for other opportunities to partner with local stakeholders and really benefit the communities we work in, and see [water development] as a huge opportunity for us,” Apex’s Merten said on a recent webinar.

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CleanBay Renewables signs LOI for SPAC takeover

The proposed transaction values CleanBay, a producer of RNG, green hydrogen and controlled-release fertilizer, at $330m.

CleanBay Renewables, a producer of RNG, green hydrogen and controlled-release fertilizer, has signed a letter of intent for a potential business combination with NASDAQ-listed SPAC BurTech Acquisition Corp., according to a news release.

Under the terms of the letter, CleanBay’s existing equity holders would convert 100% of their equity into the combined public company. The proposed transaction values CleanBay at $330m. The BurTech trust account currently holds approximately $294m in cash.

“BurTech expects to announce additional details regarding the proposed business combination when a definitive merger agreement is executed in the second quarter of 2023,” the release states.

CleanBay’s process converts agricultural byproducts into fertilizer. CleanBay’s Chief Executive Officer Donal Buckley said in the release that the company is pursuing new facility developments for that purpose.

“We are excited to partner with CleanBay and believe that access to capital markets will enable CleanBay to commercialize and scale its proprietary and patented processes,” BurTech Chairman and CEO Shahal Khan said in the release. “CleanBay’s ‘shovel-ready projects’ present an attractive investment opportunity for existing and future shareholders.”

The release also highlights Maryland and California state policies to assist in financing such plants and produce RNG, hydrogen and natural fertilizer on an industrial scale.

“With nine identified facilities and eight potential future facilities in the pipeline, we believe that CleanBay will become a significant player in the North American RNG and natural fertilizer market,” Khan said.

According to CleanBay’s management, at full capacity, each CleanBay bioconversion facility can recycle more than 150,000 tons of poultry litter annually. By repurposing a potential source of excess nutrients, each facility can generate more than 750,000 MMBtus of sustainable RNG, 100,000 tons of natural, controlled-release fertilizer, and up to an estimated 1,000,000 tons of CO2 equivalent carbon credits that can be available for monetization in global carbon markets.

As an alternative to renewable natural gas, the facilities can also produce clean hydrogen at an estimated rate of 20,000 tons per year. CleanBay has accumulated proprietary intellectual property covering its conversion process to include trade secrets, a U.S. patent and pending patent applications in the U.S. and Europe.

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BayoTech hires VP of development

The new hire, Jack Hedge, will be responsible for leading the development of hydrogen projects in North America.

New Mexico-based BayoTech Hydrogen has hired Jack Hedge as its new vice president of hydrogen hub development, according to a press release.

Hedge will be responsible for leading the development of hydrogen projects in North America. He will lead a team that is developing relationships with host property managers, community stakeholders, regulators, and local government officials who are interested in decarbonization.

“BayoTech is on the verge of making hydrogen production local and hub development is how we achieve it,” said BayoTech President & CEO, Mo Vargas. “Jack has years of experience in developing and executing major projects for some of the most recognized ports in the nation. That experience paired with his dedication to clean energy projects is exactly why we thought he was the right person to lead this phase of growth. We are delighted to have Jack’s leadership, passion for making the world better and experience both as a developer and as a project host to support customers decarbonization goals and drive projects to completion.”

“I am excited to begin this next chapter and blend all my previous experience into something truly meaningful and impactful. Working with the team at BayoTech we will lead the way to truly “smart, sustainable and equitable” supply chains,” Hedge said in the release.

Prior to joining BayoTech, Jack served as president of Utah Inland Port Authority, where he was responsible for developing and building one of the nation’s leading sustainable intermodal logistics hubs. Jack has also worked as the director of cargo and industrial real estate for the Port of Los Angeles where he lead the development, leasing, and asset management functions of the largest container port complex in North America.

BayoTech last year agreed to a memorandum of understanding with Carbon Clean under which the two parties will work togeterh on a demonstration facility to evaluate, design, and operate a carbon capture plant at a BayoTech site in North America which is expected to be operational by the end of 2022.

Investors in BayoTech include Newlight Partners, Opal Fuels, Nutrien, The Yield Lab, Cottonwood Technology Fund, Sun Mountain Capital and Caterpillar Venture Capital Inc.

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EnCap and Mercuria invest in Arbor Renewable Gas

The Houston-based renewable gas developer has also entered into development and licensing agreements with SunGas Renewables and Haldor Topsoe, respectively.

Arbor Renewable Gas, the Houston, Texas-based sustainable gas developer, has taken an underlying capital commitment from EnCap Investments L.P. and Mercuria Energy Company, according to a news release.

SunGas Renewables, a subsidiary of GTI International, has entered into an exclusive Joint Development Agreement with Arbor Gas to provide its gasification systems to Arbor Gas projects and Haldor Topsoe has licensed its process and technology for methanol and gasoline synthesis.

Arbor Gas is developing industrial scale renewable gasoline and green hydrogen projects in the US. The strategy is to design, build, own, and operate facilities that efficiently convert woody biomass into renewable gasoline and green hydrogen.

Arbor Gas is led by Co-Founders, Chief Executive Officer Timothy E. Vail and John G. Kennedy III.

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Hydra Energy raising equity and debt capital for hydrogen refueling infrastructure

The hydrogen-as-a-service provider for commercial trucking fleets is pursuing an equity raise that will unlock a debt facility for scaling up hydrogen refueling infrastructure in Western Canada.

Hydra Energy, a hydrogen-as-a-service provider for commercial trucking fleets, is in the midst of a CAD 14m equity capital raise.

The Vancouver-based company is pursuing the equity raise in support of its Prince George hydrogen fueling station, which is set to be operational in 2024 and would be the largest in the world, Hydra CEO Jessica Verhagan.

The equity portion of the financing is needed to unlock an additional CAD 150m debt facility to complete initial scale-up of the company’s planned hydrogen corridor along Highway 16 in Western Canada, Verhagan added.

Verhagan said the company is not working with a financial advisor on the capital raise but could issue RFPs for advisory services in the future. She declined to name the provider of the proposed debt facility, apart from clarifying that it was not government-sponsored.

“To date, Hydra has been signing up commercial fleets and building out its initial hydrogen refuelling infrastructure throughout Western Canada, but the company is about to announce expansion throughout the rest of the country via licensing to a national fossil fuel distributor looking to extend its low-carbon alternative fuel offerings,” the executive said via email.

Hydra’s target market to date has been the roughly 5 million Class 8 trucks within North America, Verhagan said, with the company aiming to “conservatively” capture 1% of that market by 2030 through commercial discussions already underway. Hydra is also exploring expansion into the UK as well as Europe, Australia, and the Middle East.

“Hydra’s initial focus has been on proving out its Hydrogen-as-a-ServiceTM (HaaSTM) template which includes the company providing its proprietary hydrogen-diesel, co-combustion conversion kits to commercial fleets at zero cost (in exchange for long-term hydrogen fuel contracts at diesel equivalent prices) as well as an initial hydrogen refuelling station to service 65 Hydra- converted trucks in Prince George, B.C.,” she said.

Verhagan said the company will announce its first electrolysis partner for the Prince George hydrogen refueling station early next year. The station will be able to refuel – as quickly as diesel – up to 24 Hydra-converted trucks each hour across four bays. The station will provide hydrogen from two onsite, 5 MW electrolyzers powered with electricity from BC Hydro.

“The adoption of Hydra’s technology really comes down to availability of low carbon hydrogen – showing fleets it’s possible to go green cost-effectively – and government support to utilize hydrogen to reduce trucking emissions right now,” Verhagan said.

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Exclusive: Ambient Fuels options land in Texas

Ambient Fuels recently entered into an option agreement to purchase land in Texas. Among only a handful of green hydrogen developers to attract equity capital last year — from Generate Capital — Ambient has not yet made public announcements about its projects or locations. 

Ambient Fuels, a green hydrogen developer backed by Generate Capital, recently signed a 24-month option to purchase a plot of land in Chambers County, Texas, according to filings made with the clerk there.

A memorandum outlines the option to purchase land in Mont Belvieu, to the east of Houston. The agreement is effective as of October 2, according to the filing.

Ambient declined to comment.

According to the ReSource project tracker, Ambient has been involved in three Gulf Coast hydrogen hub efforts: The Alliance for Renewable Clean Hydrogen Energy Systems (ARCHES) hub; the Port of Corpus Christi Green Hydrogen Hub; and the Horizons Clean Hydrogen Hub (HCH2). ARCHES was selected for DOE funding.

ReSource reported in June that Ambient Fuels had begun to evaluate potential acquisitions of hydrogen projects that are under development.

In May, 2023, Generate Capital, a sustainable infrastructure investment and operating company, made an investment into Ambient, including a commitment to fund up to $250m of green hydrogen infrastructure.

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Interview: Vinson & Elkins’ Alan Alexander on the emerging hydrogen project development landscape

Vinson & Elkins Partner Alan Alexander, whose clients include OCI and Lotus Infrastructure, has watched the hydrogen project development space evolve from a fledgling idea to one that is ready for actionable projects.

Vinson & Elkins Partner Alan Alexander, whose clients include OCI and Lotus Infrastructure, has watched the hydrogen project development space evolve from a fledgling idea to one that is ready for actionable projects.

In the meantime, a number of novel legal and commercial issues facing hydrogen project developers have come to the forefront, as outlined in a paper from the law firm this week, which serves as a guide for thinking through major development questions that can snag projects.

In an interview, Alexander, a Houston-based project development and finance lawyer, says that, although some of the issues are unique – like the potential for a clean fuels pricing premium, ownership of environmental attributes, or carbon leaking from a sequestration site – addressing them is built on decades of practice.

“The way I like to put it is, yes, there are new issues being addressed using traditional tools, but there’s not yet a consensus around what constitutes ‘market terms’ for a number of them, so we are having to figure that out as we go,” he says.

Green hydrogen projects, for example, are “quite possibly” the most complex project type he has seen, given that they sit at the nexus between renewable electricity and downstream fuels applications, subjecting them to the commercial and permitting issues inherent in both verticals.

But even given the challenges, Alexander believes the market has reached commercial take-off for certain types of projects.

“When the hydrogen rush started, first it was renewables developers who knew a lot about how to develop renewables but nothing about how to market and sell hydrogen,” he says. “Then you got the people who were very enthusiastic about developing hydrogen projects but didn’t know exactly what to do with it. And now we’re beginning to see end-use cases develop and actionable projects that are very exciting, in some cases where renewables developers and hydrogen developers have teamed up to focus on their core competencies.”

A pricing premium?

In the article, Vinson & Elkins lawyers note that commodities pricing indices are not yet distinguishing between low-carbon and traditional fuels, even though a clean fuel has more value due to its low-carbon attributes. The observation echoes the conclusion of a group of offtakers who viewed the prospect of paying a premium for clean fuels as unrealistic, as they would need to pass on the higher costs to customers.

Eventually, Alexander says, the offtake market should price in a premium for clean products, but that might depend in the near term on incentives for clean fuels demand, such as carbon offsets and levies, like the EU’s Carbon Border Adjustment Mechanism.

“Ultimately what we need is for the market to say, ‘I will pay more for low-carbon products,’” he says. “The mindset of being willing to pay more for low-carbon products is going to need to begin to permeate into other sectors. 30 or 40 years ago the notion of paying a premium for an organic food didn’t exist. But today there are whole grocery store chains built around the idea. When the consumer is willing to pay a premium for low-carbon food, that will incentivize a farmer to pay a premium for low carbon fertilizer and ammonia, which will ultimately incentivize the payment of a premium for low-carbon hydrogen. The same needs to repeat itself across other sectors, such as fuels and anything made from steel.”

The law firm writes that US projects seeking to export to Europe or Asia need to take into account the greenhouse gas emissions and other requirements of the destination market when designing projects.

In the agreements that V&E is working on, for example, clients were first focused on structuring to make sure they met requirements for IRA tax credits and other domestic incentives, Alexander says. Meanwhile, as those clean fuels made their way to export markets, customers were coming back with a long list of requirements, “so what we’re seeing is this very interesting influx” of sustainability considerations into the hydrogen space, many of which are driven by requirements of the end-use market, such as the EU or Japan.

The more stringent requirements have existed for products like biofuels for some time, he adds, “but we’re beginning to see it in hydrogen and non-biogenic fuels.”

Sharing risk

Hydrogen projects are encountering other novel commercial and legal issues for which a “market” has not yet been developed, the law firm says, especially given the entry of a raft of new players and the recent passage of the Inflation Reduction Act.

In the case of a blue hydrogen or ammonia project where carbon is captured and sequestered but eventually leaks from a geological formation, for example, no one knows what the risk truly is, and the market is waiting for an insurance product to provide protection, Alexander says. But until it does, project parties can implement a risk-sharing mechanism in the form of a cap on liabilities – a traditional project development tool.

“If you’re a sequestration party you say, ‘Yeah, I get it, there is a risk of recapture and you’re relying on me to make sure that it doesn’t happen. But if something catastrophic does happen and the government were to reclaim your tax credits, it would bankrupt me if I were to fully indemnify you. So I simply can’t take the full amount of that risk.’”

What ends up getting negotiated is a cap on the liability, Alexander says, or the limit up to which the sequestration party is willing to absorb the liability through an indemnity.

The market is also evolving to take into account project-on-project risk for hydrogen, where an electrolyzer facility depends on the availability of, for example, clean electricity from a newly built wind farm.

“For most of my career, having a project up and reaching commercial operations by a certain date is addressed through no-fault termination rights,” he says. “But given the number of players in the hydrogen space and the amount of dollars involved, you’re beginning to see delay liquidated damages – which are typically an EPC concept – creep into supply and offtake agreements.”

If a developer is building an electrolyzer facility, and the renewables partner doesn’t have the wind farm up and running on time, it’s not in the hydrogen developer’s interest to terminate through a no-fault clause, given that they would then have a stranded asset and need to start over with another renewable power provider. Instead, Alexander says, the renewables partner can offset the losses by paying liquidated damages.

Commercial watch list

In terms of interesting commercial models for hydrogen, Alexander says he is watching the onsite modular hydrogen development space as well as power-to-fuels (natural gas, diesel, SAF), ammonia and methanol, given the challenges of transporting hydrogen.

“If you’re going to produce hydrogen, you need to produce it close to the place where it’s going to be consumed, because transporting it is hard. Or you need to turn it into something else that we already know how to transport – natural gas, renewable diesel, naphtha, ammonia.”

Alexander believes power-to-fuels projects and developers that are focused on smaller, on-site modular low-carbon hydrogen production are some of the most interesting to watch right now. Emitters are starting to realize they can lower their overall carbon footprint, he says, with a relatively small amount of low-carbon fuels and inputs.

“The argument there is to not completely replace an industrial gas supplier but to displace a little bit of it.”

At the same time, the mobility market may take off with help from US government incentives for hydrogen production and the growing realization that EVs might not provide a silver-bullet solution for decarbonizing transport, Alexander adds. However, hydrogen project developers targeting the mobility market are still competing with the cost of diesel, the current “bogey” for the hydrogen heavy mobility space, Alexander says.

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