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Avangrid and Vitol reach tax credit transfer deal

The agreement marks one of the largest publicly announced PTC transfer deals to-date since the passage of the Inflation Reduction Act.

Avangrid, Inc., a sustainable energy company and member of the Iberdrola Group, and Vitol Inc. have reached a landmark transfer agreement for an estimated $100m of 2023 production tax credits (PTCs) from eight operating wind farms, totaling 1,134 MW of generating capacity, according to a news release.

Basis Climate served as advisor to Avangrid in the transfer, according to a separate press release.

The IRA created a new transferable credit framework to help developers monetize PTCs. Under the IRA, renewable energy owners like Avangrid who qualify for tax credits but are not able to use them immediately can transfer credits to a third-party investor, such as Vitol. Prior to the IRA, this was only possible through a tax equity partnership, which requires a lengthy diligence and negotiation process as well as significant transaction costs.

“The Inflation Reduction Act offers an unprecedented stable framework, enhancing the attractiveness of renewables,” said Pedro Azagra, Avangrid CEO. “It has created a tax credit transfer process that is streamlined and removes the bottleneck that existed with the tax equity investment structure. We expect this transaction to serve as a reference point in this rapidly expanding market. The transfer ensures that we receive greater value from our renewable energy projects, and it will allow us to pay down debt and make further capital investments to benefit our customers.”

“We are delighted to partner with Avangrid through this tax credit investment, part of Vitol’s broader strategic investment in renewable resources and the energy transition,” said Rick Evans, CFO of Vitol Inc. “This new tax credit transfer mechanism promises to unlock significant pools of new capital to support investment in renewable resources.”

In its press release, Basis Climate noted that the seller had multiple potential buyers, while a simple 10-page contract reduced friction and costs.

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Los Angeles moves forward with $800m green hydrogen conversion

The Los Angeles City Council has authorized the Department of Water and Power to begin contracting processes for converting a gas-fired generating station to hydrogen.

The Los Angeles City Council has unanimously approved a motion to move forward with the the conversion of the gas-fired Scattergood Generating Station near El Segundo to hydrogen, according to a vote record posted on the city’s website.

Subsequent coverage in the Los Angeles Times states that the city has plans to converting additional regional gas facilities — Harbor and Haynes and Valley Generating Station – into hydrogen-fueled peaking power stations.

Environmentalists have grouped to oppose the plan based on expressed climate and safety concerns.

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Woodside’s H2OK green hydrogen project on hold for final 45V rules

Australia-based Woodside’s Oklahoma green hydrogen project has been unable to secure offtake and is on hold until final rules are issued on 45V tax credits.

Woodside is engaging with the US federal government in an effort to make 45V tax credit rules for green hydrogen more accessible.

The Australian energy company’s green hydrogen project in Oklahoma, known as H2OK, is fully permitted and technically ready for a final investment decision, amounting to Woodside’s most advanced project currently in its development pipeline.

“H2OK is the most advanced project, and we’re technically ready to take an investment decision, but because we were unable to secure sufficient customer offtake, we paused that decision,” CEO Meg O’Neill said in a presentation this week.

H2OK is a liquid hydrogen production facility proposed for the Westport Industrial Park in Ardmore, Oklahoma. Phase 1 involves the construction of a 290 MW facility, producing up to 60 tonnes per day of liquid hydrogen through electrolysis, targeting the heavy transport sector.

“The reason we weren’t able to secure offtake was because of some complexities around how the IRA is being implemented and we’re engaged in conversations with the US government on levers they can pull to make those tax credits more accessible, which will bring prices down, which will bring customers to the table,” said O’Neill.

Woodside has already made financial commitments for critical path activities and electrolyzers are being manufactured for the project, she added.

In early 2024, Woodside reached a water deal with the city of Ardmore, Oklahoma. Subject to Woodside taking a final investment decision on the project, Ardmore would construct a transmission line to Woodside’s delivery location by January 1, 2026.

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Duke to build end-to-end hydrogen facility in Florida

During times of high energy demand, the system will deliver stored green hydrogen to a combustion turbine that can run on a natural gas/hydrogen blend or up to 100% hydrogen.

Duke Energy will break ground in DeBary, Fla., on a demonstration project in the United States to create clean energy using an end-to-end system to produce, store and combust 100% green hydrogen.

The system is the result of collaboration between Duke Energy, Sargent and Lundy, and GE Vernova and will be located at Duke Energy Florida’s DeBary plant in Volusia County, Fla.

“Duke Energy is constantly evolving and seeking ways to provide clean, safe energy solutions to our customers,” said Melissa Seixas, Duke Energy Florida state president in a news release. “DeBary will be home to Duke Energy’s first green hydrogen production and storage system connected to existing solar for power generation, and we are grateful to the city for allowing this innovative technology in their community.”

The system will begin with the existing 74.5 MW DeBary solar plant providing clean energy for two 1 MW electrolyzer units.

Construction of the project will begin later this year and could take about one year to complete. Duke Energy anticipates the system will be installed and fully functioning in 2024.

The resulting oxygen will be released into the atmosphere, while the green hydrogen will be delivered to nearby, reinforced containers for safe storage. During times when energy demand is highest, the system will deliver the stored green hydrogen to a combustion turbine (CT) that will be upgraded using GE Vernova technology to run on a natural gas/hydrogen blend or up to 100% hydrogen. This will be the nation’s first CT in operation running on such a high percentage of hydrogen.

“Duke Energy anticipates hydrogen could play a major role in our clean energy future,” said Regis Repko, senior vice president of generation and transmission strategy for Duke Energy. “Hydrogen has significant potential for decarbonization across all sectors of the U.S. economy. It is a clean energy also capable of long-duration storage, which would help Duke Energy ensure grid reliability as we continue adding more renewable energy sources to our system.”

Readily available hydrogen is a dispatchable energy source, meaning it is available on demand. It can be turned on and off at any time and is not dependent on the time of day or the weather, like sun, wind or other renewable energy sources known as intermittent.

Dispatchable energy provides a needed element of reliability that will enable us to add more intermittent energy sources, yet still ensure we can meet customer demand, even during extended periods of high demand. Using solar energy to generate green hydrogen enables solar plants to be optimized. Relying on intermittent energy sources without available dispatchable energy sources would put our future electric system at risk of having insufficient energy to serve customer demand.

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Exclusive: Emissions reduction technology firm in Series A capital raise

A technology start-up that uses plasma to reduce emissions from natural gas and methane flaring is seeking an additional $15m to top off its Series A capital raise. One of its principal products converts natural gas into hydrogen and usable graphene with no CO2 emissions.

Rimere, a climate solutions company with proprietary plasma technology, is seeking to raise an additional $15m as part of its ongoing Series A capital raise.

The start-up recently announced an anchor investment of $10m from Clean Energy Fuels Corp, a publicly listed renewable natural gas firm, and is pursuing further investments from strategics and financial players, with an eye on closing the round in 2Q24, CEO Mitchell Pratt said in an interview.

The company is not currently working with a financial advisor on the Series A capital raise, Pratt said. Its legal counsel is Morrison Foerster.

The anchor investment along with additional funds raised will allow Rimere to advance development and field testing of its two principal products, the Reformer and the Mitigator. 

The Mitigator is a plasma thermal oxidizer that reduces the greenhouse gas potency of small-scale fugitive methane emissions, while the Reformer transforms natural gas into clean hydrogen and usable graphene without creating any CO2 emissions.

The products are meant to work in tandem to decarbonize natural gas infrastructure and deliver cleaner gas to end users in transportation, power generation, and industry.

“We believe that, overall, what the technology does is revalue natural gas reserves and the long-term viability of natural gas for global future energy,” Pratt said.

Commercial strategy

Rimere will develop a commercial strategy throughout the course of this year for the Mitigator, and plans to deploy the product in the beginning of next year.

“We have quite a bit of interest for this as a solution because of the low cost of the product and the terrific results,” Pratt said, noting that the Mitigator removes CO2 for under $5 per metric ton.

In contrast, the Inflation Reduction Act passed in 2022 introduced the Methane Emissions Reduction Program, a charge on methane emitted by oil and gas companies that report emissions under the Clean Air Act. The charge starts at $900 per metric ton of methane for calendar year 2024, increasing to $1,500 for 2026 and beyond.

To be sure, the Mitigator, as a thermal oxidizer, transforms methane, which is a much more potent greenhouse gas, into hydrogen, water, and CO2 for a net reduction of the global warming impact of 200 metric tons a year of CO2.

The Reformer, a container-style unit, is being scaled up to produce 50 kg per day of hydrogen from natural gas along with 150 kg of graphene, a marketable nano carbon where the CO2 is captured. Graphene is used in batteries, composites, medical devices, and concrete to reduce greenhouse gas emissions, among other applications.

Rimere plans to increase the scale of the Reformer to between 400 – 600 kg per day and raise additional funds next year, Pratt said. The amount of funds needed for that is not yet known, he said.

Pratt envisions an application for hydrogen blending using the two products.

“We see it as a way to decentralize hydrogen production, taking advantage of a cleaner natural gas infrastructure, because we’ve applied the Mitigator to cleaning up those fugitive methane emissions that are occurring in the normal operations of equipment,” Pratt said.

For example, Rimere can tap into a natural gas pipeline, take a slipstream of gas, extract the valuable graphene, and then re-inject hydrogen and natural gas back into the pipeline.

Additionally, the blending application can be positioned at an end-use customer’s facility, allowing the Reformer to start blending hydrogen into the gas stream, going into boilers and burners and reducing the CO2 emissions more effectively and immediately, Pratt said.

$1 per kg

Taking the average cost of delivered natural gas and power to industrial users, the company can already produce hydrogen at $1 per kilogram, Pratt said.

For every four kilograms of end-use product – one being hydrogen, the other three graphene – the energy cost allows hydrogen to be produced at or below $1 per kg.

“The last 12 months of running is less than a dollar,” he said, emphasizing that the graphene production is not subsidizing the hydrogen.

“Although the value of graphene could make hydrogen a throwaway fuel.”

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AGDC seeks $150m in development capital for Alaska LNG project

The Alaska corporation is raising capital to reach FID on a $44bn LNG project that includes the construction of a natural gas pipeline and carbon capture infrastructure.

The Alaska Gasline Development Corporation (AGDC) is actively working to raise $150m in development capital for the Alaska LNG project, with Goldman Sachs providing advisory services.

This capital will cover third-party Front End Engineering Design (FEED) costs, project management, legal and commercial expenses, and overhead for 8 Star Alaska, the entity overseeing the project. Investors will receive a majority interest in both 8 Star Alaska and Alaska LNG as part of the fundraising efforts, according to a presentation​​.

AGDC, a public corporation of the state of Alaska, is hoping to finalize a deal for development capital in the next 12 months, but has not set a definitive timeline for the fundraise, AGDC’s Tim Fitzpatrick said.

The total cost of the project is estimated at $44bn, according to Fitzpatrick, and consists of three principal infrastructural components:

  1. Arctic Carbon Capture (ACC) Plant: Located in Prudhoe Bay on Alaska’s North Slope, this plant is designed to remove carbon dioxide and hydrogen sulfide before natural gas enters the pipeline.
  2. Natural Gas Pipeline: This 807-mile pipeline, with a 42-inch diameter, connects the ACC plant to the LNG facility and is capable of transporting 3.7 billion ft³/d of natural gas. It includes multiple offtake points for in-state residential, commercial, and industrial use.
  3. Alaska LNG Facility: Situated at tidewater in Nikiski, Alaska, this facility features three liquefaction trains, two loading berths, two 240,000 m³ LNG tanks, and a jetty. It is designed to produce 20 million tons per year of LNG​​.

Strategies to raise the necessary funds include collaborating with established LNG developers, strategic and financial investors, and possibly forming a consortium, according to the presentation. All project equity will flow through 8 Star Alaska, keeping the legal and commercial structure of the project consistent​​.

As of last year, the corporation was negotiating sales agreements for a significant portion of the Alaska LNG project’s capacity. Discussions include contracts covering 8 million tonnes per annum (MTPA) at fixed prices and market-linked charges, and equity offtake talks for up to 12 MTPA. Additionally, three traditional Asian utility customers have shown interest in a minimum of 3 MTPA, potentially increasing to 5 MTPA.

These negotiations involve traditional Asian utility buyers, LNG traders, and oil and gas companies, all credit-worthy and large-scale market participants, the company said. Some buyers are contemplating equity offtake, investing at the Final Investment Decision (FID) in exchange for LNG supplied at cost​​.

A key component of the project’s advancement is securing gas supply agreement terms, identified as a prerequisite by multiple investors. AGDC has held meetings with executives from two major producers to emphasize the need for Gas Supply Precedent Agreements to attract further investment. These discussions, highlighting the project’s importance to Alaska, were joined by key figures including the DOR Commissioner Crum, the DNR Commissioner Boyle, and representatives from Goldman Sachs​​.

The Japan Energy Summit, sponsored by AGDC, focused on the need for new LNG capacity in Asia. Japan’s Ministry of Economy Trade & Industry (METI) expressed strong support for new LNG investments and offtake, emphasizing the replacement of coal with gas in developing Asian markets​​.

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Exclusive: Green hydrogen developer planning capital raises for distributed portfolio

A developer of US green hydrogen projects will need to access the project equity, debt and tax equity markets in the near term for a pipeline of distributed assets nationwide.

NovoHydrogen, the Colorado-based renewable hydrogen developer, will be in the market for project financing for a portfolio of distributed green hydrogen projects in 2024, CEO Matt McMonagle said.

The company, which recently agreed to a $20m capital raise with Modern Energy, is aiming to attract additional private equity and infrastructure investors for the projects it is developing, the executive said.

“The opportunity is really there for attractive risk-adjusted returns at the project level based on how we’re structuring these projects with long-term contracted revenue,” he said.

The company plans to bring its first projects online in late 2024 or 2025.

“We don’t have the project financing set at the point that we can announce, but that’s something myself and my team have done in our careers,” McMonagle said, adding that he’s focused on bankability since founding the company. “We wanted to be as easy for the lenders to underwrite as possible.”

No financial advisors have been attached to the project financings, McMonagle said. A recently announced Series A, first reported by ReSource in February, gave the company exposure to investors that want to participate in project financings, he said.

“We’ll really be ramping that process up, likely after the new year,” McMonagle added, declining to say how much the company would need to raise in 2024.

NovoHydrogen doesn’t have a timeline on a Series B, he said.

Distributed pipeline

The company looks to do onsite projects adjacent to consumption, McMonagle said. The first projects that will go online will be 10 MW and smaller.

“Typically the permitting is straightforward in that we’re adding equipment to an already impacted industrial site,” McMonagle said. He declined to elaborate on where these projects are located or what customers they will serve.

The company also has off-site, or near-site projects, where production is decoupled from consumption. But the company still calls those distributed because they are being developed with a targeted customer in mind.

“We want to be as close as possible to that customer,” he said. Those off-site projects typically are larger and will begin coming online in 2026 and 2027.  

In Texas NovoHydrogen has two large-scale green hydrogen developments in production, co-located with greenfield renewables projects, McMonagle said. Partners, including EPC, are in place for those efforts. The company also has projects in West Virginia, Pennsylvania, New Jersey and along the west coast.

“Where can we add the most value and have the biggest competitive advantage?” McMonagle said of the company’s geographic strategy. “We have very specific go-to-markets in each of those regions which we feel play to our strengths.”

NovoHydrogen is a member of the Pacific Northwest Hydrogen Hub and is involved with the Appalachian Regional Clean Hydrogen Hub (ARCH2), though not in line to receive DOE funding through that hub.

Post-IRA, green hydrogen projects will look much like renewables deals from the equity, tax equity and debt perspectives, he said.

“We’re structuring and setting up our projects to take advantage of that existing infrastructure and knowledge base of how to finance deals,” he said. New options on transferability will enable additional financing options as well.

No flipping

NovoHydrogen does not plan to flip projects before COD, McMonagle said.

“We are planning to deploy hundreds of millions if not billions of dollars in capex for these projects, and we’ll certainly need to partner with folks to deploy that capital,” McMonagle said. “But we will remain in deals with our customers because that relationship is really the fundamental value that we bring in our business.”

Hydrogen projects are different from renewables in that the customers need greater assurances of resiliency, security of supply and performance, than in a space like solar, he said.

Flipping projects before COD would be inconsistent with the trust required to attract offtakers.

“We don’t believe doing a flip reflects that level of importance and support and, frankly, incentive, behavioral incentive, that we have to show to our customers,” he said.

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