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Biofuels developer adds Topsoe and Chemex to project roster

Topsoe and Chemex will join a renewables fuels and SAF project in development in East Texas.

Biofuels producer Santa Maria Renewable Resources (SMRR) has selected Topsoe as its technology provider, according to a news release.

The Topsoe licenses encompass the state-of-the-art Hydroflex and H2bridge technologies, both pivotal components for a biofuels and sustainable agriculture project currently in development by SMRR in East Texas.

The facility will provide 600 to 700 construction jobs and 300-plus permanent operating employment positions. A daily output of up to 3,000 barrels per stream per day is expected, encompassing both renewable diesel and sustainable aviation fuel.

Additionally, SMRR has partnered with Chemex Global, a wholly-owned subsidiary of The Shaw Group, to commence the front-end engineering design for the facility in East Texas.

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How the Siemens Gamesa meltdown shapes the emerging electrolyzer market

The near-collapse of Siemens Energy in part due to the performance of its wind turbine unit, Siemens Gamesa, is informing contract developments in the emerging market for electrolyzer technology.

Siemens Energy in November reached a deal for performance guarantees backstopped by the German government and major banks after issues emerged with two of its wind turbine offerings, putting the company on the hook for nearly $5bn in added costs.

The financial wobbles have focused attention not just on the underlying technical glitches in the turbines, but also on the performance guarantees that Siemens Gamesa has provided in support of the operations of those turbines. 

Performance guarantees from technology suppliers ensure the quality of equipment at installation and through the life of a generation facility. Such guarantees from electrolyzer manufacturers have become a formidable sticking point in negotiations for supply contracts and the associated green hydrogen project finance deals.

“The lender at the project level needs the technology vendor to take technology and operational risk for 10 years,” Strata Clean Energy’s Mike Grunow said in an interview last month, referring to a series of agreements that must be in place in order for green hydrogen projects to reach financial close.

Market dynamics are currently working in favor of the electrolyzer makers, where a rush to build projects has created a supplier’s market, allowing the electrolyzer OEMs to hold back more favorable terms from project owners relating to liquidated damages and performance guarantees.

But the harsh spotlight on the issue at Siemens Gamesa is also informing the stance of electrolyzer OEMs.

Siemens Energy, itself, is working through onerous performance guarantees in the wind business while avoiding granting those same types of guarantees in other areas of its business, including electrolyzers.

‘The T&C’s situation’

In an investor presentation last month, executives from Siemens Gamesa noted their strategy to revamp the terms and conditions for the guarantees they are granting in the wind business, referring to the problem as “the T&Cs situation.”

“We have been extremely generous in the past to accept terms and conditions which, going forward, may hit us,” Jochen Eickholt, Siemens Gamesa’s CEO, said. “We are by far away from what should be the standard terms and conditions.”

In the green hydrogen industry, the lack of sufficient guarantees has held up supply contracts as well as project finance negotiations, as lenders, sponsors, and EPC firms are unwilling to take on the risks of underperformance from emerging electrolyzer technologies, experts said.

The NEOM green hydrogen project in Saudi Arabia, which reached financial close in May, is often referred to as a market precedent for similar projects. But the project had unique characteristics that will be difficult to emulate: Air Products, for one, served as sponsor, EPC contractor, and offtaker, eliminating the usual cross-party risk-sharing dynamics. 

Even so, opportunities for electrolyzer performance to deviate significantly from proven operating results is “pretty small,” according to James Bowe, a partner at King & Spalding, a law firm that advised on the NEOM project. As such, electrolyzer performance is less of an issue as it would be with rotating equipment or solar PV cells. 

Additionally, project proponents and their electrolyzer partners are finding creative ways to overcome the lack of performance guarantees. 

“The way you can overcome it is just put in another electrolyzer, because the fundamental question is ‘are you getting enough gas out to supply your requirements?’ You can do that either by adding another electrolyzer or turning up the power,” Bowe added.

He noted, for example, that green hydrogen developers can set up something of an escrow scheme, where the first shipment of green hydrogen includes extra units, which would sit for a certain delivery period in case the supply of hydrogen comes up short.

King & Spalding was recently on the verge of concluding a supply agreement with one electrolyzer manufacturer that will include a performance guarantee or performance shortfall remediation scheme, as well as a provision addressing delays, Bowe said. 

“Given this, there seems to be some hope that at least some manufacturers will agree to performance and schedule guarantees of some sort,” he added. “But this was a hard fought battle.”

Electrolyzer OEMs are having to come up the learning curve from garage industry to large-scale infrastructure projects with project financing literally overnight, said Fred Lazell, an associate on King & Spalding’s energy team in London.

These companies “know it’s a supplier’s market,” Lazell said. “The instructions they’re receiving from senior management are ‘don’t give away the family jewels too early in the game.’ They see experiences from other technologies like offshore wind and solar, where the OEMs gave up early on in the expansion of the industry quite favorable performance regimes, and that had a big impact on those industries.”

Indeed, warranties for wind turbines have been a systemic issue for the industry, with Vestas, GE, and others having their profitability sapped in recent years.

EPC margins

The reticence of electrolyzer OEMs to provide robust performance guarantees stems from legitimate technical questions: there has never been this scale of operations and related offtake and financing commitments tied to electrolyzer technology. 

But the electrolyzer OEMs are also positioning themselves commercially, according to Lazell. “And the only way we see to get around this is through a partnership between the project owner and the OEM.”

Lazell noted that EPC contractors will provide a “wrap” – turnkey EPC agreements providing for engineering, procurement, construction, commissioning and testing of a project – but pass through the guarantees they get from the electrolyzer provider, nothing more.

Moreover, the margins required by EPC contractors to provide a wrap for the electrolyzer technology would likely blow up project economics.

“That’s why it’s so important to have that direct relationship with the electrolyzer supplier, so the owner can get the best deal possible,” he said. “Because ultimately the project owner is paying for the OEMs’ plant expansion to meet that demand and future demand,” he added, referring to the many electrolyzer providers that are planning to build new production capacity.

To mitigate the cost of an EPC wrap, a project can first put in place credit support from the technology provider, which then gets wrapped through the EPC contract, bringing down the cost of the EPC contract.

While credit support mechanisms will likely be required for many of the smaller, start-up electrolyzer makers, creditworthiness of the OEM is still an issue for the larger companies – like Siemens Energy.

S&P moved in July to downgrade Siemens Energy’s long-term credit rating to BBB-, one step above junk status.

“Although size usually matters, it doesn’t make the creditworthiness problem go away,” Bowe said. 

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Aemetis projects huge growth

Aemetis, a California-based RNG and renewable fuels producer, projects that it will generate $645m of adjusted EBITDA in 2028.

Aemetis, Inc., a renewable natural gas and renewable fuels company focused on negative carbon intensity products, has released an updated Aemetis five-year plan that projects the company will generate $1.95bn in revenues and $645m of adjusted EBITDA in year 2028.

The 2024 plan states revenues are expected to grow at a compound annual growth rate of 38%, and adjusted EBITDA is expected to grow at a projected compound annual growth rate of 83% for the years 2024 to 2028.

In the Aemetis 2024 Five Year Plan, the company’s revenue and adjusted EBITDA growth is expected from 75 dairies producing RNG by 2028; from a 90 million gallon per year sustainable aviation fuel and renewable diesel (SAF/RD) plant in Riverbank, California; from a CO2 Carbon Sequestration and Underground Storage (CCUS) well located near the Riverbank and Keyes biofuels plant sites in California; from the completion of solar, mechanical vapor recompression and other energy efficiency, carbon emission reduction, and electrification projects at our Keyes biofuels plant; and from the continued expansion of biodiesel and tallow refining production at the Aemetis plant in India. The presentation also describes the tax credits expected to be received by Aemetis from the Inflation Reduction Act (IRA) for its renewable fuel and sequestration projects.

“Through the expansion of our RNG, biodiesel, SAF/RD, CCUS, and ethanol businesses, Aemetis is poised to rapidly grow revenue to almost $2 billion by the end of 2028,” said Eric McAfee, Chairman and CEO of Aemetis.  “Additionally, Aemetis closed $50 million of new USDA funding and received $55 million from the sale of IRA tax credits in the past year.  With strong financing support from the USDA for renewable fuels projects, the passage of the $380 billion Inflation Reduction Act to provide funding to renewable energy projects, and EPA approval allowing 15% ethanol blends in 49 states which expands the ethanol market by almost 50%, the regulatory and financial climate for renewable energy projects continues to support our overall growth plan,” added McAfee.

Significant milestones were achieved in the past year under the previous 2023 Five Year Plan, including the transition to receiving revenue and positive operational cash flow from the biogas-to-RNG upgrading facility and dairy digesters; receiving the Use Permit and CEQA approval for the SAF/RD plant at the Riverbank site; receiving the first private carbon sequestration characterization well drilling permit issued by the State of California; completing construction and commissioning of the 1.9 megawatt solar microgrid with battery backup; installing an Allen Bradley distributed control system with AI capabilities to optimize energy use and other operational performance of the Keyes ethanol plant; completing design engineering and are now procuring equipment for the Mechanical Vapor Recompression (MVR) unit at the Keyes plant to utilize low carbon intensity electricity instead of fossil natural gas; completing deliveries of biodiesel to the Oil Marketing Companies in India under the first $40 million of contracts; and receiving awards for an additional $150 million of allocations from the three India government Oil Marketing Companies to be fulfilled using a Cost-Plus pricing formula.

Due to uncertainties regarding timing, the 2024 Plan does not include several other growth initiatives that are actively under development at Aemetis, including revenues and EBITDA from the planned operation of the 50 million gallon per year capacity, debt-free, India refined tallow plant.  The export of tallow from India to North America customers at approximately $4 to $5 per gallon for 50 million gallons per year, increasing revenues by up to $250 million per year, is excluded.  The 2024 Plan projections include using the refined tallow from India as a feedstock supply source for the operations of the SAF/RD plant under development in California to improve profit margins.

In addition to the $55 million received in Q4 2024 from the sale of transferable tax credits, the Inflation Reduction Act is expected to provide transferable investment and production tax credits to Aemetis related to our U.S. renewable fuels and CO2 sequestration projects, which are included in the 2024 Plan.

The Five Year Plan for Aemetis Dairy RNG operations projects revenues will grow from $18 million in 2024 to $190 million in 2028, while Dairy RNG project EBITDA is expected to expand from $7 million in 2024 to $123 million in 2028. The RNG plan accounts for the delays in receiving LCFS revenue that are caused by the current regulatory process to obtain LCFS pathway approvals for each dairy digester that may be shortened if pending regulatory changes are adopted by the California Air Resources Board.

The Five Year Plan projects that the Aemetis Sustainable Aviation Fuel and Renewable Diesel plant will provide revenue of $672 million with adjusted EBITDA of $195 million in year 2027 from the 90 million gallon plant that received the Use Permit and CEQA approval in September 2023 to be built at the 125-acre Riverbank Industrial Complex which has 100% renewable hydroelectricity; a rail line and storage for 120 railcars; 710,000 square feet of buildings; and 50 acres of developable industrial land.

In connection with the carbon reduction upgrades at the Keyes plant, expansions of the India biodiesel plant, and expanded market opportunities resulting from changes to governmental policies, the Five Year Plan projects that the Company will generate annual revenue from ethanol and biodiesel of approximately $826 million in 2028, up from $368 million of expected revenue in 2024.

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Biofuels developer seeking to raise $3.5bn for US refinery projects

A biofuels developer has engaged an international bank and is nearing FID on its first project, which produces bio-based ethylene for the plastics industry. It is seeking $3.5bn for four additional refineries.

New Energy Blue, the clean-energy developer of lowest-carbon biofuel and biochemicals from crop residues, today advances its Decarbonizing America agenda by forming New Energy Chemicals.

In phase one, the new biochemical subsidiary will produce American-sourced and American-made bio-based ethylene to enable Dow’s production of low carbon plastics used in everyday life; in phase two, it will expand operations at its Port Lavaca, Texas, facility to produce sustainable aviation fuel (SAF), according to a news release.

“New Energy Chemicals opens multiple pathways to our exponential growth in biobased fuels and chemicals,” says Albury Fleitas, President of New Energy Blue. “We’re particularly excited by our new end-to-end alternative to Brazilian ethanol for making SAF, which will begin in the American Midwest by refining agricultural waste.”

“Flexibility is baked into the process design and business operations of our biomass refineries,” adds CEO Thomas Corle. “We’re not locked into a single product, single market, or single feedstock. New Energy Chemicals gives us 360-degree downstream options for achieving liftoff of an American bioenergy revolution. We can pivot to mitigate market risk, seize growth opportunity, and hit lowest-carbon targets consistently.”

In late 2025, the New Energy Freedom biomass refinery in Mason City, Iowa, will begin converting local corn stalks into 16-20 million gallons a year of highly decarbonized (HD) cellulosic ethanol and 120,000 tons of clean HD lignin. Lignin has high value as a fossil substitute in markets like paving American roads and decarbonizing steel production.

Some of Freedom’s ethanol is destined for California and Oregon auto fuel markets; by meeting their strict low-carbon standards, it will reduce greenhouse gas emissions by over 100% per gallon of gasoline displaced. Millions of HD gallons will also head to Texas, where New Energy Chemicals will convert it into bio-based ethylene, transported via pipeline to Dow’s U.S. Gulf Coast operations for production of renewable plastics across fast-growing end markets.

Dow’s use of bio-based feedstocks from New Energy Blue is expected to be certified by ISCC Plus, an international sustainability certification program with a focus on traceability of raw materials within the supply chain. While Dow intends to mix agriculture-based ethylene into its existing manufacturing process, ISCC Plus’s chain of custody certification would allow Dow’s customers to account for bio-based materials in their supply chains.

Albury Fleitas reports that “strategic and institutional investors are actively involved in our Freedom and Chemicals projects and upcoming expansions. With engineering design completed and major permits secured, we’ve reached the final investment decision (FID) stage. By partnering with an international bank and securing USDA loan guarantees for both project sites, we anticipate ground-breaking this year.”

New Energy Blue has ambitious plans to expand its biomass refineries across America’s 140-million-acre corn belt and wheat basin, harvesting excess straws and stalks to produce billions of gallons of highly decarbonized ethanol. Shorter-term, a six-year strategy calls for attracting $3.5 billion from capital markets to build four new refineries at twice the size of Freedom and provide abundant feedstock to New Energy Chemicals. Taken together, the five refineries are designed to keep over 1,000,000 tons of CO2 out of the atmosphere annually.

Beyond meeting its growing commitments to Dow, New Energy Chemicals’ phase-two expansion can capitalize on both domestic and international demand for SAF since the Port Lavaca site has barge access to deep water shipping.

Substantial European demand by 2030 is expected from the ReFuelEU Aviation initiative, which aims to mandate a SAF blending requirement at EU airports. In addition to ramping up its biomass refinery build-out, New Energy Blue plans to license its platform globally to accelerate the production of low-carbon, plant-based feedstock for HD auto fuel, SAF, and other biochemicals.

According to the U.S. Sustainable Aviation Fuel Grand Challenge, the American SAF goal is 3 billion gallons a year by 2030, 35 billion gallons by 2050. “U.S. carbon-reducing incentives have ignited a $400 billion SAF market,” Fleitas notes. Lifecycle analysis of the company’s refinery project consistently exceeds the required 50% reduction in GHG emissions compared to ethanol made from corn grain or sugar cane. New Energy Chemicals is expected to pre-qualify for maximum decarbonizing credits, giving it an advantage in a competitive capital marketplace.

The HD ethanol-to-ethylene process employed by New Energy Chemicals is most likely compatible with conventional jet fuel methods of production, using a technology pathway similar to Brazilian ethanol-to-SAF conversion.

“Except there’s a significant gap in decarbonization scores,” says Kelly Davis, Vice President, “and that gives our future SAF a dramatic edge in getting the airlines closer to their net-zero goal for GHG emissions. It’s an extra advantage that comes from using American-sourced leftovers from the annual grain harvest.”

Because of process design flexibility, New Energy Blue biomass refineries can also convert wheat, barley, and rye straws. In arid regions where food crops can no longer grow, the company intends to restore American grasslands by planting and harvesting perennials like arundo donax and miscanthus.

“Decarbonizing America is a big ask for a big task,” Corle says. “Those 140 million acres of U.S. grain provide enough stalks and straws and grasses to feed 500 refineries and produce 20 billion gallons of exceptionally low-carbon ethanol annually. That’s how you decarbonize SAF and Dow’s renewable plastic materials, how you make a dent in replacing oil refining with biomass refining.

“It starts with a biomass refinery in Mason City, Iowa and New Energy Chemicals conversion operations in Port Lavaca, Texas. But we’re already forging partnerships with governments, customers, and developers across CanadaEuropeAsia, and Africa. Inviting them to work collaboratively towards sustainable decarbonization with global impact.”

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US hydrogen developer to raise $1bn in 2023

Avina Clean Hydrogen will need $600m or more of debt and between $200m and $300m of equity. Capital raising talks are focused on the operating company and project level.

Avina Clean Hydrogen, a U.S.-based developer of hydrogen production plants, will seek to raise approximately $1bn, or possibly more, in 2023, CEO Vishal Shah said in an interview.

The company will need $600m or more of debt and between $200m and $300m of equity, Shah said. Capital raising talks are focused on the operating company and project level.

Avina is also in discussions with potential investment bankers, but has not hired anyone yet, Shah said.

“The capital needs for us are going to continue to grow,” Shah said. “We are certainly open to bringing on additional partners.”

Four development projects have offtake agreements in place, Shah said. The first operational plant will open in Southern California next year or early 2024, followed by Avina’s 700,000 mtpa green ammonia project in the Texas Gulf Coast. Additional projects are underway in the Midwest.

Three of those projects, each with offtakers in place, will reach FID in 2023 and need project debt, Shah said.

Avina is engaged with half-a-dozen potential customers and will seek to develop additional projects within that existing footprint.

Renewable energy procurement is also an important concern for Avina; the Texas project alone will require 900 MW of renewable energy to power, Shah said. The company is in offtake discussions with regional IPPs, mostly in solar and battery storage, but could use help with those agreements. Shah declined to name the firm’s legal advisor.

Avina was founded more than three years ago and is principally backed by Hydrogen Technology Ventures, a firm headed by Shah.

An equity raise was completed in early Q4, Shah said, declining to provide details. The company has a “large industrial firm” as a strategic investor that it hopes to announce soon. Looking forward, the company will look for a second strategic investor, as well as project finance.

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Exclusive: Hydrogen blank-check deal and capital raise on track

A de-SPAC deal and associated capital raise for a hydrogen technology and project development firm are still on track to close this year, despite this year’s busted SPAC deals and sagging hydrogen public market performance.

H2B2 Technologies is still on track to close a de-SPAC deal and related capital raise before the end of this year, CEO Pedro Pajares said in an interview.

Spain-based H2B2 announced the deal to be acquired by RMG Acquisition Corp. III and go public in a $750m SPAC deal in May. In tandem, Natixis Partners and BCW Securities are acting as co-private placement agents to H2B2 for a capital raise that the company must close as part of the acquisition.

The company said recently in filings that the deal as well as the capital raise would close before the end of 2023, a fact that Pajares reiterated in the interview. He declined to comment further.

Many publicly traded hydrogen companies have dropped significantly in value in recent months, and dropped further on Friday following news from Plug Power that it would need to raise additional capital in the next 12 months to avoid a liquidity crisis.

Meanwhile, there have been 55 busted SPAC deals this year, according to Bloomberg, with Ares Management’s deal for nuclear tech firm X-Energy the latest to not close.

Expansion

H2BE recently inaugurated SoHyCal, its first facility in Fresno, California, and wants to get the message out to offtakers in California’s Central Valley that it has hydrogen available to sell.

“What we want to show is that H2B2 is the solution for those who are seeking green hydrogen in the Central Valley,” Pajares said.

Phase 1 (one ton per day) of the plant was funded by a grant from the California Clean Energy Commission. Phase 2 (three tons per day) will involve transitioning to solar PV power, and the company could consider a project finance model to finance the expansion, though Pajares believes the market is not yet ready to finance hydrogen projects.

In addition to project development, the company is also an electrolyzer manufacturer. It is focusing its efforts in the California market on future projects that are larger than SoHyCal, as well as those related to individual offtakers, Pajares said. End users will be in mobility and fertilizer, with offtake occurring via long-term contracts as well as through spot market transactions.

The company is pursuing developments in other regions of the US as well, he added, declining to name specific areas.

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Exclusive: Pattern Energy developing $9bn Texas green ammonia project

One of the largest operators of renewable energy in the Americas, San Francisco-based Pattern is advancing a 1-million-ton-per-year green ammonia project in Texas.

Pattern Energy knows a thing or two about large renewable energy projects.

It built Western Spirit Wind, a 1,050 MW project in New Mexico representing the largest wind power resource ever constructed in a single phase in the Americas. And it has broken ground on SunZia, a 3.5 GW wind project in the same state – the largest of its kind in the Western Hemisphere.

Now it is pursuing a 1-million-ton-per-year green ammonia project in Corpus Christi, Texas, at an expected cost of $9bn, according to Erika Taugher, a director at Pattern.

The facility is projected to come online in 2028, and is just one of four green hydrogen projects the company is developing. The Argentia Renewables project in Newfoundland and Labrador, Canada is marching toward the start of construction next year, and Pattern is also pursuing two earlier-stage projects in Texas, Taugher said in an interview.

The Corpus Christi project consists of a new renewables project, electrolyzers, storage, and a pipeline, because the electrolyzer site is away from the seaport. It also includes a marine fuels terminal and an ammonia synthesis plant.

Pattern has renewable assets in West and South Texas and is acquiring additional land to build new renewables that would allow for tax incentives that require additionality, Taugher said.

Financing for the project is still coming together, with JV partners and prospective offtakers likely to take project equity stakes along with potential outside equity investors. No bank has been mandated yet for the financing.

Argentia

At the Argentia project, Pattern is building 300 MW of wind power to produce 90 tons per day of green hydrogen, which will be used to make approximately 400 tons per day of green ammonia. The ammonia will be shipped to counterparties in Europe, offtake contracts for which are still under negotiation.

“The Canadian project is particularly exciting because we’re not waiting on policy to determine how it’s being built,” Taugher said. “The wind is directly powering our electrolyzers there, and any additional grid power that we need from the utility is coming from a clean grid, comprised of hydropower.“

“We don’t need to wait for rules on time-matching and additionality,” she added, but noted the renewables will likely benefit from Canada’s investment tax credits, which would mean the resulting ammonia may not qualify under Europe’s rules for renewable fuels of non-biological origin (RFNBO) as recently enacted.

Many of the potential offtakers are similarly considering taking equity stakes in the Argentia project, Taugher added.

Domestic offtake

Pattern is also pursuing two early-stage projects in Texas that would seek to provide green hydrogen to the domestic offtake market.

In the Texas Panhandle, Pattern is looking to repower existing wind assets and add more wind and solar capacity that would power green hydrogen production.

In the Permian Basin, the company has optioned land and is conducting environmental and water feasibility studies to prove out the case for green hydrogen. Pattern is considering local offtake and is also in discussions to tie into a pipeline that would transport the hydrogen to the Gulf Coast.

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