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Carbon removal firm spins out of UCLA contracted with Boeing

Equatic has a pre-purchase agreement with Boeing for its carbon-negative hydrogen and currently operates two carbon removal pilots in Los Angeles and Singapore.

Carbon removal company Equatic recently spun out from the UCLA Samueli School of Engineering’s Institute for Carbon Management to deploy the first technology combining CO2 removal and carbon-negative hydrogen generation, according to a news release.

Alongside the launch, Equatic is announcing that it has entered into a pre-purchase option agreement with Boeing, a leading global aerospace company. Under the agreement, Equatic will remove 62,000 metric tons of carbon dioxide and will deliver 2,100 metric tons of carbon-negative hydrogen to Boeing.

“The oceans are the world’s largest reservoir of carbon dioxide. One quarter of the world’s daily CO2 emissions are drawn down into the ocean,” the release states. “Equatic’s technology accelerates and amplifies this natural cycle to remove and durably store CO2. The entire removal and sequestration process happens within the boundaries of an industrial carbon removal plant, enabling Equatic to precisely measure CO2.”

Equatic currently operates two carbon removal pilots in Los Angeles and Singapore. One hundred percent of the CO2 removed from these pilots has been pre-sold, including via pre-purchase agreements with global payment solution provider, Stripe.

Equatic expects to reach 100,000 metric tons of carbon removal per year by 2026 and millions of metric tons of carbon removal for less than $100 per metric ton by 2028.

“Furthermore, Equatic will become a dominant producer of carbon-negative hydrogen — hydrogen created from processes that reduce atmospheric CO2,” the release states. “The hydrogen will be sold as a clean energy source to decarbonize industrial processes, produce electricity for the transportation sector, create Sustainable Aviation Fuels (SAFs) and fuels for trucking, and power the Equatic technology itself.”

Equatic emerges from UCLA with over $30m in initial funding including grants and equity investments from organizations such as the Chan Zuckerberg Initiative, the Anthony and Jeanne Pritzker Family Foundation, the Grantham Foundation for the Protection of the Environment, the National Science Foundation, YouWeb Incubator, The Nicholas Endowment, Singapore’s Temasek Foundation, PUB: Singapore’s National Water Agency, and the U.S. Department of Energy’s Office of Fossil Energy and Carbon Management, and the U.S. Department of Energy’s Advanced Research Projects Agency-Energy (ARPA-E).

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NextEra leads Series A round for DAC start-up

NextEra has led a $36m Series A funding round for a start-up that’s developing hybrid direct air capture technology.

Avnos, Inc. (Avnos), the Los Angeles-based company developing novel Hybrid Direct Air Capture (HDAC) technology for carbon dioxide removal, has closed $36 million in Series A funding, according to a news release.

Avnos will use the new funds to grow its world-class team, deploy additional HDAC assets across North America and Europe, and open a new, state-of-the-art research and development facility located just outside New York City.

NextEra Energy, one of America’s largest utilities and investors in clean energy infrastructure, led the round. Other investors include Safran Corporate Ventures, Shell Ventures, Envisioning Partners, and Rusheen Capital Management. The funding supplements Avnos’ previously announced capital raises and strategic commercial agreements with Shell Ventures, ConocoPhilips, JetBlue Ventures and the Grantham Foundation, as well as pilot projects with the U.S. Department of Energy and the U.S. Office of Naval Research.

Avnos has pioneered HDAC using proprietary materials and processes to capture both carbon dioxide and water simultaneously from the atmosphere, according to a news release. The process eliminates the need for external heat input and produces approximately 5 tons of water for every 1 ton of carbon dioxide captured. Avnos’ resource-intelligent technology means lower impact on and expanded employment opportunities for the communities surrounding HDAC facilities.

“At Avnos, we believe our novel HDAC technology is the world’s best shot at reaching the much-needed gigaton scale of carbon dioxide removal,” said Will Kain, CEO of Avnos. “We feel the urgency to roll out HDAC more broadly so as to deliver on the enormous, positive climate and economic opportunities in front of us. With this substantial funding, Avnos continues to expand its unparalleled roster of partners supporting our rapid acceleration.”

The new, multi-million-dollar research and development facility, equipped with best-in-class equipment and infrastructure, will enable Avnos to accelerate the pace of scaling the company’s HDAC technology while ensuring its systems continue to operate at peak performance. The 20,000 square foot facility will be fully operational in February 2024 and will employ an estimated 20 new employees.

“Our state-of-the-art lab underscores our mission to push the frontiers of innovation and deliver scalable and efficient carbon removal solutions,” said Ben McCool, Senior VP of Technology at Avnos. “As we expand our dynamic technical team, I’m proud to cultivate a collaborative environment that brings together top-notch talent, actively shaping and advancing the cutting-edge technologies driving Avnos towards impactful solutions.”

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IRS 45V tax credit rules draft stricter than EU

A leaked draft report of pending 45V guidance from the US Treasury Department has advocates of the emerging green hydrogen industry warning of too-stringent measures.

US Treasury guidance for clean hydrogen producers to claim the top $3/kg rate of the hydrogen production tax credit could be overly onerous on the fledgling industry, according to responses to reporting on a draft in Politico and Bloomberg.

Reportedly, new rules include requirements that hydrogen be produced from newly created renewables (additionality), as well as geographic correlation and hourly time-matching requirements to qualify for the top rate.

“The proposal suggests that there will be an hourly matching requirement from 2027, making the rules stricter than those in the EU: a surprise to many, and potentially problematic in the eyes of some,” Ben Heininger, a manager at Baringa, said in a statement on LinkedIn. “This will lead to a material increase in costs, given the challenges in procuring firm 24/7 green power – a boon for storage developers no doubt.”

The increase in cost will drive the levelized cost of hydrogen higher and producers will likely have greater concerns over competitiveness for exports, Heininger said.

“If true, the Biden Administration’s proposed strategy for implementing these provisions will fail to get this new industry off the ground,” Jason Grumet, chief executive officer of the Washington-based American Clean Power Association, said in a statement yesterday. “It is surprising and disappointing that the administration would propose such a rigid approach that is at odds with decades of learning about new technology deployment.”

The 45V tax credit was originally unveiled as part of the Inflation Reduction Act and is split into four rates based on emissions intensity.

Hydrogen project developers and investors worry that stringent 45V rules will put the nascent industry on its back foot, significantly enough to kill projects by increasing the cost of green hydrogen production as the number of hours an electrolyzer can be operational is reduced and the sources of energy from which they can purchase power is limited.

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OCI Global hires advisors for strategic review

Dutch chemicals producer OCI Global has hired advisors to explore potential asset monetizations. It is also in talks with offtakers that could take an equity stake in its Texas blue ammonia project, with strong demand spurring the company to evaluate an expansion at the site.

OCI Global has retained advisors as part of its strategic review to explore potential asset monetizations, CEO Ahmed El-Hoshy said today.

The aim of the asset sale exploration is to bridge the gap between the combined value of the individual assets in the company’s portfolio and the discount on holding company shares, El-Hoshy said.

The decision to pursue the asset sales came after “constructive dialog” with Inclusive Capital, he said, an activist shareholder that has been pushing for the dispositions.

OCI CFO Hassan Badrawi added that he expected to provide an additional update before the end of the year, and that there was “strong interest in the active discussions.”

In the meantime, OCI is exploring adding a second line at its Texas blue ammonia project, a 1.1 mtpa facility under construction in Beaumont, Texas. 

“We’re currently in advanced discussions regarding long-term offtake and potential equity participation, reflecting strong commercial interest and an increasing appetite from strategics to pay a premium to secure long-term low-carbon ammonia, given regulatory scores,” El-Hoshy said.

Any further expansion at the site will benefit from enhanced project economics, with cost benefits deriving from an early-mover advantage, as well as the ability to leverage existing infrastructure and utilities, El-Hoshy added.

“With this in mind – and against the backdrop of a positively evolving regulatory environment – we are prudently evaluating a second line at the site to capitalize upon anticipated demand,” he said, noting that the expansion would bring its clean fuels capacity in total to 2.8 million tons.

“With the incentives that are being provided for the utility space and the power space in Japan and Korea, there is, for many of the offtakers, a requirement to have an equity participation in the low-carbon ammonia,” El-Hoshy said.

The strategic investors could come with lower return requirements, allowing for a higher premium for the transfer of equity in the project, he said.

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EnCap’s Shawn Cumberland on the fund’s approach to clean fuels

Cumberland, a managing partner with EnCap Energy Transition, discusses how the clean fuels sector compares to the emergence of other new energy technologies, and outlines the firm’s wait-and-see approach to investment in hydrogen and other clean fuels.

EnCap Energy Transition, the energy transition-focused arm of EnCap Investments, is evaluating scores of opportunities in the hydrogen and clean fuels space but doesn’t feel the need to be an early mover if the risk economics don’t work, Managing Partner Shawn Cumberland said in an interview.

Houston-based EnCap prefers to invest in early stages and grow companies deploying proven technologies to the point that they’re ready to be passed onto another investor with much deeper pockets. There are hundreds of early-stage clean fuels companies looking for growth equity in the space, he said, but the firm believes it’s not necessary to deploy before the technology or market is ready.

Given the fund’s strategy of investing in the growth-equity stage, EnCap gains exposure to a niche set of businesses that are not yet subjected to the broader financial markets.

For example, when EnCap stood up Energy Transition Fund I, a $1.2bn growth capital vehicle, the manager piled heavily into storage, dedicating some $600m, more than half of the fund, to the sector.

“That was at a time when all we saw were some people putting some really dinky 10 MW and 20 MW projects online,” he said. “We absolutely wanted to be a first and fast mover and saw a compelling opportunity.”

The reasons for that were two converging macro factors. One was that the battery costs had come down 90% because of EV development. Meanwhile, the demand for batteries required storage to be built out rapidly at scale. So, that inflection point – in addition to the apparent dearth of investor interest in the space at the time – called for early action.

“We were sanctioning the build of these things with no IRA,” Cumberland said.

‘If it works’

To be sure, EnCap is not a technology venture capital firm and waits for technologies to be proven.

As such, the clean fuels sector could end up being a longer play for EnCap, Cumberland noted, but the fund continues to weigh whether there will be a penalty for waiting. In the meantime, regulatory issues like IRS guidance on “additionality” for green hydrogen and the impact of the EU’s rules for renewable fuels of non-biological origin should get resolved.

Still, market timing plays a role, and the EnCap portfolio includes a 2021 investment into Arbor Renewable Gas, which develops and owns facilities that convert woody biomass into low-carbon renewable gasoline and green hydrogen.

Cumberland also pointed to EnCap’s investment in wind developer Triple Oak Power, which is currently for sale via Marathon Capital. That investment was made when many industry players were moving toward solar and dropping attention to wind.

Now, clean fuels are trading at a premium because of investor interest and generous government incentives for the sector, he noted.

“Hydrogen, if it works, may be more like solar,” Cumberland said, describing the hockey-stick growth trajectory of the solar industry over 15 years. If the industry is cost-competitive without subsidies, there will be a flood of project development that requires massive funding and talented management teams

“We won’t be late to the party,” he said.

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Hydrogen firm launches equity raise

A US hydrogen infrastructure and project development outfit has mandated a banker to conduct a raise for equity and project capital.

Lifte H2, the Boston-based hydrogen infrastructure and project developer, has mandated a banker to conduct a Series A capital raise, according to two sources familiar with the matter.

Energy & Industrial Advisory Partners is running the process, which launched recently, the sources said. Lifte H2 is seeking equity in the topco and development capital for its first project.

Talks with strategic and financial investors are being conducted now.

Lifte H2, which also has offices in Berlin, is led by Co-founder and CEO Matthew Blieske, who served as global hydrogen product manager for Shell before starting Lifte H2 in 2021. The founding team also includes Jeremy Manaus, Angela Akroyd, Richard Zhang, Paul Karzel, and Richard Wiens, all of whom previously worked at Shell.

In January, the company launched two hydrogen transport and dispensing products, the MACH₂ Mobile Refueler, which is a combination dispenser and high-capacity trailer; and the MACH2 High-Capacity Hydrogen Trailer, which has a capacity of 1,330 kg at approximately 550 bar and, according to the company, enables the lowest cost per kilogram for over-the-road transport.

The company signed an MOU last year with Swiss compressor manufacturer Burckhardt Compression to develop a joint offering of hydrogen solutions.

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Renewables developer exploring move into green hydrogen

North Carolina-based Strata Clean Energy is engaged with engineers and consultants in preparations for a potential move into the production of green hydrogen.

Strata Clean Energy, the North Carolina-based utility-scale renewables developer, is researching locations in the U.S. where it could potentially build a green hydrogen production plant, executives said in an interview.

“We’ve been doing some hydrogen work for the past few years,” said Tiago Sabino Dias, former CEO of Crossover Energy, which was acquired by Strata in a deal announced this week. That forward momentum on green hydrogen and other areas of the energy transition was part of the reason the deal with Strata was made, he said.

Sabino Dias is now the senior vice president of origination at Strata following the takeover.

“We’ve done a lot of work thinking about where the high-value locations are,” Strata’s Chief Development Officer Josh Rogol said in a separate interview.

Hydrogen is adjacent to Strata’s core competencies in energy storage, Rogol said. The company is confident it could supply the green kilowatt hours for hydrogen production and is researching offtake scenarios in transportation and industrial uses.

Strata has a 13 GW project pipeline of standalone and combined solar and storage, according to its website, with 4 GW under management.

The company’s IPP has about 1 GW with ambitions to grow, Rogol said. It’s go-forward pipeline comprises more than 100 projects across 26 states.

Strata is now engaged with several consultants and engineers to explore green hydrogen opportunities, Rogol said. The company is open to new advisory relationships across verticals.

“We think we are really well positioned to be both the energy supplier, as well as the molecule producer,” Rogol said. The capabilities and intellectual property acquired through Crossover put the firm six to 18 months ahead of other nascent developers.

Early-stage development in green hydrogen can be funded with Strata’s balance sheet, similar to Strata’s bilateral takeover of Crossover, Rogol said. Later stage development and EPC will require “an ecosystem of partners” potentially both financial and strategic, he added.

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