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CCS developer initiating discussions for corporate capital raise

Following its sale of a stake in a mega-scale carbon capture project in the Gulf Coast, Carbonvert is planning to initiate conversations to raise additional corporate capital, with plans to deploy as much as $500m into new projects.

Carbonvert, a Houston-based carbon capture and sequestration developer, is planning to start conversations soon with an eye to raise corporate capital that will allow it to advance mega-scale CCS projects, CEO Alex Tiller said in an interview.

Owned by a group of outside investors and the management team, Carbonvert is advancing a business model that takes advantage of the group’s expertise in early-stage project development, Tiller said.

The company recently completed the sale of its 25% interest in the Bayou Bend CCS project to Norway’s Equinor, which will now own the development alongside Chevron (50%) and Talos Energy (25%).

Bayou Bend CCS is the type of mega-scale project that Carbonvert will be pursuing in coming years, and for which the company will need to raise as much as $500m in corporate capital due to the capital-intensive nature of the projects, Tiller said.

Chevron last year bought its 50% operating stake in Bayou Bend for $50m, implying a $100m valuation for the project, which is positioned to become one of the largest CCS developments in the US for industrial emitters, with nearly 140,000 gross acres of pore space – 100,000 onshore and 40,000 offshore.

Carbonvert’s stake sale, announced yesterday, was “a positive result” for the company, Tiller said, though he declined to comment further on the valuation.

“It delivers capital to our balance sheet and allows us to grow our pipeline of projects and fund additional projects,” he said. Carbonvert used Jefferies as sell-side financial advisor in the sale to Equinor, he added.

Tiller, a veteran of the renewable energy industry, is a founding member of Carbonvert alongside Chief Development Officer Jan Sherman, who previously had a 30-year career with Shell and helped build the oil major’s Quest CCS project in Alberta, Canada.

For the upcoming capital raise, Carbonvert has not decided on whether to use a financial advisor; the structure of the capital raise will likely determine if an advisor is needed, Tiller said.

“We’ll definitely be out raising more corporate capital – these projects are tremendously expensive,” he said. “We’ll be starting conversations soon.”

The company has a line of sight to deploy as much as $500m of capital into its own projects over the next several years, he said, an indication of how much capital it will need to raise.

“These are large infrastructure projects that are going to take many years to bring to fruition, followed by decades of operations,” he said. “We live at the front end of the projects,” he added, “and when the appropriate parties are at the table, it’s really an act of humility to say ‘hey, maybe we’ve taken this as far as we can or should,’” a reference to finding the right time to sell the company’s stakes in the projects it is developing.

In addition to the Bayou Bend CCS project, Carbonvert is part of a consortium that’s developing a carbon hub in Wyoming. The company is also collaborating on an exploratory study for the direct air capture and storage of CO2 emissions from a nuclear power plant in Alabama.

“You can expect to see project announcements that look like Bayou Bend in the future,” Tiller said. “We like that type of mega-scale project, we like offshore, and we’re also pursuing some opportunities onshore that are less mature.”

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Gas separations provider raises $11m seed round

An industrial separations technology company that purifies gases has raised an oversubscribed VC round in addition to funding from the DOE.

Osmoses, an industrial separations technology company that purifies gases, has raised an oversubscribed $11m seed round led by Energy Capital Ventures, according to a news release.

Additional participating investors include Engine Ventures, Fine Structure Ventures, New Climate Ventures, Collaborative Fund, Little Green Bamboo, BlindSpot Ventures and several prominent angel investors, including Martin Madaus, the former CEO of Millipore Corporation.

In addition to its venture capital funding, Osmoses recently received a $1.5m grant from the US Department of Energy (DOE), as well as additional grant support from ARPA-E and NSF, among other organizations.

Osmoses will use the funding to develop commercial scale membrane modules for field deployment and establish pilot partnerships.

“In the coming months, Osmoses will double its full-time employee headcount, increase its pilot programs with chemical and petrochemical companies, utilities, and alternative energy companies, and develop partnerships with engineering and manufacturing firms,” the release states.

Gas molecules like hydrogen, biomethane, and oxygen are essential ingredients for alternative, low-carbon energy production, the release states. Because these gases don’t naturally occur in a form pure enough for direct use, they must first be separated, but their size and volatility makes doing so energy-intense, and expensive.

Today’s industrial separation processes, including cryogenic processes, distillation, and solvent absorption, account for 15% of the world’s energy consumption, the release states. CO2 emissions from energy combustion and industrial processes accounted for 89% of energy-related greenhouse gas emissions in 2022.

“Membrane technology, which operates as molecular filters to separate gas molecules from one another, has the potential to reduce energy consumption, but widespread implementation remains limited due to product loss and high operating costs,” the release states. Osmoses has developed a patented novel membrane technology that purifies gas molecules with unprecedented flux and selectivity, meaning lower capital requirements and operating costs for customers, with a significantly smaller physical footprint than today’s traditional separation processes – all while reducing industrial energy consumption by up to 90%.”

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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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Developer taps ING to raise project finance for Texas H2 plant

Clean Energy Holdings is assembling a roster of advisors to advance its Clear Fork green hydrogen project.

ING Americas will take the lead in securing project financing for Clean Energy Holding’s 250 MW Clear Fork, Texas renewable energy supplied green hydrogen and liquefaction project.

The project has a baseline schedule slated to enter commercial operations in the third quarter of 2024. The project is expected to produce a levelized average of 30,000 kg a day of liquefied green hydrogen. The CEH Platform is designed to attract leading edge and emerging technologies to integrate into our projects for validation and certification.

CEH is assembling a Renewable Energy and Technology Alliance, which now includes Equix Inc., a well-established and highly respected infrastructure firm. Bair Energy, LLC (BE) joins The Alliance as the Program Management Construction Management (PMCM) and serves as The Alliance Representative for the CEH Platform. The Alliance is working with an experienced commodities group to market and lead offtake negotiations for its projects.

CEO of Clean Energy Holdings, Nicholas Bair, stated: “Our Alliance is leading energy transformation, and we are committed to continue to lead the North American market in the production and implementation of green hydrogen for industrial, chemical, and mobility applications. We are also driving technological advancements developed through our projects. We have assembled a group of industry leaders as well as local and state governments to navigate through the potential challenges as we deliver our projects from concept to delivery and provide turnkey projects with a complete basis for design. Our Alliance delivers on contract and safety, with guaranties. This project is a strategic priority for The Alliance to showcase its turnkey design, long term operations and production guaranties.”

CEH President, Cornelius Fitzgerald, added, “These early, large-scale, projects will help define the green hydrogen industry in North America. Our Alliance partners and advisors have been carefully selected as both best-in-class for their respective roles and dedication to make these projects a success.”

Chair of Bair Energy, Candice McGuire stated, “flawless project delivery is the focus of the CEH Platform and The Alliance to lead the nation in energy security.”

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Exclusive: Glenfarne exploring hydrogen projects on existing asset base

Glenfarne Energy Transition is advancing its flagship liquefied natural gas project, Texas LNG, and evaluating hydrogen projects on or near its existing asset base on the Gulf Coast.

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

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

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

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

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

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

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

LNG pause

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

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

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

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

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

Hydrogen projects

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

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

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

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exclusive

Carbon credit project developer planning equity raise

A Texas-based carbon credit firm is preparing to sell credits from its first project in the US southeast and planning its first equity raise in 2024.

Sky Harvest Carbon, the Dallas-based carbon credit project developer, is preparing to sell credits from its first project, roughly 30,000 acres of forest in the southeastern US, while looking toward its first equity raise in 2024, CEO and founder Will Clayton said in an interview.

In late 2024 the company will seek to raise between $5m and $10m in topco equity, depending on the outcome of grant applications, Clayton said. The company is represented by Scott Douglass & McConnico in Austin, Texas and does not have a relationship with a financial advisor.

Sky Harvest considers itself a project developer, using existing liquidity to pay landowners on the backend for timber rights, then selling credits based on the volume and age of the trees for $20 to $50 per credit (standardized as 1 mtpy of carbon).

The company will sell some 45,000 credits from its pilot project — comprised of acreage across Virginia, North Carolina, Louisiana and Mississippi – in 2024, Clayton said. The project involves 20 landowners.

Clayton, formerly chief of staff at North Carolina-based renewables and P2X developer Strata Clean Energy, owns a controlling stake in Sky Harvest Carbon. He said he’s self-funded operations to date, in part with private debt. The company is also applying for a multi-million-dollar grant based on working with small and underrepresented landowners.

“There’s a wall of demand… that’s coming against a supply constraint,” Clayton said of companies wanting to buy credits to meet carbon reduction goals.

Sky Harvest would be interested in working with companies wanting to secure supply or credits before price spikes, or investors wanting to acquire the credits as an asset prior to price spikes, Clayton said.

“Anybody who wants to go long on carbon, either as an investment thesis or for the climate benefits to offset operational footprint, it’s a great way to do it by locking supply at a low cost,” he said.

A novel approach to credit definition

Carbon credits on the open market vary widely in verifications standards and price; they can cost anywhere from $1 to $2,000.

“There’s a long process for all the measurements and verifications,” Clayton said.

There are many forestry carbon developers paying landowners for environmental benefits and selling those credits. Where Sky Harvest is unique is its attempt to redefine the carbon credit, Clayton said.

The typical definition of 1 mtpy of CO2 is problematic, as it does not gauge for duration of storage, he said. Carbon emitted into the atmosphere can stay there indefinitely.

“If you’re storing carbon for 10, 20, 30 years, the scales don’t balance,” Clayton said. “That equation breaks and it’s not truly an offset.”

Sky Harvest is quantifying the value of carbon over time by equating volume with duration, Clayton said.

“If you have one ton of carbon dioxide going into the atmosphere forever on one side of the scale, you need multiple tons of carbon dioxide stored on the other side of the scale if it’s for any time period other than forever,” he said, noting that credit providers often cannot guarantee that the protected trees will never be harvested. Sky Harvest inputs more than 1 ton per credit, measured in periods of five years guaranteed storage at a time. “We compensate for the fact that it’s not going to be stored there forever.”

Monitoring protected land is expensive and often difficult to sustain. Carbon markets work much like conservation easements, but those easements often lose effect over time as oversight diminishes (typically because of staffing or funding shortages at the often nonprofit groups charged with monitoring).

“That doesn’t work in any other industry with real physical commodities,” Clayton said. “The way every other industry works is you pay a fund delivery. That’s our measure-as-you-go approach.”

A similar methodology has been put forward by the United Nations and has been adopted in Quebec, Clayton said.

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Analysis: States with hydrogen use and production incentives

Some states are mulling hydrogen-specific incentives and tax credits as they wait for final federal regulations for clean hydrogen production, Bianca Giacobone reports.

[Editor’s note: Paragraphs six through nine have been modified to clarify that Colorado legislation does in fact include ‘three pillars’ language.]

Final guidelines for the federal hydrogen production tax credits are still a work in progress, but in the meantime, legislatures across the country have been mulling their own incentives to spur production. 

So far, 14 U.S. states have or are considering legislation that includes tax credits or other incentives for the use or production of hydrogen, five of which specify the hydrogen has to be “green,” “clean” or “zero-carbon.” 

The industry is waiting for the final regulations relating to the 45V tax credit for production of clean hydrogen, a draft of which was released last December, and states are similarly waiting to make their own moves. 

“States have interest in developing hydrogen programs, but they will lag the federal initiatives,” said Frank Wolak, CEO of the Fuel Cell and Hydrogen Energy Association. “The new suite of things that the states will do is largely dependent upon the reaction from the federal government, which is brand new.” 

The ones that aren’t waiting opt for vagueness. 

Val Stori, senior program manager at the Great Plains Institute, a non-profit focused on the energy transition, notes that Washington state has a bill supporting renewable electrolytic hydrogen, but it doesn’t specify whether electricity has to be sourced directly from renewables or if it can come from the grid. It doesn’t touch upon the more granular “three pillars” requirements for clean hydrogen which could be included in federal regulations: new supply, temporal matching, and deliverability.

“The lack of specificity is the trend,” she said.

Meanwhile, Colorado’s Advance the Use of Clean Hydrogen Act is the exception to that rule with what’s considered the country’s first clean hydrogen standards, including “matching electrolyzer energy consumption with electricity production on an hourly basis” and requiring that “the electricity used to produce clean hydrogen comes from renewable energy that would otherwise have been curtailed or not delivered to load or from new zero carbon generation.”

The standard will be enforced starting in 2028 or when the deployment of hydrogen electrolyzers in the state exceeds 200 MW.

(Colorado also has a Clean Air Program and a recently launched Colorado Industrial Tax Credit Offering that can offer financial support for industrial emissions reduction projects, including hydrogen projects, but they don’t mention hydrogen use or production specifically.)

“You might see the beginnings of laws that are starting to appear now,  but it might take two or three years before states build the momentum to figure out what they should be doing,” said Wolak. 

Nine out of the 14 states that have hydrogen-specific legislation don’t target clean hydrogen, but hydrogen in general. Kentucky, for example, has a 2018 tax incentive for companies that engage in alternative fuel production and hydrogen transmission pipelines. 

More recently, Oklahoma introduced a bill that proposes a one-time $50m infrastructure assist to a company that invests a minimum of $800m in a hydrogen production facility. According to local news reports, the bill is aimed at Woodside Energy’s electrolytic hydrogen plant in Ardmore. 

“We are an oil and gas state and we will be a primarily oil and gas state for a long time,” Oklahoma Senator Jerry Alvord, the bill’s sponsor, said in an interview. “But we could be at the forefront in our area of hydrogen and the uses that hydrogen puts before us.” 

Depending on the state, general hydrogen incentives could potentially add to federal tax incentives for clean hydrogen projects. 

Meanwhile, other states have been implementing Low Carbon Fuel Standards to encourage the development and use of clean fuels, including hydrogen, in transportation.

Last month, for example, New Mexico enacted its Low Carbon Fuel Standard, a technology-neutral program based where producers and vendors of low-carbon fuels, including clean hydrogen, generate credits to sell in the clean fuels marketplace, where they can be bought by producers of high carbon fuels. 

Similar programs exist in Oregon, Washington, and California, which was early to the game and began implementing its program in 2011. 

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