Resource logo with tagline

DG Fuels charting path to be SAF powerhouse

The company has retained advisors and is mapping out a plan to build as many as 50 production facilities in North America for a "gigantic" sustainable aviation fuel market.

DG Fuels is charting a plan to build a proprietary network of 30 to 50 sustainable aviation fuel (SAF) production facilities in North America, CEO Michael Darcy said in an interview.

The Washington, D.C.-based company will pursue a combination of debt and equity on a case-by-case basis to fund the projects, Darcy explained, with financings underway now for the firm’s initial project in Louisiana and a second facility in Maine. The Louisiana facility recently inked a USD 4bn offtake agreement with an undisclosed investment grade industrial buyer.

The company is working with Guggenheim and Stephens as financial advisors, Darcy said. About 60 people hold equity in the company; Darcy and the founding team hold a majority stake.

In the coming months DG Fuels will likely make announcements about more SAF plants in the US and British Columbia, Darcy said. Site negotiations are underway and each project is its own subsidiary of the parent company.

“There’s clearly a good return of what we refer to as the ‘project level,’ and then we have the parent company,” Darcy said. “We have strategic investment at the parent and now we’re looking at strategic investment at the project level.”

Huge demand, low supply

DG Fuels produces SAF from cellulosic biomass feedstock, a technology that does not need sequestration of CO2 because natural gas is not used.

“We like to say it’s the corn cob, not the corn,” Darcy said. The company can also use timber waste, waxes, and renewable power as an important source of energy.

The company gets about 4.5 barrels of SAF for every ton of biomass feedstock, which is roughly three to four times the industry average, Darcy said.

“Practical scale” for a facility is 12,000 to 15,000 barrels a day, Darcy said. That’s big enough to be commercialized without stressing the electrical grid with power demand.

Despite the company’s advantages, there is “plenty of room” for other producers to come into the SAF space, Darcy said.

“Right now, the market for SAF is gigantic and the supply is minimal,” Darcy said. “Companies like us are able to pick and choose high-quality offtakers.”

DG Fuels includes Delta Airlines, Air France and General Electric as committed offtakers.

Multi-tasking

DG Fuels is “always engaged in some level of capital raise for construction of facilities and detailed engineering,” Darcy said. “There’s always more engineering to be done.”

Some of the financing has already been completed, but Darcy declined to go into additional detail. After Louisiana, the company will quickly follow up with Maine.

HydrogenPro AS recently announced that it would join Black & Veatch and Energy Vault in financing the remaining capital requirements of DG Fuels’ project in Louisiana, which is expected to be completed in mid-2022.

Most of the engineering work in Louisiana is transferable to the company’s project in Maine. Darcy likened the facilities’ build-out to a class of ships: once the first is completed, the second and third can be built almost concurrently.

“There will be a point where we won’t be building one at a time,” Darcy said.

The opportunity for funders to participate is broad in the SAF space, Darcy said. There is a crossover of good economics and ESG, so strategics, industrials, private equity and other pure financial players can all be involved.

The broad base of capital eager to participate in companies that are innovative — but not too innovative as to scare investors — is indicative of the industry’s ability to secure offtakers and feedstock.

Storing power

It’s one thing to acknowledge the need for reduction of carbon, but hard work is required ahead, Darcy said.

“The low-hanging fruit has been done,” he said of the renewables industry. “Now it’s not really about the power, it’s about the storage of power.”

DG Fuels is an offtaker of non-peak renewable power to displace fossil fuel energy. But baseload renewable power is becoming available almost anywhere.

The Maine project will use stranded hydroelectric power, Louisiana will use solar, and projects in the Midwest will use wind, Darcy said. Additionally, geothermal power is “starting to become a very real opportunity,” he added.

Deploying broadly with renewable power gets past the issues of variability of renewable power at a reasonable cost, he said.

Unlock this article

The content you are trying to view is exclusive to our subscribers.
To unlock this article:

You might also like...

Hyzon and partners complete commercial deliveries with liquid H2

Hyzon Motors completed deliveries to eight customers of Performance Food Group in Texas, traveling over 540 miles on a 16-hour continuous run in a liquid hydrogen fuel cell electric vehicle.

Hyzon Motors, Performance Food Group, and Chart Industries, have completed Hyzon’s first commercial run with a liquid hydrogen fuel cell electric vehicle (LH2 FCEV), according to a news release.

Starting in Temple, Texas, the truck completed deliveries to eight PFG customers near Dallas, travelling over 540 miles on a 16-hour continuous run including over 100-degree Fahrenheit temperatures.

“The run – further than the distance from Sacramento to San Diego – demonstrates the viability of on-board liquid hydrogen to fuel long-distance, zero-emission transport,” the release states.

Compared to gaseous hydrogen, liquid hydrogen allows Hyzon to increase the amount of fuel on board significantly thanks to increased energy density. Hyzon partnered with Chart Industries to develop a tank system capable of storing liquid hydrogen at extremely cold temperatures and delivering it to the fuel cell system at the necessary pressure.

Liquid hydrogen as a fuel source has been estimated to be up to $5 per kilogram less expensive all-in to dispense than high-pressure gaseous hydrogen1, which would provide meaningful benefits to fleet owners.

For vehicle testing and the demo run, liquid hydrogen transportation, storage and dispensing was provided by Certarus, with liquid hydrogen produced by Air Liquide.

It was previously reported that Hyzon is partnered with Raven SR and Chevron New Energies to commercialize operations of a green waste-to-hydrogen production facility in Richmond, California.

Read More »

Advent Technologies purchases 10m shares of common stock

The Boston firm previously announced intentions to collaborate on deployment of methanol-based fuel cells and green methanol generation development.

Advent Technologies, the Boston-based fuel cell and hydrogen tech firm, has entered into securities purchase agreements with investors to purchase 10m shares of common stock in a registered direct offering at a per share purchase price of $0.20, according to a news release.

The transaction, generating gross proceeds of $2m, is expected to close before the end of the year. Joseph Gunnar & Co. is acting as the exclusive placement agent for the offering.

In September Advent entered an MOU with Emergent Waste for deployment of methanol-based fuel cells and development of large-scale green methanol generation plants.

Read More »

Toyota powering California port facility with fuel cell technology

Toyota and FuelCell Energy have completed installation of a fuel cell system at the Long Beach vehicle processing center.

FuelCell Energy, Inc. and Toyota Motor North America, Inc. (Toyota) have announced the completion of the first-of-its-kind “Tri-gen system” at Toyota’s Port of Long Beach operations, according to a news release.

The Tri-gen system, owned and operated by FuelCell Energy, produces renewable electricity, renewable hydrogen, and water from directed biogas. FuelCell Energy has contracted with Toyota to supply the products of Tri-gen under a 20-year purchase agreement.

Tri-gen is an example of FuelCell Energy’s ability to scale hydrogen-powered fuel cell technology, an increasingly important energy solution in the global effort to reduce carbon emissions. Tri-gen will enable Toyota Logistic Services (TLS) Long Beach to be the company’s first port vehicle processing facility in the world powered by onsite-generated, 100 percent renewable energy and represents the types of innovative and bold investments the company is making as part of its environmental sustainability strategy.

“By utilizing only renewable hydrogen and electricity production, TLS Long Beach will blaze a trail for our company,” said Chris Reynolds, Chief Administrative Officer, Toyota. “Working with FuelCell Energy, together we now have a world-class facility that will help Toyota achieve its carbon reduction efforts, and the great news is this real-world example can be duplicated in many parts of the globe.”

FuelCell Energy CEO Jason Few said, “FuelCell Energy is committed to helping our customers surpass their clean energy objectives. By working with FuelCell Energy, Toyota is making a powerful statement that hydrogen-based energy is good for business, local communities, and the environment. We are extremely pleased to showcase the versatility and sophistication of our fuel cell technology and to play a role in supporting Toyota’s environmental commitments.”

Read More »

Exclusive: Advanced Ionics raising $12.5m, seeking pilot project partners

Advanced Ionics, an electrolyzer developer based in the Midwest, is approaching a close on the second tranche of its Series A and is seeking sponsors for pilot projects in Texas and elsewhere.

The company’s Symbiotic electrolyzers use steam by tapping into excess heat from industrial settings, thereby lowering electricity needs for water splitting to 35 kWh per kg, with 30 kWh per kg possible. That compares to industry averages over 50 kWh per kg.

Advanced Ionics, the Milwaukee-based electrolyzer developer, is about six weeks out from closing a second tranche of its Series A and is seeking new partnerships for pilot projects in the US, Chief Commercial Officer Ignacio Bincaz told ReSource.

Bincaz, based in Houston, is working to close the second $12.5m tranche, which is roughly the same size as the first tranche. The company has technical teams in Wisconsin but could build out those as well as commercial capabilities in Houston.
The company’s Symbiotic electrolyzers use steam by tapping into excess heat from industrial settings, thereby lowering electricity needs for water splitting to 35 kWh per kg, with 30 kWh per kg possible. That compares to industry averages over 50 kWh per kg.

“We just put together our first stack, Generation One, which are 100 square centimeters,” Bincaz said. Generation Two stacks will come later this year, but to get to Generation Three — commercial size, producing between 7 and 16 tons per day — the company will have to conduct a Series B about one year from now.

“For that, we need to hit certain benchmarks on durability of a stack,” he said. “The money will go toward scaling up and getting the data expected by investors to get us to Series B.”

Aside from equity provisions, Advanced Ionics is looking for sponsors for pilots and related studies, Bincaz said. “There’s different ways that we’re looking for collaboration.”

Between 2027 and 2028 the company expects to have commercial-size Generation Three stacks in the market.

Pilot projects

Advanced Ionics has two pilot projects in development with Repsol Foundation and Arpa-E (US Department of Energy), respectively.

The Repsol project is a Generation One development producing 1 kilogram per day, Bincaz said. The government project will be the first Generation Two project.

Another pilot is in development with a large energy company that Bincaz declined to name. The company is also exploring pilot projects with bp, which is an investor in the company.

After four or so pilot projects of ascending scale, the company will look to do its first industrial-scale project using real process heat or steam, integrated into a hydrogen-use process like ammonia manufacturing or chemical refining.

“We’re talking to companies in Asia, companies in Europe, companies in the US,” he said, specifically naming Japan and Singapore. “I’m in early conversations.”

Advanced Ionics’ first tranche Series A was led by bp ventures, with participation from Clean Energy Ventures, Mitsubishi Heavy Industries, and GVP Climate.

Read More »
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.

Read More »
exclusive

AIMCo-backed midstream infrastructure firm in refi

The company, whose asset footprint includes Gulf Coast hydrogen production, today priced a debt refinancing transaction with an 8.875% coupon.

Howard Energy Partners today priced $550m of senior unsecured notes to refinance amounts outstanding on its revolving credit facility.

The company, which is majority owned by the Alberta Investment Management Corporation (AIMCo), will pay 8.875% on the notes, inside of price talk of between 8.75% – 9%, according to sources familiar with the matter.

RBC Capital Markets and TD Securities are joint active bookrunners on the deal, the sources said.

Howard in 2021 closed on the acquisition of the Javelina Facility in Corpus Christi, Texas — a treating and fractionation plant that extracts olefins, hydrogen, and natural gas liquids from the gas streams produced by local refineries.

Starting in Jan of 2023, a strategic technology partner began producing a low-carbon diesel substitute using Javelina’s hydrogen and CO2 as feedstocks, making it one of the first merchant “clean” hydrogen facilities on the US Gulf Coast, according to the company. HEP is also pursuing carbon capture and sequestration opportunities with its Javelina assets through a joint venture with TALOS Energy and the Port of Corpus Christi.

AIMCo acquired an initial 28% stake in HEP in 2017, and brought its ownership stake to 87% last year following the purchase of Astatine Investment Partners’ stake in the company.

Howard operates in two key segments in the US and Mexico: natural gas and liquids. The natural gas segment includes 1,175 miles of pipelines and approximately 4.3 Bcf/d of throughput capacity and 600 MMCf/d of cryogenic processing capacity.

The liquids segment includes terminalling and logistics services for refined products as well as refinery-focused off-gas handling, treating, processing, fractionation and hydrogen supply services.

Spokespersons for the company, RBC, and TD did not respond to emails seeking comment.

Read More »

Welcome Back

Get Started

Sign up for a free 15-day trial and get the latest clean fuels news in your inbox.