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E.P.A. makes selections for $20bn greenhouse gas reduction fund

The EPA announced its selections for $20bn in grant awards under two competitions within the $27 billion Greenhouse Gas Reduction Fund, established by the Inflation Reduction Act.

The U.S. Environmental Protection Agency has announced its selections for $20bn in grant awards under two competitions within the $27 billion Greenhouse Gas Reduction Fund (GGRF), which was created under the Inflation Reduction Act as part of President Biden’s Investing in America agenda, according to a news release.

The three selections under the $14bn National Clean Investment Fund and five selections under the $6bn Clean Communities Investment Accelerator will create a national clean financing network for clean energy and climate solutions across sectors, ensuring communities have access to the capital they need to participate in and benefit from a cleaner, more sustainable economy.

By financing tens of thousands of projects, this national clean financing network will mobilize private capital to reduce climate and air pollution while also reducing energy costs, improving public health, and creating good-paying clean energy jobs in communities across the country, especially in low-income and disadvantaged communities.

National Clean Investment Fund (NCIF) Selectees

Under the $14 billion National Clean Investment Fund, the three selected applicants will establish national clean financing institutions that deliver accessible, affordable financing for clean technology projects nationwide, partnering with private-sector investors, developers, community organizations, and others to deploy projects, mobilize private capital at scale, and enable millions of Americans to benefit from the program through energy bill savings, cleaner air, job creation, and more. Additional details on each of the three selected applicants, including the narrative proposals that were submitted to EPA as part of the application process, can be found on EPA’s Greenhouse Gas Reduction Fund NCIF website.

All three selected applicants surpassed the program requirement of dedicating a minimum of 40% of capital to low-income and disadvantaged communities. The three selected applicants are:

  • Climate United Fund ($6.97 billion award), a nonprofit formed by Calvert Impact to partner with two U.S. Treasury-certified Community Development Financial Institutions (CDFIs), Self-Help Ventures Fund and Community Preservation Corporation. Together, these three nonprofit financial institutions bring a decades-long track record of successfully raising and deploying $30 billion in capital with a focus on low-income and disadvantaged communities. Climate United Fund’s program will focus on investing in harder-to-reach market segments like consumers, small businesses, small farms, community facilities, and schools—with at least 60% of its investments in low-income and disadvantaged communities, 20% in rural communities, and 10% in Tribal communities.
  • Coalition for Green Capital ($5 billion award), a nonprofit with almost 15 years of experience helping establish and work with dozens of state, local, and nonprofit green banks that have already catalyzed $20 billion into qualified projects—and that have a pipeline of $30 billion of demand for green bank capital that could be coupled with more than twice that in private investment. The Coalition for Green Capital’s program will have particular emphasis on public-private investing and will leverage the existing and growing national network of green banks as a key distribution channel for investment—with at least 50% of investments in low-income and disadvantaged communities.
  • Power Forward Communities ($2 billion award), a nonprofit coalition formed by five of the country’s most trusted housing, climate, and community investment groups that is dedicated to decarbonizing and transforming American housing to save homeowners and renters money, reinvest in communities, and tackle the climate crisis. The coalition members—Enterprise Community Partners, LISC (Local Initiatives Support Corporation), Rewiring America, Habitat for Humanity, and United Way—will draw on their decades of experience, which includes deploying over $100 billion in community-based initiatives and investments, to build and lead a national financing program providing customized and affordable solutions for single-family and multi-family housing owners and developers—with at least 75% of investments in low-income and disadvantaged communities.

Clean Communities Investment Accelerator (CCIA) Selectees

Under the $6 billion Clean Communities Investment Accelerator, the five selected applicants will establish hubs that provide funding and technical assistance to community lenders working in low-income and disadvantaged communities, providing an immediate pathway to deploy projects in those communities while also building capacity of hundreds of community lenders to finance projects for years. Each of the selectees will provide capitalization funding (typically up to $10 million per community lender), technical assistance subawards (typically up to $1 million per community lender), and technical assistance services so that community lenders can provide financial assistance to deploy distributed energy, net-zero buildings, and zero-emissions transportation projects where they are needed most. 100% of capital under the CCIA is dedicated to low-income and disadvantaged communities. Additional details on each of the five selected applicants, including the narrative proposals that were submitted to EPA as part of the application process, can be found on EPA’s Greenhouse Gas Reduction Fund CCIA website.

The five selected applicants are:

  • Opportunity Finance Network ($2.29 billion award), a ~40-year-old nonprofit CDFI Intermediary that provides capital and capacity building for a national network of 400+ community lenders—predominantly U.S. Treasury-certified CDFI Loan Funds—which collectively hold $42 billion in assets and serve all 50 states, the District of Columbia, and several U.S. territories.
  • Inclusiv ($1.87 billion award), a ~50-year-old nonprofit CDFI Intermediary that provides capital and capacity building for a national network of 900+ mission-driven, regulated credit unions—which include CDFIs and financial cooperativas in Puerto Rico—that collectively manage $330 billion in assets and serve 23 million individuals across the country.
  • Justice Climate Fund ($940 million award), a purpose-built nonprofit supported by an existing ecosystem of coalition members, a national network of more than 1,200 community lenders, and ImpactAssets—an experienced nonprofit with $3 billion under management—to provide responsible, clean energy-focused capital and capacity building to community lenders across the country.
  • Appalachian Community Capital ($500 million award), a nonprofit CDFI with a decade of experience working with community lenders in Appalachian communities, which is launching the Green Bank for Rural America to deliver clean capital and capacity building assistance to hundreds of community lenders working in coal, energy, underserved rural, and Tribal communities across the United States.
  • Native CDFI Network ($400 million award), a nonprofit that serves as national voice and advocate for the 60+ U.S. Treasury-certified Native CDFIs, which have a presence in 27 states across rural reservation communities as well as urban communities and have a mission to address capital access challenges in Native communities.

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Advanced Ionics takes investment from heavy industry giants

The Wisconsin-based company will use proceeds from a Series A to deploy its new electrolyzer technology to early customers.

Electrolyzer developer Advanced Ionics has closed a $12.5m Series A financing led by bp ventures, with Clean Energy Ventures, Mitsubishi Heavy Industries, and GVP Climate, according to a news release.

The capital will facilitate the initial deployment of the Symbio water vapor electrolyzer technology for heavy industry. The electrolyzer reduces the cost and electricity requirements for green hydrogen production by integrating with standard industrial processes to harness available heat.

“The system is made of widely available steels and other simple materials rather than expensive metals or materials common in other electrolyzers,” the release states.

Advanced Ionics will use the funds to expand its team and deliver the electrolyzer systems to early customers. The company is in a pilot program with Repsol Foundation. Bp will also be exploring pilot opportunities with Advanced Ionics.

Other investors in the company include Aster, and angel investor collectives Clean Energy Venture Group and SWAN Impact Network.

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HydrogenPro raises equity in private placement

Norway’s HydrogenPro has raised almost $8m in a private placement with international technology group ANDRITZ AG.

Norway-based HydrogenPro ASA has secured NOK 82.7m ($7.65m) in new equity through a private placement of new shares towards ANDRITZ AG, an international technology group listed on the Vienna stock exchange and one of the leading companies within green hydrogen plants and solutions.

HydrogenPro embarked on a new trajectory in August last year, expanding its presence in the United States and seeking strategic partnerships and alternative funding sources, according to a news release.

Jarle Dragvik, CEO of HydrogenPro, comments: “We are delighted to strengthen the ANDRITZ partnership as we continue to execute on our vision of delivering sustainable hydrogen solutions globally. They bring valuable industrial expertise as one of the leading actors within green hydrogen plants and solutions. Thanks to the partnership with Andritz and their EPC (Engineering, Procurement and Construction) capability, HydrogenPro will together with Andritz achieve full scope delivery, fulfilling requirements of many customers in the large-scale electrolysis sector.”

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Canada to fund CAD 800m for clean fuel projects

60 projects have been selected to receive funding through Canada’s CAD 1.5bn Clean Fuels Fund.

Canadian Minister of Natural Resources Jonathan Wilkinson announced that approximately 60 projects have been selected to receive funding under the Government of Canada’s CAD 1.5bn Clean Fuels Fund (CFF).

These projects represent a first tranche of the highest-ranking applications from last year’s call for proposals and have a total combined value of more than CAD 3.8bn. They include production facilities, as well as feasibility and front-end engineering and design studies, spanning seven jurisdictions and covering five different fuel types.

The federal government is undertaking negotiations to finalize the terms of funding for each project, and the total federal investment in these projects will be up to CAD 800m. This funding will help project proponents address critical barriers to growth in the domestic clean fuels market and lays the groundwork for the low-carbon fuels of the future.

A second tranche of projects, from last year’s call for proposal, is currently being reviewed, with funding decisions expected to be finalized in December. Once successful applicants have been informed, Natural Resources Canada will start contribution agreement negotiations.

Canada’s clean fuels industry is rapidly growing, owing to the global demand to reduce greenhouse gas emissions and bolster energy security. The importance of continued investment into the production, development and distribution of clean fuels together with their infrastructure and technology is clear, as Canada strives to position itself as a global leader with investments such as the CFF.

At today’s announcement, Minister Wilkinson also highlighted a combined investment of more than $8.8m to six organizations for 10 hydrogen and natural gas refuelling stations to help accelerate the decarbonization of road transportation. Federal funding for these projects was provided through Natural Resources Canada’s Zero-Emission Vehicle Infrastructure Program (ZEVIP) and the Electric Vehicle and Alternative Fuel Infrastructure Deployment (EVAFIDI).

The funding under ZEVIP and EVAFIDI includes:

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Exclusive: Former green hydrogen executive raising capital for fusion startup

A former executive that developed large hydrogen and ammonia projects in Texas is raising money in a new role with a fusion energy firm with ambitions to co-locate generation with heavy industry and fuels production.

Tokamak Energy, the UK-based fusion energy startup, is seeking to raise about $80m in a self-conducted Series C capital raise, President Michael Ginsberg told ReSource.

The company previously hired Bank of America to run a $1bn raise but pulled back on the process in favor of more incremental growth, Ginsberg said. The company has already raised $40m of the $120m Series C and is aiming for a close by mid-summer.

With US operations in West Virginia (where co-founder Mark Koepke is a professor of physics at WVU) and headquarters in Oxford, England, Tokamak was recently included in the US Department of Energy’s multimillion-dollar Fusion Development Program and partnered with General Atomics on advanced magnet technology.

Ginsberg previously worked as vice president of technology and project execution at Avina Clean Hydrogen, where he was instrumental in developing the Nueces Clean Ammonia project in Texas. He said Tokamak is planning to build fusion generation in the United States, but has a magnets business with a near-term return profile.

Magnets business

Tokamak is a developer of high-temperature superconducting (HTS) magnets.

They are developed for fusion to contain plasma energy, but like the semi-conductor business, they’ve had applications in other industries, such as defense, offshore wind turbines, and mineral separation.

First revenue from those magnets, from another fusion company, came in last year, he said. There are ongoing contract negotiations with the US Department of Defense and an imaging device maker that uses magnets.

Rail companies interested in maglev (from magnetic levitation) technology are also in discussions with Tokamak, he said.

Turnaround for that business for investors is expected to be three to five years, Ginsberg said.

Fusion-to-X

Tokamak is planning to develop its first commercial scale plant (COD after 2030) in the US.

Requirements for site selection are dependent on nearby capabilities; if deuterium and tritium are to be used as fuels, there needs to be a nearby facility that can handle those hydrogen-isotope fuels. For example, Oak Ride National Labs in Tennessee can handle tritium.

The other siting concern is use case.

“It could be, certainly, pumping electrons onto the grid, in which case your limited by transmission lines,” Ginsberg said. “But also, we could create industrial thermal energy, thermal heat, and co-locate with decarbonized heavy industry.”

Co-location with data centers is another option, he said. Tokamak is also exploring hydrogen production.

“Obviously you could do the traditional electrolysis process, and we’re talking to some companies that just need electrons to convert the H2O into hydrogen and oxygen, and they want baseload power to do that as opposed to intermittent power,” he said. “Also, there’s thermal energy and thermal processes to produce hydrogen that we could use from the fusion reaction.”

Ginsberg, who oversees US operations at Tokamak, was hired following the DOE award.

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exclusive

Interview: Vinson & Elkins’ Alan Alexander on the emerging hydrogen project development landscape

Vinson & Elkins Partner Alan Alexander, whose clients include OCI and Lotus Infrastructure, has watched the hydrogen project development space evolve from a fledgling idea to one that is ready for actionable projects.

Vinson & Elkins Partner Alan Alexander, whose clients include OCI and Lotus Infrastructure, has watched the hydrogen project development space evolve from a fledgling idea to one that is ready for actionable projects.

In the meantime, a number of novel legal and commercial issues facing hydrogen project developers have come to the forefront, as outlined in a paper from the law firm this week, which serves as a guide for thinking through major development questions that can snag projects.

In an interview, Alexander, a Houston-based project development and finance lawyer, says that, although some of the issues are unique – like the potential for a clean fuels pricing premium, ownership of environmental attributes, or carbon leaking from a sequestration site – addressing them is built on decades of practice.

“The way I like to put it is, yes, there are new issues being addressed using traditional tools, but there’s not yet a consensus around what constitutes ‘market terms’ for a number of them, so we are having to figure that out as we go,” he says.

Green hydrogen projects, for example, are “quite possibly” the most complex project type he has seen, given that they sit at the nexus between renewable electricity and downstream fuels applications, subjecting them to the commercial and permitting issues inherent in both verticals.

But even given the challenges, Alexander believes the market has reached commercial take-off for certain types of projects.

“When the hydrogen rush started, first it was renewables developers who knew a lot about how to develop renewables but nothing about how to market and sell hydrogen,” he says. “Then you got the people who were very enthusiastic about developing hydrogen projects but didn’t know exactly what to do with it. And now we’re beginning to see end-use cases develop and actionable projects that are very exciting, in some cases where renewables developers and hydrogen developers have teamed up to focus on their core competencies.”

A pricing premium?

In the article, Vinson & Elkins lawyers note that commodities pricing indices are not yet distinguishing between low-carbon and traditional fuels, even though a clean fuel has more value due to its low-carbon attributes. The observation echoes the conclusion of a group of offtakers who viewed the prospect of paying a premium for clean fuels as unrealistic, as they would need to pass on the higher costs to customers.

Eventually, Alexander says, the offtake market should price in a premium for clean products, but that might depend in the near term on incentives for clean fuels demand, such as carbon offsets and levies, like the EU’s Carbon Border Adjustment Mechanism.

“Ultimately what we need is for the market to say, ‘I will pay more for low-carbon products,’” he says. “The mindset of being willing to pay more for low-carbon products is going to need to begin to permeate into other sectors. 30 or 40 years ago the notion of paying a premium for an organic food didn’t exist. But today there are whole grocery store chains built around the idea. When the consumer is willing to pay a premium for low-carbon food, that will incentivize a farmer to pay a premium for low carbon fertilizer and ammonia, which will ultimately incentivize the payment of a premium for low-carbon hydrogen. The same needs to repeat itself across other sectors, such as fuels and anything made from steel.”

The law firm writes that US projects seeking to export to Europe or Asia need to take into account the greenhouse gas emissions and other requirements of the destination market when designing projects.

In the agreements that V&E is working on, for example, clients were first focused on structuring to make sure they met requirements for IRA tax credits and other domestic incentives, Alexander says. Meanwhile, as those clean fuels made their way to export markets, customers were coming back with a long list of requirements, “so what we’re seeing is this very interesting influx” of sustainability considerations into the hydrogen space, many of which are driven by requirements of the end-use market, such as the EU or Japan.

The more stringent requirements have existed for products like biofuels for some time, he adds, “but we’re beginning to see it in hydrogen and non-biogenic fuels.”

Sharing risk

Hydrogen projects are encountering other novel commercial and legal issues for which a “market” has not yet been developed, the law firm says, especially given the entry of a raft of new players and the recent passage of the Inflation Reduction Act.

In the case of a blue hydrogen or ammonia project where carbon is captured and sequestered but eventually leaks from a geological formation, for example, no one knows what the risk truly is, and the market is waiting for an insurance product to provide protection, Alexander says. But until it does, project parties can implement a risk-sharing mechanism in the form of a cap on liabilities – a traditional project development tool.

“If you’re a sequestration party you say, ‘Yeah, I get it, there is a risk of recapture and you’re relying on me to make sure that it doesn’t happen. But if something catastrophic does happen and the government were to reclaim your tax credits, it would bankrupt me if I were to fully indemnify you. So I simply can’t take the full amount of that risk.’”

What ends up getting negotiated is a cap on the liability, Alexander says, or the limit up to which the sequestration party is willing to absorb the liability through an indemnity.

The market is also evolving to take into account project-on-project risk for hydrogen, where an electrolyzer facility depends on the availability of, for example, clean electricity from a newly built wind farm.

“For most of my career, having a project up and reaching commercial operations by a certain date is addressed through no-fault termination rights,” he says. “But given the number of players in the hydrogen space and the amount of dollars involved, you’re beginning to see delay liquidated damages – which are typically an EPC concept – creep into supply and offtake agreements.”

If a developer is building an electrolyzer facility, and the renewables partner doesn’t have the wind farm up and running on time, it’s not in the hydrogen developer’s interest to terminate through a no-fault clause, given that they would then have a stranded asset and need to start over with another renewable power provider. Instead, Alexander says, the renewables partner can offset the losses by paying liquidated damages.

Commercial watch list

In terms of interesting commercial models for hydrogen, Alexander says he is watching the onsite modular hydrogen development space as well as power-to-fuels (natural gas, diesel, SAF), ammonia and methanol, given the challenges of transporting hydrogen.

“If you’re going to produce hydrogen, you need to produce it close to the place where it’s going to be consumed, because transporting it is hard. Or you need to turn it into something else that we already know how to transport – natural gas, renewable diesel, naphtha, ammonia.”

Alexander believes power-to-fuels projects and developers that are focused on smaller, on-site modular low-carbon hydrogen production are some of the most interesting to watch right now. Emitters are starting to realize they can lower their overall carbon footprint, he says, with a relatively small amount of low-carbon fuels and inputs.

“The argument there is to not completely replace an industrial gas supplier but to displace a little bit of it.”

At the same time, the mobility market may take off with help from US government incentives for hydrogen production and the growing realization that EVs might not provide a silver-bullet solution for decarbonizing transport, Alexander adds. However, hydrogen project developers targeting the mobility market are still competing with the cost of diesel, the current “bogey” for the hydrogen heavy mobility space, Alexander says.

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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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