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Exclusive: Alternative asset manager exploring decarbonization fund

An asset manager in sustainable energy and agriculture is laying the groundwork for a fund focused on decarbonization of heavy industry and clean fuels.

Power Sustainable, the alternative asset manager based in Montreal, is deliberating on how to launch a fund focused on industrial decarbonization and clean fuels, a source familiar with the matter told ReSource.

The firm, which has AUM of CAD 3.8bn as of March 31 through several credit funds in energy infra and and an equity vehicle in sustainable food production, is exploring the launch of a decarbonization private equity vehicle to make investments in things like green steel, cement and plastics, the source said.

Hiring or partnering with experts in the space to make informed decisions about private equity investment opportunities would be key, the source said.

“We’re going to bring in a phenomenal team and really trust them to figure out where the best investment plays are,” the source said.

The company has a strong relationship with Éric Gauthier, the development manager and his team at TESCanada H2 in Quebec, which is developing a large-scale green hydrogen facility in that province.

That project, Project Mauricie, consists of the construction of an electrolyzer and renewable energy production assets. Upon its commissioning in 2028, the project will produce 70,000 mtpy of green hydrogen exclusively dedicated to Québec end users.

The firm is in growth mode, seeking to multiply the size of its existing mandates, the source said. The firm is open to consultation from external advisory services.

Power Sustainable declined to comment.

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AIMCo establishes $1bn energy transition fund

The Alberta Investment Management Corporation, part of a consortium of investors in the ACES Delta hydrogen project, has established a $1bn funding pool dedicated to the energy transition and decarbonization.

The Alberta Investment Management Corporation (AIMCo) today outlined its approach to climate investing and introduced its Energy Transition Opportunities Pool (ETOP), which is a $1bn fund dedicated to investing in the global energy transition and decarbonization sectors.

“AIMCo has been strategically evaluating climate change risks and opportunities for the last decade and the organization has a strong track record of making investments in the energy transition space,” said Marlene Puffer, Chief Investment Officer, AIMCo, in a news release. “Our climate approach provides important transparency around how we consider climate in our investments and how we will, over the long run, help reduce emissions.”

AIMCo’s climate approach includes the introduction of a climate taxonomy that evaluates and classifies the energy transition readiness and carbon intensity of existing and new investments. This tool helps the investment teams analyze climate risk within client portfolios, as well as measure and improve total portfolio transition readiness.

The initial $1bn in AIMCo’s ETOP represents new capital. The investments made through ETOP will be in addition to AIMCo’s other climate-related investments across asset classes. Many of AIMCo’s clients have allocated funds to the new pool, which will offer them exposure to a variety of energy transition opportunities and themes, including:

  • Industrial decarbonization, carbon capture and sequestration
  • Sustainable solutions and renewable fuels
  • Low-carbon renewable energy production and related technologies
  • Electrification, storage and energy efficiency

“We are gratified by our clients’ commitment both to the new pool and to our shared objective of supporting and benefiting from energy transition and decarbonization opportunities,” said Ben Hawkins, Executive Managing Director, Head of Infrastructure & Renewable Resources.

For more information about the climate approach and the ETOP, please click here.

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Utah green hydrogen project gets US DOE loan guarantee

DOE’s loan is its first in more than ten years for a renewable energy project.

Mitsubishi Power Americas and Magnum Development have closed on a $504.4m loan guarantee from U.S. Department of Energy’s (DOE) Loan Programs Office to Advanced Clean Energy Storage I, LLC to develop the world’s largest industrial green hydrogen facility in central Utah.

DOE’s loan is its first in more than ten years for a renewable energy project, according to a news release.

In April 2022, DOE’s Loan Programs Office issued a conditional commitment for ACES I. The loan closed on June 3, 2022, highlighting the Administration and the Energy Department’s commitment towards supporting the clean hydrogen sector. This loan helps generate a viable market for hydrogen and will make it scalable in the western United States and electrical grid, creating the fundamental infrastructure necessary to deploy this zero-carbon energy source, the release states.

The Advanced Clean Energy Storage hub will help the clean energy transition by supporting the Intermountain Power Agency’s IPP Renewed Project — upgrading to an 840 MW hydrogen-capable gas turbine combined cycle power plant. The plant will initially run on a blend of 30% green hydrogen and 70% natural gas starting in 2025 and incrementally expand to 100% green hydrogen by 2045.

The hub will produce up to 100 metric tonnes per day of green hydrogen from renewable energy using electrolysis. Green hydrogen can then be stored in two massive salt caverns, each capable of storing 150 gigawatt hours (GWh) of energy, resulting in the world’s single largest hydrogen storage site and providing capabilities for seasonal shifting of excess renewable energy. The long-duration energy storage capability of the salt caverns will help improve resource adequacy and decrease costs by capturing excess renewable power when it is abundant and dispatching it back on the grid when it is needed.

“This joint venture is historic for Mitsubishi Power Americas and the future of global hydrogen deployment,” says Bill Newsom, President and CEO of Mitsubishi Power Americas. “We’re proud to partner with Magnum Development and provide the hydrogen equipment to further advance carbon-free hydrogen as a cornerstone of our future energy supply and help chart the path towards net zero.”

The development and operation of the Advanced Clean Energy Storage hub will help spur economic development locally by creating up to 400 local construction jobs throughout the 3-year construction cycle, and it will employ a projected 25 full-time operations and maintenance personnel to provide 24/7 operations and maintenance of the facility.

“Magnum Development has enjoyed a synergistic relationship with the City of Delta and Millard County since 2008,” said Craig Broussard, CEO of Magnum Development and ACES Delta. “In addition, royalties paid from our operations go to our mineral estate partner, the Utah School and Institutional Trust Lands Administration, to provide funding for the Utah educational system. Over the next three decades significant taxes and royalties will flow from this initial phase of green hydrogen development at our site.”

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New Fortress Energy planning five industrial-scale hydrogen plants

The company is building a pure-play clean hydrogen business, known as Zero, which it plans to capitalize separately in the near future.

New Fortress Energy is planning to build five industrial-scale hydrogen production hubs as part of its pursuit of a pure-play clean hydrogen infrastructure business.

The liquefied natural gas company has started construction on its first plant in Beaumont, Texas, where it is expected to produce 50 tons per day of green hydrogen, the company said on its 3Q22 earnings call today.

New Fortress Energy is taking learnings from the construction of the Beaumont plant to scale up its hydrogen business via additional projects that will produce a combined 90,000 tons per year, according to a presentation.

The company is building a pure-play clean hydrogen business, known as Zero, which it plans to capitalize separately in the near future.

Plug Power will provide electrolyzers while Entergy will provide renewable power to the Beaumont plant, which is set to begin operations in 2024.

The location of the project in southeast Texas is near refineries with an anticipated demand of 1,000 tons per day – over 20 times what the Beaumont plant will produce initially, said Patrick Hughes, managing director and chief commercial officer of NFE Zero.

“So plenty of demand and plenty of growth potential in the immediate region,” the executive said, who noted the company was focused on optimizing offtake for the first phase of the project.

In addition to nearby refineries, the Beaumont project could also supply for an Entergy power plant known as Orange County Advanced Power station. Existing pipeline networks could also ship green hydrogen around the region.

“The good thing about electrolyzers is that it’s fairly straightforward to scale,” Hughes said.

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Canadian renewables major eyeing hydrogen production at pumped hydro facility

Canadian power generation giant TransAlta could co-locate hydrogen production with select wind and hydroelectric facilities.

TransAlta, the Canadian power generator and wholesale marketing company, is contemplating a buildout of hydrogen production capabilities at its 320 MW Tent Mountain pumped hydro storage project in Alberta, Executive Vice President of Alberta Business Blain van Melle said in an interview.

“Our view on hydrogen is that it’s a technology that’s an option, somewhat further out in the future, particularly when it comes to power generation,” van Melle said. “If we can offer our customers maybe a power and hydrogen solution, and they’re using the hydrogen in another process, that would be something we would look at.”

In early 2022 TransAlta made a CAD 2m equity investment in Ekona Power, a methane pyrolysis company based in Vancouver. The company also committed USD $25m over four years to EIP’s Deep Decarbonization Frontier Fund 1.

That latter investment is a way to continue to learn about hydrogen and have exposure to emerging technologies, van Melle said.

The recent 50% stake acquisition in the Tent Mountain project includes the intellectual property associated with a 100 MW offsite green hydrogen electrolyzer and a 100 MW offsite wind development project.

Having hydrogen production co-located with wind and pumped hydro storage could make sense for the company in a few years, van Melle said. FID on Tent Mountain could be reached sometime in 2025 and will require the company to secure a PPA offtake and determine capital cost. Development work will take three to four years and earliest construction could begin in 2026.

The company has not had discussions with potential offtakers, van Melle said, adding that development on the pumped hydro facility needs to mature before a hydrogen component advances.

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Exclusive: Alternative asset manager exploring decarbonization fund

An asset manager in sustainable energy and agriculture is laying the groundwork for a fund focused on decarbonization of heavy industry and clean fuels.

Power Sustainable, the alternative asset manager based in Montreal, is deliberating on how to launch a fund focused on industrial decarbonization and clean fuels, a source familiar with the matter told ReSource.

The firm, which has AUM of CAD 3.8bn as of March 31 through several credit funds in energy infra and and an equity vehicle in sustainable food production, is exploring the launch of a decarbonization private equity vehicle to make investments in things like green steel, cement and plastics, the source said.

Hiring or partnering with experts in the space to make informed decisions about private equity investment opportunities would be key, the source said.

“We’re going to bring in a phenomenal team and really trust them to figure out where the best investment plays are,” the source said.

The company has a strong relationship with Éric Gauthier, the development manager and his team at TESCanada H2 in Quebec, which is developing a large-scale green hydrogen facility in that province.

That project, Project Mauricie, consists of the construction of an electrolyzer and renewable energy production assets. Upon its commissioning in 2028, the project will produce 70,000 mtpy of green hydrogen exclusively dedicated to Québec end users.

The firm is in growth mode, seeking to multiply the size of its existing mandates, the source said. The firm is open to consultation from external advisory services.

Power Sustainable declined to comment.

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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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