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Exclusive: Inside Strata’s P2X strategy

Strata Clean Energy is seeking to engage with global chemical, energy, and shipping companies as a potential partner for a pipeline of green hydrogen projects that will have FIDs in 2025 and CODs later this decade.

Strata Clean Energy is developing a pipeline of green hydrogen projects that will produce large amounts of green ammonia and other hydrogen derivatives later this decade.

Mike Grunow, executive vice president and general manager of Strata’s Power-to-X platform, said in an interview that the company is investing in the development of proprietary modeling and optimization software that forms part of its strategy to de-risk Power-to-X projects for compliance with strict 45V tax credit standards.

“We’re anticipating having the ability to produce substantial amounts of low-carbon ammonia in the back half of this decade from a maturing pipeline of projects that we’ve been developing, and we’re looking to collaborate with global chemical, energy, and shipping companies on the next steps for these projects,” he said.

Strata’s approach to potential strategic offtakers could also include the partner taking an equity stake in projects, “with the right partner,” Grunow said. The projects are expected to reach FID in 2025.

Grunow declined to comment on the specific size or regional focus of the projects.

“We aspire for the projects to be as large as possible,” he said. “All of the projects are in deep discussions with the regional transmission providers to determine the schedule at which more and more transmission capacity can be made available.”

Strata will apply its expertise in renewable energy to the green hydrogen industry, he said, which involves the deployment of unique combinations of renewable energy, energy storage, and energy trading to deliver structured products to large industrial clients, municipal utilities and regulated utilities.

The company “commits to providing 100% hourly matched renewable energy over a guaranteed set of hours over the course of an entire year for 10 – 20 years,” Grunow said.

“It’s our expectation that the European regulations and more of the global regulations, and the guidance from the US Treasury will require that the clean energy supply projects are additional, deliverable within the same ISO/RTO, and that, eventually, the load of the electrolyzer will need to follow the production of the generation,” he said.

Strata’s strategy for de-risking compliance with the Inflation Reduction Act’s 45V revenue stream for green hydrogen will give asset-level lenders certainty on the delivery of a project’s IRA incentives.

“Right now, if I’m looking at a project with an hourly matched 45V revenue stream, I have substantial doubt about that project’s ability to actually staple the hourly matched RECs to the amount of hydrogen produced in an hour, to the ton of hydrogen derivative,” he said.

During the design phase, developers evaluate multiple electrolyzer technologies, hourly matching of variable generation, price uncertainty and carbon intensity of the grid, plant availability and maintenance costs along with evolving 45V compliance requirements.

Meanwhile, during the operational phase, complex revenue streams need to be optimized. In certain markets with massive electrical loads, an operator has the opportunity to earn demand response and ancillary service revenues, Grunow said.

Optimal operations

“The key to maximizing the value of these assets is optimal operations,” he said, noting project optionality between buying and selling energy, making and storing hydrogen, and using hydrogen to make a derivative such as ammonia or methanol.

Using its software, Strata can make a complete digital twin of a proposed plant in the design phase, which accounts for the specifications of the commercially available electrolyzer families.

Strata analyzes an hourly energy supply schedule for every project it evaluates, across 8,760 hours a year and 20 years of expected operating life. It can then cue up that digital project twin – with everything known about the technology options, their ability to ramp and turn down, and the drivers of degradation – and analyze optimization for different electrolyzer operating formats. 

“It’s fascinating right now because the technology development cycle is happening in less than 12 months, so every year you need to check back in with all the vendors,” he said. “This software tool allows us to do that in a hyper-efficient way.”

A major hurdle the green hydrogen industry still needs to overcome, according to Grunow, is aligning the commercial aspects of electrolysis with its advances in technological innovation.

“The lender at the project level needs the technology vendor to take technology and operational risk for 10 years,” he said. “So you need a long-term service agreement, an availability guarantee, key performance metric guarantees on conversion efficiency,” he said, “and those guarantees must have liquidated damages for underperformance, and those liquidated damages must be backstopped by a limitation of liability and a domestic entity with substantial credit. Otherwise these projects won’t get financed.”

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Black Hills Energy acquires RNG facility in Iowa

The South Dakota-based utility purchased the RNG production facility at the Dubuque Metropolitan Area Solid Waste Agency site.

Black Hills Corp., through its nonregulated subsidiary, Black Hills Energy Renewable Resources, completed the purchase of a renewable natural gas production facility in Dubuque, Iowa, according to a news release.

The acquisition of the production facility at the Dubuque Metropolitan Area Solid Waste Agency site includes onsite infrastructure and the rights to RNG production at the landfill under a long-term contract. The facility currently injects RNG into the natural gas distribution system serving Dubuque, which is owned and operated by Black Hills Corp.’s regulated natural gas utility in Iowa.

“This investment advances our goal to responsibly integrate renewable resources as a component of our overall emissions reduction strategy,” said Todd Jacobs, senior vice president of growth and strategy. “This acquisition represents our entry into the production of RNG as a nonregulated business while leveraging our expertise in owning and operating regulated natural gas pipeline systems, including RNG interconnections.”

The RNG produced from the landfill facility captures methane that would otherwise vent into the atmosphere. It is delivered under long-term contracts to a third party that purchases the RNG and its related environmental attributes, in conformity with the U.S. EPA Renewable Fuel Standard Program.

“Investing in the production facility will allow BHERR to focus on growing its RNG business with an efficient and sustainable lower-carbon fuel,” said Jacobs.

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Air Products, Aramco, ACWA Power reach financial close on $12bn gasification and power JV

Air Products announced financial close and the transfer of the second group of assets for the $12bn JV in Saudi Arabia.

Air Products today announced financial close and transfer of the second group of assets for the $12bn gasification and power joint venture (JV) with Aramco, ACWA Power and Air Products Qudra in the Jazan Economic City, Saudi Arabia.

The JV’s purchase of this second group of assets at Jazan follows the successful asset acquisition and project financing transactions for the first group of assets completed in late October 2021. Some minor final commissioning items are expected to be completed later this calendar year.

Seifi Ghasemi, chairman, president and CEO of Air Products, said, “We are very proud to mark the close on the second group of assets at Jazan, a world-scale project that is a perfect fit with our growth strategy and which supports the Kingdom’s Vision 2030. Consistent with our commitment, this will deliver significant contributions to our earnings going forward.”

Approximately 40 percent of the JV’s capital structure consists of member contributions, and the remaining 60 percent consists of non-recourse project financing.

The JV has purchased ASU, gasification, syngas cleanup, utilities and power assets from Aramco. The JV owns and operates the facility under a 25-year contract for a fixed monthly fee, with Aramco supplying feedstock to the JV, and the JV producing power, steam, hydrogen and other utilities for Aramco.

Aramco, via its subsidiary Saudi Aramco Power Company, has a 20 percent share in the JV; Air Products 46 percent; ACWA Power 25 percent; and Air Products Qudra (a 51/49 JV between Air Products and Qudra Energy) nine percent in the JV. Air Products’ total ownership position is 50.6 percent through 46 percent direct ownership and 4.6 percent through Air Products Qudra.

The JV serves Aramco’s Jazan Refinery, a megaproject to process 400,000 barrels per day of the crude oil to produce main products such as ultra-light sulfur diesel, gasoline, and other products.

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RNG, SAF and biomass projects backed by Canadian government

Public funding to three companies is meant to aid development of six separate RNG, SAF and woody biomass-to-electricity projects across the country, including two in the Niagara region.

The federal government of Canada will invest CAD $15m to support six clean fuels projects across the country, including CAD $10m for two projects in the Niagara region, according to a news release

The federal investments include:

  • $4.6 million to StormFisher Hydrogen to support a front-end engineering (FEED) study for a renewable natural gas (RNG) production facility at BMI’s Multimodal Hub in Thorold, Ontario.
    • Upon the completion of the FEED study in the summer of 2025 and construction of the planned CAD $200m production facility in 2027, StormFisher Hydrogen will combine renewable electricity from Ontario’s clean grid along with biogenic CO2 emissions from local industry to produce 1.25m gigajoules of RNG.
    • The project will support the decarbonization of the Canadian natural gas system and anchor a hydrogen hub in Thorold that will help attract other clean energy and technology businesses to the Niagara region.
  • More than CAD $5m to CHAR Technologies to support FEED studies that will enable CHAR to replicate their first-of-its-kind woody-biomass-to-renewable-energy facility in Thorold, Ontario in other parts of Canada.
    • Supported by an existing investment of $5 million from NRCan, CHAR is finalizing its construction of its clean fuels production facility at BMI’s Multimodal Hub in Thorold, which will convert woody biomass to renewable energy like RNG and biocarbon. The new NRCan funding announced today will enable CHAR Technologies to replicate this work at four new facilities in Kirkland Lake, Ontario; Drayton Valley, Alberta; and Saint Félicien and La Salle, Quebec and create a distributed network of low-carbon fuels production facilities across three provinces in Canada.
    • Taken together, the Thorold, Ontario, project — which is expected to reach commercial production this year — and the four other clean fuel production facilities in Kirkland Lake, Ontario, Quebec; and Alberta – which are expected to come online in the following two years — will maximize the value of underutilized waste wood resources and help decarbonize Canada’s steel and mining industries, and Canadian gas utilities.
  • CAD $5m to support Azure Sustainable Fuels Corp. in delivering a FEED study to support the construction and operation of a sustainable aviation fuels (SAF) production facility in Port Colborne, Ontario.
    • If the project reaches a positive Final Investment Decision (FID), following the completion of the FEED study, it is expected that the Azure’s SAF project would support approximately 1,500 construction jobs and 150 full time jobs during operations in Port Colborne, Ontario.
    • The FEED study is expected to be completed in by the end of 2024 and the construction of the planned facility would be commenced immediately following a positive FID.  The proposed project will be located on the north end of Port Colborne, Ontario, along the Welland Canal — a strategic location that will provide immediate access to local and global markets.
    • The planned processing facility in Port Colborne will leverage Canada’s agricultural sector to produce SAF that will meet the growing demand to help reduce emissions from the aviation sector.  Azure’s proposed project in Port Colbourne is one of three projects that Azure is progressing in Canada, with support from the federal government.

“We are leveraging Canada’s innovative clean tech companies and abundant range of feedstocks — including forest byproducts, agricultural crops and our low-emitting electricity grid — to grow Canada’s domestic production of clean fuels across the economy,” the release states.

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Carbon-negative materials firm in $40m equity raise

A Texas-based manufacturer of renewable plastics is developing its first plant in the Midwest, with a commercialization date set for 2026.

Citroniq Chemicals, a maker of renewable and carbon-negative plastics, is undergoing a $40m equity raise, according to two sources familiar with the matter.

The process has launched and is being led by Young America Capital, the sources said. The company’s projects account for about $1bn in CapEx.

Based in Houston, Citroniq uses bio-based feedstocks to produce plastics at scale. The company recently signed a Letter of Intent with Lummus Technology for the development of Citroniq’s green polypropylene projects in North America.

“With a projected investment of over $5bn and a combined polypropylene annual capacity of over 3.5 billion pounds, Citroniq is prepared to execute a rapid expansion plan of its E2O process, to meet the market’s growing need for sustainable, carbon negative polypropylene at a competitive price,” Mel Badheka, Principal and Co-Founder of Citroniq Chemicals, said in a press release announcing the LOI. “Located in the Midwest, Citroniq’s first plant is scheduled to start production in 2026 and provide identical, drop-in products that can be directly certified as biogenic through physical testing.”

In January Citroniq announced a separate LOI with Mitsui Plastics for a large-scale supply agreement for sustainable polypropylene.

Citronia and Young America Capital did not respond to requests for comment.

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Exclusive: Zero-emission locomotive start-up in Series B capital raise

A locomotive start-up focused on the US market for zero-emission freight trains is undergoing a Series B capital raise, with sights on a much larger Series C raise next year.

OptiFuel Systems, a provider of zero-emission line haul locomotives and generation solutions, is conducting a $30m Series B capital raise.

The South Carolina-based firm is seeking to finalize the Series B by the end of this year, and plans to use proceeds to advance production of its zero-emission technologies for the rail industry, which represents a massive decarbonization opportunity, CEO Scott Myers said in an interview.

Meanwhile, the firm will seek to tap the market for around $150m for a Series C next year, Myers added. The company is not working with a financial adviser. 

While the Series B will focus on bringing to production some of OptiFuel’s smaller rail offerings, such as the switcher locomotives, the Series C will be mostly dedicated to progressing testing, manufacturing, and commercialization of its larger line haul locomotive.

The company is also considering making its own investments into digesters for RNG facilities, from which it would source the gas to run its RNG-fueled locomotives. As part of its offering, OptiFuel also provides refueling infrastructure, and envisions this aspect of its business to be just as profitable as selling trains.

“We anticipate that we would be the offtaker” of RNG, “and quite potentially, the producer,” Cynthia Heinz, an OptiFuel board member, said in the interview.

A systems integrator, OptiFuel offers modular locomotives for the freight industry that can run on zero-emission technology such as renewable natural gas, batteries, and hydrogen. The company recently announced that it will begin testing of its RNG line haul locomotive, which is a 1-million-mile test program that will take two years and require 10 RNG line haul locomotives.

Image: OptiFuel

The company’s target market is the 38,000 operating freight trains in the U.S., 25,000 of which are line haul locomotives run by operators like BASF, Union Pacific, and CSX. Fleet owners will be required to phase out diesel-powered trains starting next decade following passage of in-use locomotive requirements in California, which includes financial penalties for pollution and eventual restrictions on polluting locomotives. Other states are evaluating similar measures.

“The question is not will the railroads change over: they have to,” Myers said. “The question is, how fast?”

Following completion of testing, OptiFuel aims to begin full production of the line haul locomotive – which has a price tag of $5.5m per unit – in 2028, and is aiming to produce 2,000 per year as a starting point. The smaller switcher units are priced between $1.5m and $2.5m depending on horsepower.

OptiFuel has held discussions with Cummins, one of its equipment providers, to source at least 2,000 engines per year from Cummins to support its production goal. 

“That’s a $10bn-a-year market for us,” Myers added.

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Green hydrogen developer raising capital for projects

Fusion Fuel, a green hydrogen developer based in Portugal, has engaged an advisor and is in talks with investors to raise capital for projects in North America.

Fusion Fuel, a green hydrogen developer based in Portugal, has engaged an advisor and is in talks with investors to raise capital for projects in North America.

The company is working with RBC Capital Markets as financial advisor, Fusion Fuel Co-Head Zachary Steele said in an interview, and expects to produce infrastructure-type returns on its projects.

For its first project in the U.S., Fusion Fuel has agreed to a JV with Electus Energy to build a 75 MW solar-to-hydrogen facility in Bakersfield, California.

The project will produce up to 9,300 tons of green hydrogen per annum including nighttime operation and require an estimated $180m in capital investment, with a final investment decision expected in early 2024 and commissioning in the first half of 2025.

The combination of green hydrogen and solar production incentives along with California’s low carbon fuel standard make the economics of the project attractive, Steele said.

“Hydrogen is selling for up to $15-$18 per kilogram in California in the mobility market, and we can produce it at around the low $3 per kilogram area, so that leaves a lot of room for us to make a return and reduce costs for customers,” he said.

The company sells electrolyzer technology for projects but also serves as a turnkey developer. The technology consists of Hevo-Solar, which utilizes concentrated solar power to create hydrogen; and Hevo-Chain, a centralized PEM electrolyzer powered by external electricity.

Fusion Fuel’s proposition is that its smaller-scale technology – of 25 kW per unit –  is ready to use now, and can be dropped into places like a gas station in New York City, Steele said.

“This allows customers to scale into hydrogen and makes it available on site, compared with the massive projects going up in Eastern Canada or the Gulf Coast that require customers to commit significant capital to underwrite large scale projects,” he added.

Along with Electus, Fusion Fuel has already entered into a land-lease agreement for 320 acres in Kern County, California for the Bakersfield development. Black & Veatch will perform a concept study while Cornerstone Engineering and Headwaters Solutions are also engaged.

Iberian pipeline

The company targets to have EUR 40m of revenues in 2023, with a third of that coming from tech sales and the balance coming from Fusion Fuel-owned development projects.

Its revenue pipeline for next year is focused on the Iberian peninsula, and has been largely de-risked with the company having secured grants, with land and permitting underway.

In addition to the electrolyzer sales, the company, together with its partners, can provide turnkey projects that include engineering, procurement of the balance of plant equipment, construction of the facility, and operations, Steele said on an investor call this week.

“This allows us to not only make returns on the tech sale but also on the overall project and potentially recurring revenue from operations,” he said.

The company plans to use projects it is building in Portugal to expand into other core markets, beginning with a focus on mobility opportunities and targeted industrial decarbonization projects. Starting in 2024 the company plans to extend its reach further into North America and also Italy.

U.S. focus

Similar to other international hydrogen players, the passage of the Inflation Reduction Act caused a strategic shift of focus to the U.S. and accelerated Fusion Fuel’s plans to grow its business there, company executives said.

Notably, since Fusion Fuel will use its own technology in the projects it is seeking to develop, a required amount of that technology will need to be manufactured in the U.S. in order to qualify for the full benefits provided in the IRA.

As such, Fusion Fuel is scouting for a location to build one, or possibly two, manufacturing facilities in the U.S.

“The size of the Bakersfield project alone justifies building a new manufacturing facility,” Steele said on the investor call.

Steele was previously CEO of Cedar LNG, a floating LNG development in British Columbia, prior to exiting to Pembina. He works alongside Fusion Fuels Co-Head & CFO, Frederico Figueira de Chaves, who is based in Portugal.

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