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Exclusive: Residential microgrid developer to seek electrolysis partner, raise capital

A developer of planned microgrid communities will look for an electrolysis partner to provide green hydrogen for use in agricultural applications and is planning to go to market for platform equity and project debt.

Embark Fund and NOVA Constructors, a group of real estate development interests focused on developing three planned residential communities, will look for an electrolysis partner for its community microgrid development efforts, managing partner Craig McBurney said in an interview.

McBurney, who is also solar development manager for the South Carolina-based renewables developer Alder Energy, said the partners are in the process of acquiring land – between 1,500 and 2,000 acres per parcel – in Virginia, Maryland and Illinois. The latter project is the most advanced.

Each is for a planned residential community including microgrid development, he said. The communities will include renewables, which could be used to power electrolysis during times of low demand. He gave the example of a 30 MW solar ground array.  

“We are preparing to announce a [$60m to $80m] equity raise,” McBurney said, adding that between $240m and $300m of debt will also be required. The money will be used for site acquisition, development and EPC. “The whole capital stack is an opportunity.”  

The group has not formally engaged with an investment bank or financial advisor, he said. They will be targeting private equity, sovereign wealth funds, and family offices.

McBurney pointed to communities like Whisper Valley in Texas and Babcock Ranch in Florida as examples of his group’s efforts to develop sustainable off-grid communities.

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OCOChem raises $5m seed round

The Washington-based startup has partnered with investor INPEX to evaluate collaboration opportunities on the transportation of CO2 and clean hydrogen.

Carbon conversion startup OCOchem has raised $5m in Seed funding from lead investor TO VC, according to a news release.

Japan’s INPEX Corp., the LCY Lee Family Office, and MIH Capital Management also participated in the round. They join Halliburton Labs, Halliburton Company’s energy and climate tech accelerator, which has been supporting OCOChem since 2021.

The Richland, Wash.-based company is commercializing a way to make highly versatile carbon-neutral platform molecules by electrochemically converting recycled CO2, water and clean electricity into formic acid and formate chemicals, for use in agricultural and industrial applications.

“Using renewable energy, OCOChem’s technology enables the conversion of water and carbon dioxide into formic acid, which is stable under ambient conditions.” The release states. “The formic acid can also be converted to useful carbon and hydrogen components with minimal energy input.”

In addition to investing in the company, INPEX, Japan’s largest oil and gas production company, has partnered with OCOchem to evaluate collaboration opportunities leveraging the company’s technology to transport CO2 and clean hydrogen.

OCOchem will use the new funds to scale its modular carbon conversion technology to industrial proportions and build a pilot plant for commercial demonstration operations.

“Using OCOchem technology and clean electricity, we can now do what plants and trees have been able to do for billions of years — convert CO2 and water into useful organic molecules using clean energy. But unlike photosynthesis, we can do it faster and more efficiently at a lower cost, using much less land,” said Todd Brix, co-founder and CEO of OCOchem, in the news release.

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Aemetis closes $25m USDA loan to fund eight additional projects

When completed, the biogas digesters for the combined 15 dairies are designed to produce more than 400,000 MMBtus per year of carbon negative renewable natural gas.

Aemetis, Inc., a renewable natural gas and renewable fuels company focused on negative carbon intensity products, has closed its second $25m, 20-year term loan guaranteed by the U.S. Department of Agriculture (USDA) for a total of $50m of Aemetis Biogas project financing arranged by Greater Commercial Lending (GCL) in the past nine months.

The Aemetis Biogas Central Dairy RNG Project is now fully funded to build biogas digesters and related assets for eight additional dairies using the $9.4m of equity financing already provided by Aemetis and the $25m of new debt financing guaranteed by the USDA. Magnolia Bank of Elizabethtown, Kentucky provided the primary funding for the $25 million loan to Aemetis Biogas 2, LLC (AB-2), a wholly-owned subsidiary of Aemetis, Inc, according to a news release.

“The USDA Renewable Energy for America Program (REAP) provides long term, 20-year financing that enables the construction of projects that improve air quality and reduce carbon pollution such as the Aemetis Biogas Central Dairy Digester Project,” stated Eric McAfee, Chairman and CEO of Aemetis. “We appreciate the good working relationship that has been developed with the team at Greater Commercial Lending and we are pleased to have Magnolia Bank as the new primary lender for the AB-2 phase of the project.”

Aemetis Biogas has built and is fully operating dairy biogas digesters for seven dairies, a 40-mile biogas pipeline, the central biogas-to-RNG production facility and the PG&E gas utility interconnection unit. When completed, the biogas digesters for the combined 15 dairies are designed to produce more than 400,000 MMBtus per year of carbon negative renewable natural gas.

The long-term, 20-year project financing was guaranteed by the USDA through the Rural Energy for America Program (REAP) and carries approximately an 8.75% fixed interest rate for the first five years. With two REAP loans closed and three more REAP loans in process, Aemetis Biogas is currently arranging $125 million of 20-year debt funding for the development, construction and operation of the Aemetis Central Dairy Digester project which has already signed 37 dairies and plans to build digesters for 65 dairies within the next 60 months.

Aemetis Biogas is building passive solar anaerobic digesters at dairies to capture biomethane from animal waste. After removal of key contaminants and gas pressurization at the dairy, a biogas pipeline connects the dairies to a central facility located at the Keyes ethanol plant where the biogas is converted into below zero carbon intensity RNG. The RNG is tested and odorized in an interconnection unit, then injected into the Pacific Gas and Electric (PG&E) gas pipeline for delivery to transportation fuel customers throughout California. In addition to delivery of RNG through third parties, Aemetis is building an onsite RNG fueling station to fuel local trucks.

About 25% of the methane emissions in California are emitted from dairy waste lagoons. When fully built, the Aemetis biogas project plans to connect dairy digesters spanning more than 65 dairy farms, producing more than 1,650,000 MMBtu of renewable natural gas from captured dairy methane each year. The project is designed to reduce greenhouse gas emissions equivalent to an estimated 6.8 million metric tonnes of carbon dioxide over ten years, equal to removing the emissions from approximately 150,000 cars per year.

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WATT Fuel Cell receives investment from Generac Power Systems

Pennsylvania-based WATT closed a separate financing round led by EQT Corporation earlier this year, and is building momentum for commercial launch of fuel cell-driven power for homeowners.

WATT Fuel Cell has received an investment from Generac Power Systems, a market leader in residential energy technology, according to a press release.

The new investment closes 2022 with growing momentum toward commercial launch of fuel cell-driven power for homeowners. As a part of the transaction, a member from the Generac executive team will join the WATT board of directors.

WATT closed a separate financing round led by EQT Corporation earlier this year, alongside Senvest Management LLC, Park West Asset Management LLC, and Emerald Development Managers LP.

“This partnership with Generac is a major step forward for WATT as we begin addressing the world’s need for clean, reliable and cost-efficient energy sources in an increasingly disruptive marketplace,” said Caine Finnerty, WATT’s president, chief operating officer and founder. “Generac is the market leader in residential backup power, with a proven and growing brand built on the promise of dependable power for homes in the US and beyond. Partnering with and investing in companies with market leading energy-based technologies like WATT will maintain and extend that lead,” he added.

“Generac is excited to join WATT’s existing investor base and looks forward to collaborating with the WATT team towards the integration of this innovative technology into the Generac Home Energy Ecosystem,” said Patrick Forsythe, chief technical officer at Generac. “We assessed the global fuel cell industry and were impressed by the technological advancements the WATT team has made.”

WATT’s Imperium fuel cells make power using an electrochemical process that generates electricity from hydrogen molecules and other electrochemically oxidizable species derived from one of several readily available fuel options such as propane, natural gas, blended natural gas and hydrogen, or hydrogen.

“This investment by Generac further propels the viability of WATT’s fuel cell power generation technology and gives us an exponential boost as we approach our launch into the residential market,” said Rich Romer, CEO of WATT. “In today’s world of rising energy costs, growing disruptions and threats to the reliability of the power grid, and the need to for lower-carbon energy, WATT will help lead the continued drive for technology and innovation to address those issues.”

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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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How hydrogen from nuclear power shows pitfalls of ‘additionality’

An interview with the Nuclear Energy Institute’s Director of Markets and Policy Benton Arnett.

Tax credits for low-carbon hydrogen production in the Inflation Reduction Act represent one of the climate law’s most ambitious timelines for implementation, with the provision taking effect late last year. That means low-carbon hydrogen producers can, in theory, already begin applying for tax credits of up to $3 per kilogram, depending on the emissions intensity of production.

However, IRS guidelines for clean hydrogen production have yet to be issued, and industry groups, environmentalists, and scientists are taking sides in a debate over whether the tax credits should require hydrogen made via electrolysis to be powered exclusively with new sources of zero-carbon electricity, a concept known as “additionality.”

In a February letter, a coalition of environmental groups and aspiring hydrogen producers expressed concern to the IRS that guidelines for 45V clean hydrogen production tax credit implementation would not be sufficiently rigorous, especially when it comes to grid-connected electrolyzers. Citing research from Princeton University, the group argued that grid-powered electrolyzers siphon off renewable generation capacity, requiring the grid to be backfilled by fossil power and thus producing twice the carbon emissions that natural gas-derived hydrogen emits currently.

(The group, which includes the National Resources Defense Council, Intersect Power, and EDF Renewables, among others, also argues in favor of hourly tracking, which they say would better guarantee energy used for electrolysis comes from clean sources, and deliverability, requiring renewable power to be sourced from within a reasonable geographic distance. In February, the European Commission issued a directive phasing in, over a number of years, rules for additionality, hourly tracking, and deliverability.)

Benton Arnett, director of markets and policy for the Washington, DC-based Nuclear Energy Institute, a nuclear industry trade association, does not believe the concept of additionality was part of Congress’s intent when the body crafted the Inflation Reduction Act. For one, he notes, the text of the 45V provision for clean hydrogen production includes specific prescriptions for the carbon intensity of hydrogen production as well as for the analysis of life-cycle emissions, but says nothing about additionality.

“When you get legislative text, you don’t usually have prescriptions on carbon intensities for the different levels of subsidies,” he said. “You don’t usually have specifications on what life-cycle analysis model to use – and yet all of that is included in the 45V text. Clearly [additionality] is not something that was intended by Congress.”

Reading further into the law, section 45V contains precise language allowing renewable electricity used for the production of hydrogen to also claim renewable energy tax credits, or “stacking” of tax credits. Further, the statute includes a subsection spelling out that producers of nuclear power used to make clean hydrogen can also avail themselves of the 45U tax credit for zero-emission nuclear energy production.

“It’s really hard for me to think of a scenario where the drafters of the IRA would have included a provision allowing existing nuclear assets to claim 45V production tax credits and also be thinking that additionality is something that would be applied,” Arnett said.

Text of the IRA

The NEI emphasized these provisions in a letter to Treasury and IRS officials last month, noting that, “given the ability to stack tax credits for existing sources with section 45V, the timing of when the section 45V credit was made available” – December 31, 2022 – “and congressional support for leveraging existing nuclear plants to produce hydrogen, it is clear Congress intended for existing facilities to be eligible to supply electricity for clean hydrogen production.”

Arnett adds that the debate around additionally ignores the fact that not all power generation assets are created equal. Nuclear facilities, in particular, given the regulatory and capital demands, do not fit within a model of additionality geared toward new renewable energy capacity. (Hydrogen developers have also proposed to use existing hydropower sources for projects in the Pacific Northwest and Northeast.)

This year, the NEI conducted a survey of its 19 member companies representing 80 nuclear facilities in the US. The survey found that 57% of the facilities are considering generation of carbon-free hydrogen. Meanwhile, the US Department of Energy’s hydrogen hubs grant program requires that one hub produce hydrogen from nuclear sources; and the DOE has teamed up with several utilities to demonstrate hydrogen production at nuclear power plants, including Constellation’s Nine Mile Point Power Station, Energy Harbor’s Davis-Besse Nuclear Power Station, Xcel Energy’s Prairie Island Nuclear Generating Plant, and Arizona Public Service’s Palo Verde Generating Station.

“We’re worried that if [additionality] goes into effect it’s going to remove a valuable asset for producing hydrogen from the system, and it’s really going to slow down penetration of hydrogen into the market,” Arnett said.

As for the research underlying arguments in favor of additionality, Arnett says that it appears to take the 45V provision in a vacuum, without considering some of the larger changes that are taking shape in US electricity markets. For one, the research, which argues that electrolyzers would absorb renewable capacity and require fossil-based generation to backfill to meet demand, assumes that natural gas generation will continue to be the marginal producer on the electrical grid.

“One of the shortcomings of that is that the IRA has hundreds of billions of dollars of incentives aimed at changing that very dynamic. The whole goal of the IRA is that marginal additions of power are carbon-free,” he said, noting incentives for clean electricity production tax credits, investment tax credits, supply chain buildouts, and loan program office support for all of these projects.

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Illinois ethanol company seeking offtaker for SAF project

Seeking to diversify into new markets, Marquis, a family-owned ethanol producer based in Illinois, is looking for an offtaker for its first sustainable aviation fuel plant.

Marquis, a family-owned ethanol producer based in Illinois, is seeking an offtaker for its first sustainable aviation fuel plant.

The company, which is developing the plant in partnership with LanzaJet, an SAF firm, recently completed a feasibility study for the project, and is looking for airlines or users of renewable diesel as offtakers, Dr. Jennifer Aurandt Pilgrim, the company’s director of innovation, said in an interview.

Marquis owns and operates a 400 million gallon per year ethanol plant – the largest dry-grind ethanol plant in the world – which produces sustainable ethanol for fuel and chemicals as well as a feed for the aquaculture and poultry industries.

The company will divert roughly 200 million of those gallons to make 120 million gallons per year of SAF and renewable diesel, Aurandt said, noting that Marquis is looking to branch into new markets where ethanol is a feedstock.

“As more electric vehicles come on, there will be about a 3 billion gallon demand destruction for ethanol, and SAF is one of the great markets that we can diversify into,” she said.

Aurandt said financing for the SAF facility will ultimately depend on who the offtaker is.

Use cases

United Airlines, Tallgrass, and Green Plains Inc. recently formed a joint venture – Blue Blade Energy – to develop and then commercialize SAF technology that uses ethanol as its feedstock.

SAF using corn as a feedstock does not currently qualify for incentives in the Inflation Reduction Act, which uses standards laid out by the International Civil Aviation Organization that effectively exclude corn-based SAF from qualifying.

Marquis and other ethanol producers are pushing for the adoption of a lifecycle greenhouse gas model, known as GREET, developed by the Argonne National Laboratory, that would allow corn-based feedstock to qualify, said Dustin Marquis, the company’s director of government relations.

The company is also looking to attract partners to set up operations in the Marquis Industrial Complex, which is touted as a 3,300-acre industrial site with natural gas lines, access to multiple forms of transportation, and carbon sequestration on-site.

“We’re looking for other businesses where there would be either vertical integration or business synergies between the two organizations,” Marquis said.

Marquis said in a news release it would develop two 600 ton per day blue hydrogen and blue ammonia facilities along with manufacturing for carbon neutral bio-based chemicals and plastics.

CO2 utilization

In its production process, Marquis makes 1.2 million tons of biogenic CO2 per year, and has applied for an EPA Class IV permit for sequestration.

“We like to say it’s direct air capture with the corn plant,” Aurandt said, adding that the CO2 is purified via fermentation to 99.9% pure, and will be injected into a formation that sits beneath the Marquis Industrial Complex.

The company is additionally developing a CO2 utilization project with LanzaTech, which would augment ethanol production using CO2 as a feedstock. The project was recently awarded an $8.54m grant from the US Department of Energy, the largest award in the category of corn ethanol emission reduction.

“We can increase the amount of ethanol that we produce here by 50%,” Aurandt said. “So we could make 200 million gallons of ethanol per year” from CO2, she added, noting that the pilot demonstration will be the largest CO2 utilization project in North America. It is expected to be operational in late 2024.

The SAF plant and the CO2 utilization project will use hydrogen for refining and as an energy source, respectively, Aurandt said.

Gas Liquid Engineering is the EPC for the CO2 unit, and Marquis will use compressors from Swedish multinational Atlas Copco.

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