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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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Ameresco begins construction on Sacramento biogas co-generation project

The firm has entered a nearly $140m contract to develop and construct an advanced technology biogas cogeneration facility for the Sacramento Area Sewer District.

Ameresco, Inc., a cleantech integrator specializing in energy efficiency and renewable energy, has entered a nearly $140m contract to develop and construct an advanced technology biogas cogeneration facility for the Sacramento Area Sewer District located at the EchoWater Resource Recovery Facility (EchoWater Facility) near Elk Grove, California, according to a news release.

This on-site renewable energy facility will beneficially utilize biogas (methane), a byproduct of the EchoWater Facility’s solids treatment process, to produce renewable electricity and heat for the EchoWater Facility through an integrated 13.4 MW cogeneration plant that will utilize fuel cell and engine technology.

Construction of the new facility is expected to be completed by July 2026.

By incorporating the fuel cell system, the project will have exceptional efficiency and reduced pollutant emissions, making it a clean, reliable baseload dispatchable resource. Additionally, the system will allow for the expandability to produce hydrogen in the future.

“SacSewer is committed to being a leader in environmental stewardship. Through our sustainable efforts in resource recovery, we maximize the reuse of treatment process by-products such as biogas,” shared Christoph Dobson, SacSewer’s General Manager. “This project is yet another example of how we’re working every day to fulfill our mission of protecting public health and the environment by collecting, treating, and recovering resources from sewage.”

“We are thrilled to partner with SacSewer, supporting their efforts to optimize the use of the biogas that is generated as a byproduct of the sewage treatment process,” said Michael Bakas, Executive Vice President of Ameresco. “Capturing and repurposing biogenic methane, that is already in our environment and produced by society, to displace fossil fuel is a powerful example of the circular economy in action, where waste is not discarded, but turned into a valuable asset. This voluntary act by SacSewer, backed by a material investment into this advanced renewable energy center, speaks volumes to their commitment to our environment and their surrounding community.”

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OCI Global supplying low-carbon ammonia for German fertilizer

OCI will supply COMPO EXPERT with ammonia that guarantees a 60% lower carbon footprint than the industry standard from its facilities in Texas.

OCI Global, a producer of nitrogen, methanol, and hydrogen products is supplying COMPO EXPERT, a producer of high-quality specialty fertilizers and biostimulants, with lower carbon ammonia for use in the production of COMPO EXPERT’s NPK fertilizers, with the first delivery having taken place this week, according to a news release.

COMPO EXPERT will initially replace 25% of the ammonia it uses at its facility in Krefeld, Germany, with OCI’s lower carbon product this year and has plans in place to further increase the ratio of OCI supplied lower carbon ammonia in its production over the next two years.

OCI will supply COMPO EXPERT with ammonia that guarantees a 60% lower carbon footprint 60% than the industry standard from its facilities in Texas, USA via OCI’s proprietary ammonia terminal and distribution hub at the Port Of Rotterdam.

OCI has supplied COMPO EXPERT with ammonia for fertilizer production for over a decade and the switch to lower carbon ammonia is testament to both companies’ commitment to sustainability and the decarbonization of their products.

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Fuel cell startup raises seed capital

The capital will be used to expand on the team’s growth with engineers coming from Siemens Energy, Argonne National Lab, and The US Navy, among other places.

Celadyne, a decarbonization and hydrogen solution company, has raised $4.5m in seed investment funding. The round was co-led by Maniv and Dynamo Ventures, with major participation from EPS Ventures, according to a news release.

The company collaborates with fuel cell and utility firms, offering efficient hydrogen solutions to heavy-duty industries such as energy, manufacturing, and transportation. Celadyne’s advanced technologies effectively convert hydrogen to usable energy through compact, easy-to-use fuel cells that seamlessly integrate.

“At Celadyne, our mission is simple: unlocking the true potential of hydrogen,” says Gary Ong, Ceo & Founder at Celadyne Technologies. “This new funding will accelerate our product in the market as we aim to decarbonize industries like transportation and manufacturing, offering a cost-effective route for green hydrogen production. Our goal is to embrace these industries, helping them contribute positively to the planet.”

Specifically, Celadyne’s materials and technologies replace the proton exchange membrane to create fuel cells that are more durable, and electrolyzers that are more compact and efficient. This newfound durability allows fuel cells to be utilized as an environmentally-friendlier alternative to diesel engines, and makes electrolyzers that produce low cost green hydrogen as fuel.

This latest funding will expand upon capital from Shell Ventures, Sputnik ATX, the Third Derivative Accelerator, and Sandy Spring Climate Partners. Celadyne has been publicly and financially supported for their world-changing hydrogen applications through grants from the US Department of Energy, National Science Foundation, ARPA-E, and Department of Defense – AFWERX. These entities, along with Celadyne’s customers, who are Tier 1 automotive leaders shaping the future of mobility worldwide, believe that advanced materials hold the key to unlock the full potential of hydrogen.

This latest funding will expand upon previous capital from Shell Ventures, Sputnik ATX, and the Third Derivative Accelerator and Sandy Spring Climate Partners. The capital will be used to expand on the team’s growth with engineers coming from Siemens Energy, Argonne National Lab, The US Navy, Micron Technologies, Hyzon Motors, and Northwestern University. The team will support the ongoing development of Celadyne’s materials technology, to create even better fuel cells and expand its usage in electrolysis across its growing list of clients across the US. By year end, Celadyne expects to double its customer base and these developments will open up a whole new world for green energy applications in industries that are historically some of the harshest on the environment.

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Biomass technology company launching US projects

Comstock Inc, a biomass technology company, is gearing up to build a fleet of plants that will use yield-enhancing technology to convert woody biomass into clean fuels.

Comstock Inc, a biomass technology company, is gearing up to build a fleet of plants that will use yield-enhancing new technology to process woody biomass into an intermediate product that can be further refined into clean fuels.

The company, traditionally a miner focused on gold and silver mining in Nevada, has been transformed into a technology innovator seeking to build, own, and operate a portfolio of carbon neutral extraction and refining facilities in the US, CEO Corrado De Gasperis said in an interview.

“We’re finalizing all of our documentation on readiness and engineering, and then we’ll be working to select an EPC, and then we’ll be ready to bond and finance,” he said.

Comstock, which trades on the NYSE, is currently engaged in the process of securing access to feedstock, and has mapped out nine regions in the U.S. which, combined, produce between 85 – 100 million tons of woody biomass residuals per year.

In parallel, the company is seeking to incentivize growth of trees like hybrid poplar that can be used as feedstock in the future, De Gasperis said. “We’re going to be building the backend of the supply chain with a feedstock strategy, accessing existing residuals, and then building these facilities,” he added.

In Minnesota, for example, there are around 300 sawmills with no place to send their sawdust and excess woodchips following the closure of several wood-to-energy plants, said David Winsness, a president at Comstock.

“Those are the materials that shouldn’t be sitting there – we should be converting them into fuel,” Winsness said.

Building plants

The company has set an objective to generate “billions” in revenue by 2030 – something it would achieve largely through building and operating the woody biomass plants near where the feedstock is located. Comstock also sells related services and licenses selected technologies to strategic partners.

Using simple math, Comstock could achieve its revenue goal by building and operating 10 facilities that produce approximately 1 million tons of clean fuels per year.

A plant producing 1 million tons per year would require capex of between $600m – $750m to build, and would likely be constructed using a project finance funding model, De Gasperis said. The company has not yet selected a financial advisor.

De Gasperis believes large refiners will want to co-build the facilities along with Comstock – which could also entail a strategic equity investment from the selected refiner and lead to a faster construction process.

“Speed and throughput is the goal,” he said, noting that the company has been engaged with roughly 12 of the large clean fuels refiners on a potential partnership. “The faster we’re producing these carbon-neutral gallons, the faster we’re decarbonizing, and the faster we’re making money.”

The company has private equity funds and infrastructure funds on their radar as potential investors but has not engaged with them yet.

The other half

Comstock’s technological breakthrough comes in its ability to produce a biointermediary – called bioleum – from a part of the woody biomass that is not cellulose, and which can be used to produce drop-in fuels. (Importantly, under new EPA rules implemented in June 2022, biointermediaries such as bioleum can be sold on to refiners, whereas previous rules required co-location with the refineries.)

“Cellulose only counts for 50% of a tree,” said Winsness. “For every gallon of fuel generated from cellulose, we’re getting another gallon from the byproduct. It’s a huge change for the industry to be able to get that much more throughput from the same amount of biomass.”

The Department of Energy recently issued a funding opportunity for projects that can produce more than 60 gallons of ethanol from 1 ton of wood feedstock, De Gasperis said.

“We saw that and we said, ‘We’re already there. We can do much more,’” he added.

Comstock can currently produce about 70 gallons of ethanol from 1 ton of wood, using cellulose. Meanwhile, with the non-cellulose half of the wood in 1 ton of feedstock, the technology can produce an additional 30 – 40 gallons of renewable diesel or aviation fuel.

The company has partnered on a process to convert ethanol to drop-in fuel, with the ultimate goal of producing 100 gallons of drop-in fuels from 1 ton of wood feedstock, according to De Gasperis. “All of our development is to stabilize the breakthrough we had on the bioleum – the heavy cellulose components of the wood is where our technology breaks through and shatters this.”

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Ambient Fuels evaluating hydrogen project acquisitions

The company is well capitalized following a $250m equity investment from Generate Capital and is now opportunistically reviewing an initial slate of project M&A offerings.

Following an equity investment from Generate Capital, Ambient Fuels has begun to evaluate potential acquisitions of hydrogen projects that are under development, CEO Jacob Susman said in an interview.

“We’ve seen our first project M&A opportunities come through in the last 10 days or so,” Susman said.

Three projects for sale involve land positions, he said. Those that appear most attractive have a clear line of site to offtake or a strong approach to renewable power supply. Two out of three are not on the Gulf Coast.

“In no instance are these brokered deals,” Susman said.

Following the $250m equity investment from Generate Capital, Ambient is capitalized for several years and has no immediate plans to seek debt or tax equity, Susman said. The transaction was done without the help of a financial advisor.

Moving forward Ambient is open to JV formation with a partner that can help access offtake and renewable power, Susman said. Those points will drive future capital investment in the company and were resources that Generate brought to the table besides money.

According to ReSource‘s project tracker, Ambient is involved in at least two of the hubs that were encouraged by the DOE to submit a final application: California’s Alliance for Renewable Clean Hydrogen Energy Systems (ARCHES), and the Port of Corpus Christi Green Hydrogen Hub.

In 2021 Ambient completed a funding round led by SJF Ventures. Several other VC funds and angel investors also participated.

In January The Hydrogen Source reported that Ambient was in exclusivity with an equity provider.

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California Resources pursuing pipeline of blue molecule projects

Through a subsidiary called Carbon TerraVault, the upstream oil and gas producer will approach carbon capture and blue molecule production investments on a project-level basis to help meet California’s lofty decarbonization goals.

Through its subsidiary Carbon TerraVault, California Resources Corporation will approach carbon capture and blue molecule production investments on a project-level basis to help meet California’s lofty decarbonization goals, Chief Sustainability Officer Chris Gould said in an interview.

Carbon TerraVault is differentiated by its nature as a CCS-as-a-service company, Gould said, as most CCS projects are owned by emitters themselves.

“We are bringing to market a solution to decarbonize other parts of the California economy,” Gould said, noting that hydrogen producers, power plants and steel and cement makers are among potential clients. “We are out across the state, working with emitters.”

Carbon TerraVault is self-mandated to return one billion tons of carbon back into the ground, first as a gas and then pressurized into liquid. Revenue comes from the federal 45Q incentive and the California LCFS and related tradeable market.

The company has a JV with Brookfield Renewable for the first 200 million tons. That JV recently formed a separate JV with Lone Cypress Energy Services for a planned blue hydrogen plant at the Elk Hills Field in Kern County.

Carbon TerraVault will provide permanent sequestration for 100,000 MTPA at the facility, and will receive an injection fee on a per ton basis, according to a December 7 presentation.

In hiring Carbon TerraVault to provide CCS as a service, LoneCypress also invited the company to invest in the production, Gould said. The JV has the right to participate in the blue hydrogen facility up to and including a majority equity stake, the presentation shows.

“You should expect to see over time as we do more and more of these that we’re going to have multiple models,” Gould said of these partnerships and financial structures. A typical model may emerge as the industry matures.

The company could repeat that effort for “many more” blue hydrogen projects in the state, Gould said. “Green [hydrogen] is a longer-term proposition that is going to be based on renewable buildout,” he said. “Blue is kind of here now.”

Target market

Carbon TerraVault estimates that California’s total CCS market opportunity is between 150 MMTPA – 210 MMTPA, and is in discussions for 8 MMTPA of CCS, of which 1 MMTPA is in advanced discussions, the presentation shows.

Through California Resources’ Elk Hills land position of 47,000 acres and CO2 sequestration reservoirs, the company could attract additional greenfield infrastructure projects like the Lone Cypress Hydrogen Project and create a Net Zero Industrial Park, according to the presentation.

In that vein, Gould noted the huge need for decarbonized ammonia in California’s central valley agriculture, which today is imported from abroad.

“There is a need for clean hydrogen in California and it is best if it is created in California,” Gould said.

The JV with Brookfield funds Carbon TerraVault’s storage needs, Gould said. Investments in the production processes, such as the deal with Lone Cypress, will likely require additional capital.

Project level financing is a “default assumption,” Gould said, though that’s not set in stone. The company is working with a financial advisor but Gould declined to name the firm.

The scale of California’s hydrogen ambitions is far beyond what any one company can do, Gould said.

“If you’re an advisor that is working with a developer likeLone Cypress that is considering locating in California, then I would say give us a ring,” Gould said. “We’re the ones who are going to be able to do the sequestration there.”

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