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NextEra RNG project breaks ground in Oklahoma

The project, Scissortail Renewables, will be the first municipally-owned landfill in Oklahoma to produce pipeline-quality renewable natural gas.

Sparq Renewables, The City of Enid and NextEra Energy Resources, LLC today celebrated the groundbreaking of the Scissortail Renewables project, a new renewable natural gas (RNG) plant that will harness methane from household waste into clean, renewable energy for Enid residents, according to a news release.

This public-private collaboration is the first municipally-owned landfill in Oklahoma to produce pipeline-quality renewable natural gas. The Scissortail Renewables facility will be located at the Enid City Landfill.

“The Scissortail Renewables project is a milestone for Enid,” said Enid Mayor David Mason. “We are proud to be the first municipality in Oklahoma to use a city-owned landfill to capture gas and turn it into a renewable source of energy for its residents.”

RNG production is a carbon-neutral energy solution with many environmental and economic benefits including lowering methane emissions and utilizing current natural gas infrastructure. Landfill gas is comprised of methane that is generated through the decomposition of waste and, if released into the atmosphere, is a potent greenhouse gas. However, it can be used as a renewable energy source that directly reduces pollution to the atmosphere. The project will assist the City of Enid with improving air quality near the facility.

“Sparq’s vision is to harness the state’s many renewable resources, including landfill gas, to create a more sustainable and cleaner Oklahoma,” said CEO of Sparq Renewables Norman Herrera. “Naturally occurring methane from household trash is one source we believe is significantly underutilized in the state and we appreciate the opportunity to help contribute toward meaningful environmental change through the creation of Scissortail Renewables.”

Once construction is complete and the facility is operational, Scissortail Renewables will capture the naturally occurring methane gas from household waste and turn it into clean energy for Enid residents. Once operational, Scissortail’s gas collection and processing facility will inject low-carbon gas into the existing ONEOK pipeline to deliver natural gas to consumers to heat homes and fuel businesses.

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Sumitomo invests in Colorado direct air capture company

Sumitomo’s investment in Global Thermostat includes a commercial partnership to develop projects in the US, Europe, Middle East and Asia markets.

Sumitomo Corporation, through the Group’s U.S.-based Presidio Ventures, Inc., has announced its investment in Global Thermostat, PBC, a U.S.-based company that develops and deploys a leading technology for directly capturing carbon dioxide from the atmosphere, according to a news release.

In conjunction with the investment, the companies have signed a letter of intent to develop a new line of global business for carbon capture and sequestration centered around Global Thermostat’s pioneering Direct Air Capture (DAC) technology.

DAC technology directly captures CO2 from the atmosphere and has attracted attention as one of the leading potential solutions for achieving negative emissions on a large scale. When used in combination with underground storage or mineralization solutions, it is likely to have a key role in reducing atmospheric carbon dioxide.

Global Thermostat has been developing DAC technology for more than a decade and has been recognized by the International Energy Agency (IEA) as one of the leading international companies developing large-scale DAC technology. In continually advancing its capture system, the firm has developed a proprietary solution consisting of fans which blow air through contactors with customized surface geometry and sorbents to optimize CO2 capture rates and overall cost.

At the end of 2022, Global Thermostat succeeded in putting a commercial-scale DAC facility into operation at its U.S. headquarters in Commerce City, Colorado, with the capacity to capture more than 1,000 metric tons of CO2 per year, one of the largest operating DAC plants ever. It is now expanding its operations globally.By combining Sumitomo Corporation’s global network and Global Thermostat’s leading DAC technology, the two companies will jointly identify and develop business opportunities in Carbon Capture, Utilization, and Storage (CCUS), including both underground storage and mineralization, in the U.S., Europe, Middle East and Asia markets.

The capturing and sequestration of atmospheric carbon is widely recognized as essential to keeping the global temperature rise below the 1.5 degree target. Together, Sumitomo and Global Thermostat aspire to establish a complete economic system that will provide a foundation for the widespread, global implementation of Direct Air Capture.

In developing the carbon capture value chain, Sumitomo Corporation and Global Thermostat will also explore opportunities in the production of e-fuels, produced by synthesizing CO2 and hydrogen.

“We are excited to be Sumitomo’s technology partner as we pursue our goal of a carbon-neutral economy. Our proven and fundamentally advantaged technology will enable the cost-effective and efficient capturing of atmospheric CO2 for sequestration or commercial uses,” said Paul Nahi, CEO of Global Thermostat.

Shinichi “Sandro” Hasegawa, Head of Energy Innovation Initiative America for Sumitomo Corporation of Americas, commented, “We are pleased to sign a letter of intent for a commercial partnership with Global Thermostat. We believe that DAC is one of the most important technologies for addressing climate change and the realization of a carbon-neutral society.

“Through our collaboration with Global Thermostat, we will promote and realize carbon dioxide removal from ambient air through Direct Air Capture with Carbon Storage, as well as focus on synthetic fuel production based on the captured CO2,” said Hasegawa.

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IRS 45V tax credit rules draft stricter than EU

A leaked draft report of pending 45V guidance from the US Treasury Department has advocates of the emerging green hydrogen industry warning of too-stringent measures.

US Treasury guidance for clean hydrogen producers to claim the top $3/kg rate of the hydrogen production tax credit could be overly onerous on the fledgling industry, according to responses to reporting on a draft in Politico and Bloomberg.

Reportedly, new rules include requirements that hydrogen be produced from newly created renewables (additionality), as well as geographic correlation and hourly time-matching requirements to qualify for the top rate.

“The proposal suggests that there will be an hourly matching requirement from 2027, making the rules stricter than those in the EU: a surprise to many, and potentially problematic in the eyes of some,” Ben Heininger, a manager at Baringa, said in a statement on LinkedIn. “This will lead to a material increase in costs, given the challenges in procuring firm 24/7 green power – a boon for storage developers no doubt.”

The increase in cost will drive the levelized cost of hydrogen higher and producers will likely have greater concerns over competitiveness for exports, Heininger said.

“If true, the Biden Administration’s proposed strategy for implementing these provisions will fail to get this new industry off the ground,” Jason Grumet, chief executive officer of the Washington-based American Clean Power Association, said in a statement yesterday. “It is surprising and disappointing that the administration would propose such a rigid approach that is at odds with decades of learning about new technology deployment.”

The 45V tax credit was originally unveiled as part of the Inflation Reduction Act and is split into four rates based on emissions intensity.

Hydrogen project developers and investors worry that stringent 45V rules will put the nascent industry on its back foot, significantly enough to kill projects by increasing the cost of green hydrogen production as the number of hours an electrolyzer can be operational is reduced and the sources of energy from which they can purchase power is limited.

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Aemetis approved for $200m USCIS financing

The financing will be made available through the U.S. Citizenship and Immigration Services’ EB-5 program.

Aemetis, Inc., a renewable natural gas and renewable fuels company focused on low and negative carbon intensity products, today announced approval by U.S. Citizenship and Immigration Services (USCIS) of $200 million of EB-5 program investment for the Riverbank sustainable aviation fuel (SAF) production plant, the dairy renewable natural gas (RNG) project, the carbon sequestration project, and energy efficiency upgrades to the Keyes ethanol plant.

The Riverbank plant was recently granted Authority to Construct (ATC) air permits and is designed to produce 78 million gallons per year of SAF for the aviation market. Aemetis has already secured more than $3 billion of contracts to supply airlines with SAF.

“This $200 million of funding provides attractive terms at a low interest rate to fund our projects, including the dairy renewable natural gas project and the sustainable aviation fuel plant to meet rapidly increasing global demand for SAF from airlines,” said Eric McAfee, Chairman and CEO of Aemetis. “This EB-5 funding, the 20-year USDA guaranteed loans, and other financings support the continued growth of the company as set forth in the Aemetis Five Year Plan,” McAfee added.

According to the determinations made by the USCIS, the Regional Center presented evidence asserting that 245 qualified investors will invest $200 million in EB-5 capital into Advanced Bioenergy II, the new commercial enterprise (NCE). The NCE will invest in Aemetis Advanced Products Keyes, the job creating entity (JCE).

The JCE intends to expand the existing 65 million gallon per year Aemetis ethanol plant in Keyes, California by the engineering, permitting, construction and operation of: 1) upgrades to the ethanol plant for improved energy efficiency and increased production, including the installation of solar panels,mechanical vapor recompression, and the use of sugars from waste forest and orchard wood to replace corn sugars for biofuels production; 2) the dairy Renewable Natural Gas (RNG) system that includes dairy digesters, a gas pipeline, a central facility to convert biogas to renewable natural gas, RNG fueling stations, and an interconnection facility to the utility gas pipeline; 3) a biofuels production facility that uses the distillers oil product of the ethanol plant and other renewable oils to produce SAF and RD; and 4) a well that sequesters carbon in the form of CO2 emitted by the production processes and other CO2 emissions collected in the area.

The Project’s two primary locations are the Aemetis Advanced Fuels Keyes 65 million gallon per year ethanol plant and the Riverbank Industrial Complex.  The USCIS found that the Aemetis projects are both located within high unemployment areas.

Eight investors have already invested $500,000 per investor (a total of $4.0 million) and 245 additional future investors have now been approved at $800,000 per investor (for an additional $196.0 million) for a total of $200 million under the EB-5 program.

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Pennsylvania RNG firm outlines strategic outlook

A growing RNG developer, owner and operator based in Pennsylvania is anticipating a liquidity event on the part of its private equity owner — once it has locked down a “critical mass” of projects.

Vision RNG, a developer of US RNG projects, could see its next project reach commercial operations in Tennessee in a line of projects in southeastern and mid-western states, CEO Bill Johnson said in an interview.

Vision Ridge Partners, a private equity firm, is the majority owner of the company. Management owns the remaining minority stake.

The company is still in early stages and would likely need to get something like six projects to COD before a liquidity event.

“Locking down projects creates a lot of value,” Johnson said, noting that Vision Ridge will likely follow a typical private equity monetization pattern.

The company’s project at Meridian Waste’s Eagle Ridge Landfill in Bowling Green, Missouri is fully operational. It uses 1,500 scfm of landfill gas (LFG) and produces 375,000 MMBtu of RNG annually.

That mid-sized project is similar in scale to what is being developed in Tennessee, which will likely be the next project to reach COD, Johnson said, declining to provide details on exact location.

“We’re working on developing other opportunities with some of the largest publicly owned landfill companies in the country,” Johnson said.

Projects require between $20m and $60m in capex, ranging from small to large, Johnson said. Vision Ridge takes care of the company’s equity requirements.

Debt options are being considered on a project-by-project basis, he said. Debt tends to range from 50% to 70% of total spend.
“We’ll look to put reasonable project debt on these,” he said.

Vision has not to date retained the services of an investment bank, Johnson said.

Vision is pursuing opportunities in Kentucky, Alabama, South Carolina and Oklahoma, and will evaluate suppliers of services and equipment for each. The location-agnostic company is also open to new relationships with potential future financial and strategic acquirers.

“If you are a private equity group, you’re a potential buyer of the company at some point, so we would be happy to know them and keep their interest in us up,” Johnson said. An acquirer would not necessarily need to have expertise in RNG.

M&A potential

M&A of projects is an option on the table, Johnson said. But returns are better if Vision develops its own projects; and a more challenging macroeconomic environment makes acquisitions somewhat unlikely.

“With the market premiums being paid, I see us continuing to keep our head down and focusing on organic growth,” Johnson said.

Johnson said he expects to see continued consolidation in the greater market. Many large strategic and midstream companies have yet to make significant buys in RNG.

He pointed to bp’s acquisition of Archaea Energy as a significant milestone in the RNG market.

“There’s quite a number of potential acquirers,” Johnson said. “The market is kind of fundamentally and always will be under-supplied and over-demanded.”

Vision would potentially be open to a merger with a portfolio company of a strategic or PE investor, Johnson said.

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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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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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