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North Dakota CCS project enters final development stages

Closing on financing for Project Tundra at the coal-fired Milton R. Young Station power plant is expected in early 2024.

Minnkota Power Cooperative has solidified agreements with TC Energy, Mitsubishi Heavy Industries, and Kiewit to move a North Dakota carbon capture project into its final stage of development, according to a news release.

Under the arrangements, Minnkota will continue to lead development activities for “Project Tundra” at the Milton R. Young Station power plant, as well as coordination with landowners and community members in the project area near Center, N.D.

Closing on financing and the notice to move forward with construction of Project Tundra are anticipated in early 2024. The project remains subject to closing on financing and a final investment decision by each of the project entities in the consortium.

TC Energy will lead commercialization activities, including qualifying for federal 45Q tax credits. Return on project construction and operation costs would be recouped through 45Q, which provides $85 per ton of CO2 permanently stored underground.

In addition, the project participants submitted applications in May for a $350m grant through the U.S. Department of Energy’s Carbon Capture Demonstration Projects Program and a $150m loan through the state of North Dakota’s Clean Sustainable Energy Authority. The project currently has approval for a $100m CSEA loan.

Project Tundra is designed to capture up to four million metric tons of CO2 annually from the coal-based Young Station. The CO2 will be stored more than a mile underground. Minnkota currently has the largest fully permitted CO2 storage facility in the United States and is pursuing additional CO2 storage opportunities near the Young Station.

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American Airlines invests in Universal Hydrogen

American joins Airbus Ventures, GE Aviation and Toyota Ventures, as well as several major hydrogen producers and aircraft lessors, as strategic investors.

American Airlines has made a strategic equity investment in Universal Hydrogen Co., a company building a green hydrogen distribution and logistics network for aviation.

The investment supports American’s science-based targets to reduce greenhouse gas (GHG) emissions by 2035, and ultimately its commitment to achieve net zero GHG emissions by 2050, and makes American the first U.S. airline to make two direct investments focused on the development of both hydrogen-electric propulsion technology and the future of hydrogen distribution logistics, according to a news release.

American joins Airbus Ventures, GE Aviation and Toyota Ventures, as well as several major hydrogen producers and aircraft lessors, as strategic investors in Universal Hydrogen.

Universal Hydrogen’s fuel distribution network uses modular hydrogen capsules that are handled like cargo, eliminating the need for new fueling infrastructure at airports and speeding up fuel loading operations. Universal Hydrogen anticipates starting hydrogen deliveries for regional aircraft in 2025, with plans to expand its services to larger, single aisle aircraft — first for auxiliary power in the late-2020s and then as a primary fuel by the mid-2030s. Because these segments represent two-thirds of aviation emissions — and with green hydrogen being a true zero-carbon fuel — these advances put aviation on a path to meet Paris Agreement emissions targets.

“This technology has the potential to be a game-changer on the industry’s path to zero-emission flight,” said American’s Chief Financial Officer Derek Kerr. “As the world’s largest airline, American has a responsibility to exercise leadership in making aviation sustainable. Our investment in Universal Hydrogen represents a vote of confidence for green hydrogen as a key element of a sustainable future for our industry.”

“Together with our investors, we are putting together the end-to-end value chain to make hydrogen aviation a near-term commercial reality,” said Paul Eremenko, co-founder and CEO of Universal Hydrogen. “This move by American is a strong signal that customers want a true zero-emissions solution for passenger aviation and are willing to back tangible, pragmatic steps to get there quickly.”

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GSE Solutions to build hydrogen plant model for NuScale’s SMR plant simulator

The project will determine the technical and economic feasibility of connecting a hydrogen production facility to a NuScale small modular reactor and evaluate operating parameters.

GSE Solutions, a provider of advanced engineering and workforce solutions that supports the future of clean-energy production and decarbonization initiatives of the power industry, announced today that it will build a hydrogen plant model for NuScale Power’s VOYGR small modular reactor (SMR) plant simulator.

GSE will provide the models, integration, and testing support to NuScale using its JPro Dynamic Simulation Software.

Portland, Oregon-based NuScale along with Shell Global Solutions (Shell) will develop and assess a concept for an economically optimized Integrated Energy System (IES) for hydrogen production using electricity and process heat from the SMR power plant.

GSE strives to create the most accurate, highest-level of advanced modeling technologies on the market, providing unparalleled accuracy and detail, enabling simulators to be used to test engineering changes, control system design and strategies, and even perform human factors engineering prior to plant commissioning, according to the news release.

GSE is one of just a handful of companies tapped to support NuScale in developing and assessing an economically optimized Integrated Energy System (IES) for hydrogen production using electricity and process heat from the VOYGR SMR. The existing NuScale control room simulator will be modified to evaluate the dynamics of the IES and will include GSE’s models for hydrogen production. The project will determine the technical and economic feasibility of connecting a hydrogen production facility to a NuScale SMR and evaluate operating parameters.

GSE appreciates their long-standing, 10+ year relationship with NuScale that has resulted in the delivery of their four Energy Exploration Centers, which employ GSE Solutions’ state-of-the-art simulation technology. The companies also worked together to demonstrate NuScale’s new control room operating and staffing philosophy to regulators and customers using a GSE simulator. The Solid Oxide Electrolysis Cell project will again showcase new concepts for use in small modular reactor power plants.

“We are proud to support NuScale in conducting this innovative research,” said Kyle Loudermilk, president and chief executive officer of GSE Solutions. “Our modeling of SMR technology and nuclear power systems help facilitate hydrogen production and demonstrates the potential to balance and stabilize power grids that will be driven by renewable energy sources in the future.”

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Tailwater Capital partners with renewable diesel and SAF developer

The company, Ash Creek Renewables, serves North American renewable diesel and sustainable aviation fuel producers through its feedstock marketing, distribution, pretreatment and logistics operations.

Tailwater Capital LLC, an energy and growth infrastructure private equity firm, has agreed to a partnership with Ash Creek Renewables, a platform dedicated to developing renewable fuel feedstock solutions to meet the demands of the growing renewable fuels market, according to a news release.

Terms of the partnership were not disclosed.

The company serves North American renewable diesel and sustainable aviation fuel producers through its feedstock marketing, distribution, pretreatment and logistics operations.

Dallas-based Tailwater Capital is an energy and growth infrastructure private equity firm with $4.4bn in commited capital.

Ash Creek is led by chief executive officer John Cusick, who has over 20 years of experience in the low carbon fuels sector. Previously, Cusick was an owner of The Jacobsen, the leading consultancy for the renewable fuels industry. Prior to The Jacobsen, Cusick held senior positions at Renewable Biofuels, Inc., Glencore and Morgan Stanley.

“We are thrilled to partner with Tailwater as we embark on this exciting new chapter,” Cusick said. “Pairing Ash Creek’s deep industry knowledge, capabilities and multi-decade relationships in the renewable fuels industry with Tailwater’s experience in downstream-adjacent infrastructure creates an ideal partnership to execute our strategy.”

“Ash Creek will make an incredible addition to our portfolio and aligns well with our growth infrastructure expertise that has been developed through over a decade of investing in the downstream-adjacent infrastructure, renewable fuels, and logistics sectors,” said Edward Herring, co-founder and managing partner of Tailwater. “We are excited to partner with Ash Creek as they continue to develop meaningful solutions for renewable fuel producers.”

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EnCap’s Shawn Cumberland on the fund’s approach to clean fuels

Cumberland, a managing partner with EnCap Energy Transition, discusses how the clean fuels sector compares to the emergence of other new energy technologies, and outlines the firm’s wait-and-see approach to investment in hydrogen and other clean fuels.

EnCap Energy Transition, the energy transition-focused arm of EnCap Investments, is evaluating scores of opportunities in the hydrogen and clean fuels space but doesn’t feel the need to be an early mover if the risk economics don’t work, Managing Partner Shawn Cumberland said in an interview.

Houston-based EnCap prefers to invest in early stages and grow companies deploying proven technologies to the point that they’re ready to be passed onto another investor with much deeper pockets. There are hundreds of early-stage clean fuels companies looking for growth equity in the space, he said, but the firm believes it’s not necessary to deploy before the technology or market is ready.

Given the fund’s strategy of investing in the growth-equity stage, EnCap gains exposure to a niche set of businesses that are not yet subjected to the broader financial markets.

For example, when EnCap stood up Energy Transition Fund I, a $1.2bn growth capital vehicle, the manager piled heavily into storage, dedicating some $600m, more than half of the fund, to the sector.

“That was at a time when all we saw were some people putting some really dinky 10 MW and 20 MW projects online,” he said. “We absolutely wanted to be a first and fast mover and saw a compelling opportunity.”

The reasons for that were two converging macro factors. One was that the battery costs had come down 90% because of EV development. Meanwhile, the demand for batteries required storage to be built out rapidly at scale. So, that inflection point – in addition to the apparent dearth of investor interest in the space at the time – called for early action.

“We were sanctioning the build of these things with no IRA,” Cumberland said.

‘If it works’

To be sure, EnCap is not a technology venture capital firm and waits for technologies to be proven.

As such, the clean fuels sector could end up being a longer play for EnCap, Cumberland noted, but the fund continues to weigh whether there will be a penalty for waiting. In the meantime, regulatory issues like IRS guidance on “additionality” for green hydrogen and the impact of the EU’s rules for renewable fuels of non-biological origin should get resolved.

Still, market timing plays a role, and the EnCap portfolio includes a 2021 investment into Arbor Renewable Gas, which develops and owns facilities that convert woody biomass into low-carbon renewable gasoline and green hydrogen.

Cumberland also pointed to EnCap’s investment in wind developer Triple Oak Power, which is currently for sale via Marathon Capital. That investment was made when many industry players were moving toward solar and dropping attention to wind.

Now, clean fuels are trading at a premium because of investor interest and generous government incentives for the sector, he noted.

“Hydrogen, if it works, may be more like solar,” Cumberland said, describing the hockey-stick growth trajectory of the solar industry over 15 years. If the industry is cost-competitive without subsidies, there will be a flood of project development that requires massive funding and talented management teams

“We won’t be late to the party,” he said.

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Exclusive: Glenfarne exploring hydrogen projects on existing asset base

Glenfarne Energy Transition is advancing its flagship liquefied natural gas project, Texas LNG, and evaluating hydrogen projects on or near its existing asset base on the Gulf Coast.

The Biden administration’s pause on permits for new US liquefied natural gas facilities hasn’t hurt all unbuilt projects.

Glenfarne Energy Transition, a subsidiary of Glenfarne Group, is moving ahead with its fully permitted lower-carbon flagship LNG export facility, Texas LNG, as the project is now set up to be the only such US project to reach FID this year.

Texas LNG, a 4 million MTPA facility proposed for Brownsville, Texas, will be the lowest carbon emitting LNG facility approved in the US, largely due to its use of electric motors in refrigerated compression. 

As designed, the plant would emit .15 metric tons of CO2e per ton of LNG produced, placing it slightly lower than the much larger Freeport LNG facility, which also has electric motors and emits around .17 metric tons of CO2 per ton of LNG.

The carbon intensity measurement counts emissions at the Texas LNG plant only, and not related emissions from the electric grid, which is why Glenfarne is seeking to source power for the project from wind and solar generation in south Texas, Adam Prestidge, senior vice president at Glenfarne, said in an interview.

In fact, the lower carbon aspects of Texas LNG helps with every element of the project, Prestidge said, including conversations with European offtakers and potential debt investors.

“Having a focus on sustainability is table stakes for every conversation,” he added. “It’s the finance side, it’s the offtake side, it’s our conversations with regulatory agencies.”

LNG pause

Glenfarne is seeking to raise up to $5bn of equity and debt for the project, according to news reports, a process that could benefit from the Biden administration’s pause on issuing permits for LNG projects that export to countries without free-trade agreements with the US.

“Our confidence and our timetable for that has probably been accelerated and cemented by the fact we are fully permitted, despite the Biden LNG pause impacting the broader market,” Prestidge said.

“The market has pretty quickly recognized that if you want to invest in LNG or buy LNG from a project that’s going to FID in 2024, you really don’t have very many fully permitted options right now.”

Glenfarne’s other US LNG project, called Magnolia LNG, has not yet received the required federal approvals and is therefore on pause along with a handful of other projects.

For Magnolia, Glenfarne is proposing to use a technology for which it owns the patent: optimized single mixed refrigerant, or OSMR, which uses ammonia instead of propane for cooling, resulting in less feed gas needed to run the facility and thus about 30% lower emissions than the average gas-powered LNG facility, Prestidge said.

Hydrogen projects

Glenfarne Energy Transition last year announced the formation of its hydrogen initiative, saying that projects in Chile, Texas, and Louisiana would eventually produce 1,500 kilotons of ammonia. 

“We’ve got existing infrastructure in the US Gulf Coast, and in Chile. A lot of the infrastructure required to produce LNG is similar or can be easily adapted to the infrastructure needed to produce ammonia,” Prestidge said. “And so, we’ve looked at locating hydrogen and ammonia production at sites in or near the ports of Brownsville and Lake Charles,” where Texas LNG and Magnolia LNG are located, respectively.

“The familiarity with the sites and the infrastructure and the local elements, make those pretty good fits for us,” he added.

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TC Energy executive talks hydrogen strategy

Canadian midstream giant TC Energy recently unveiled it was pursuing 10 hydrogen projects across North America. To learn more we caught up with Omar Khayum, a vice president at the company in charge of hydrogen project development.

TC Energy is evaluating 10 blue and green hydrogen hubs across North America, viewing incumbency as a significant competitive advantage.

The company is looking to use hydrogen as a means of providing a larger basket of low-carbon solutions to customers, according to Omar Khayum, a TC Energy vice president who is in charge of hydrogen project development. That basket includes mature power generation assets like wind, solar and pumped hydro, Khayum said in an interview, as well as additional firming resources, renewable natural gas, and carbon capture.

“We have a continental platform of customers that are in oil & gas and heavy industry that are looking to decarbonize their existing feedstock,” he said.

TC Energy is partnering with end-use customers, adding capabilities into the partnerships, and sharing in both the risk and benefit of the projects, he said.

“Our incumbency really allows us to partner with end users, and identify customer solutions,” Khayum said. “That’s our business model around de-risking what is a newer form of energy solution.”

Khayum declined to specify where the 10 hydrogen projects are located, other than to say they are proximate to industrial load – existing steelmaking, power plants, chemical facilities and refineries – and are not on the Gulf Coast. TC Energy has announced one project in Alberta which involves an evaluation of its Crossfield gas storage facility and would entail generating 60 tonnes of hydrogen per day with capacity potentially increasing to up to 150 tonnes per day.

In some cases, TC Energy is partnering with the end-use customer to jointly develop the hydrogen projects, Khayum said. “We are the lead developer in most cases but we’re not managing all of the risk ourselves – we’re putting together coalitions with organizations that have upstream and downstream capabilities to make sure we de-risk effectively.”

While conducting project management, TC will use external EPC firms and OEMs to deliver projects, depending on the location and technology in use, Khayum said.

Project funding

As for funding the projects, Khayum said the business model for hydrogen looks similar to the model for liquefied natural gas projects. “We have a wide degree of flexibility in how we can finance projects,” he said, noting the availability of project financing as well as the option to fund projects from TC Energy’s balance sheet.

“We have a number of financial advisors engaged to ensure that as we develop the projects from the offtake agreements to the supply chain agreements – and everywhere in between – those contracts are bankable to provide us the optionality to use project financing,” he said.

Khayum believes that the project finance market is still about 12 months away from being ready to finance hydrogen projects. “That’s because we are one of the early movers in hydrogen development and, as such, we’ll be bringing forward to the marketplace some of the first bankable offtake and supply chain contracts along with risk management tools and activities.”

He noted there was still work to be done among underwriters to validate those contracts for bankability. “We are working over the next year to not only get our projects to FID but working in tandem with our financial advisors to enable the banking system to accommodate those transactions.”

Much of the underwriting requirements have already been well-established in LNG, he noted. “If we can manage risk in a similar fashion,” he added, “we think it will be much more expeditious to achieving a positive FID.”

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