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Strata Clean Energy launches P2X platform

Strata’s initial projects will produce ammonia derived from renewable energy, while future projects will focus on alternative e-fuels.

Strata Clean Energy, a renewable energy developer, is building a Power-to-X (P2X) development and technology platform to decarbonize segments of the modern economy where direct electrification is not viable, according to a news release.

The P2X platform leverages the firm’s state-of-the-art, hourly-matched, renewable energy supply solutions to produce low-carbon hydrogen derivatives (ammonia, e-methane, and SAF) critical to the hardest-to-abate industrial, agricultural, and ocean freight and aviation markets.

“Strata will transform non-dispatchable clean energy into carbon-free alternatives for the modern industrial economy. Our structured power products and merchant BESS development track record underpin our differentiated approach to serving large loads which require hourly matched renewable energy supply,” said Mike Grunow, EVP & general manager, P2X, Strata Clean Energy. “For the past 12 months, we have been actively siting projects in ideal locations for logistics, water rights, permitting, energy cost, and grid interconnection. Our team is quickly advancing site engineering with Tier 1 partners, and we are accelerating talks with long-term buyers of the low-carbon intensity commodities. We are going to make this a reality.”

Strata’s initial projects will produce ammonia derived from renewable energy, while future projects will focus on alternative e-fuels that can reduce greenhouse gas emissions where no other alternative exists. As a 1:1 replacement for natural-gas-derived ammonia, low-carbon-intensity ammonia can be the workhorse of the zero-carbon economy as it lowers the shipment cost of green hydrogen by a factor of 30.

“For the past 15 years, Strata has been instrumental in bringing over 270 utility-scale solar and storage projects online,” commented Markus Wilhelm, Strata’s CEO. “In the coming decade, regional grids will be loaded with unscheduled wind and solar. Converting a fraction of this generation into zero-carbon, alternative fuels is the next step in the global energy transition to a net-zero future.”

In the fourth quarter of 2022, Strata P2X began recruiting a dedicated team of experts from the petrochemical and utility sectors to play critical roles in advancing the company’s ambitious goals. Among the new hires is KJ Plank, Chief Innovation Officer, who is building out the technology, engineering, energy, and procurement teams within P2X at Strata.

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Biden admin grants $4bn tax credits for 100 energy projects

The administration allocated $2.7bn in tax credits to clean energy manufacturing and recycling; $800m to critical materials recycling, processing, and refining; and $500m to industrial decarbonization.

The U.S. Department of Energy (DOE), the U.S. Department of Treasury, and the Internal Revenue Service (IRS) today announced $4 billion in tax credits for over 100 projects across 35 states to accelerate domestic clean energy manufacturing and reduce greenhouse gas emissions at industrial facilities.

Projects selected for tax credits under the Qualifying Advanced Energy Project Tax Credit (48C), funded by President Biden’s Inflation Reduction Act, span across large, medium, and small businesses and state and local governments, all of which must meet prevailing wage and apprenticeship requirements to receive a 30% investment tax credit. Of the $4 billion tax credits, $1.5 billion supports projects in historic energy communities.

The agencies did not release a full list of the projects awarded tax credits, citing prohibitions in the law. But a news release gave this overview:

Clean energy manufacturing and recycling: $2.7 billion in tax credits (67% of round 1 tax credits)

  • Selected from applications requesting support for the buildout of U.S. manufacturing capabilities critical for clean energy deployment and span clean hydrogen (e.g., electrolyzers, fuel cells, and subcomponents), grid (e.g., cables, conductors, transformers, and energy storage), electric vehicles (e.g., battery components, power electronics), nuclear power, solar PV, and wind energy (including offshore wind components), among other industries and components critical to supporting secure and resilient domestic clean energy supply chains.

Critical materials recycling, processing, and refining: $800 million in tax credits (20% of round 1 tax credits)

  • Selected projects are investing in multiple electrical steel applications, lithium-ion battery recycling, and rare earth projects, all critical areas for maintaining a secure, reliable energy system and advancing the clean energy transition.

Industrial decarbonization: $500 million in tax credits (13% of round 1 tax credits)

  • Selected projects would implement decarbonization measures across diverse sectors, including chemicals, food and beverage, pulp and paper, biofuels, glass, ceramics, iron and steel, automotive manufacturing, and building materials. Low-carbon fuels, feedstocks, and energy sources are well-represented as a solution for decarbonization across these projects.
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Exclusive: Ontario power producer takes FID on green hydrogen project

An Ontario power producer has taken a final investment decision on the province’s largest green hydrogen project to date.

Ontario Power Generation subsidiary Atura Power has taken a final investment decision on its hydro-powered Niagara Hydrogen Center, a 20 MW green hydrogen project in Niagara Falls, Ontario.

Construction on the 2,000-tonnes-per-year project is slated to commence early this year, with operations expected for 2025, company spokesperson Darius Sokal confirmed in an email.

The Ontario provincial government provided CAD 4.1m to support blending of the project’s hydrogen with natural gas to produce electricity at the Halton Hills Generating Station. The total cost of the blending demonstration effort is CAD 12.6m, according to documentation.

The province also supported the project by providing an exemption from the Gross Revenue Charge from 2024 to 2033 for electricity generated at the Sir Adam Beck Generating Station used specifically for hydrogen production under prescribed conditions. 

Additional financial terms were not immediately available.

In addition to natural gas blending, hydrogen from the project will go into Ontario’s wider fuels ecosystem. “We are looking forward to being able to provide alternative energy for vehicles such as Class-A trucks, regional transit authorities, forklifts, medium duty vehicles, etc.,” Kelly Grieves, director of hydrogen business, told The Niagara Independent.

Cummins is supplying four 5 MW electrolyzers to the project, built at the OEM’s Mississauga, Ontario facility.

CEM Engineering and Sacré-Davey Engineering were selected as Owner’s Engineering Representative for the design, permitting, and equipment selection of the project.

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Plug Power and Fortescue evaluating hydrogen co-investment opportunities in North America

Plug and Fortescue have started the initial diligence process for Fortescue to take up to a 40% equity stake in Plug’s Texas hydrogen plant and for Plug to take up to a 25% equity stake in Fortescue’s proposed Phoenix hydrogen plant.

Plug Power, a provider of hydrogen solutions for the green hydrogen economy, is currently the preferred supplier of 550 MW electrolyzers to Fortescue, a global green energy and metals company, for Fortescue’s proposed Gibson Island Project, according to a news release.

Fortescue and Plug have signed a Memorandum of Understanding (MOU) to evaluate the potential supply of a range of capital equipment including electrolyzers, liquefiers, tanker trailers and stationary storage tanks for green hydrogen production projects in North America, including Fortescue’s proposed Phoenix hydrogen plant (30 metric tons per day (MTPD) phase 1; 120 MTPD phase 2). Both parties are also looking to collaborate on additional large projects on a global basis.

Under the terms of the MOU, Plug and Fortescue will also evaluate co-investment opportunities in green hydrogen production projects in North America. Plug and Fortescue have started the initial diligence process for Fortescue to take up to a 40% equity stake in Plug’s Texas hydrogen plant (45 MTPD) and for Plug to take up to a 25% equity stake in Fortescue’s proposed Phoenix hydrogen plant.

The proposed 550 MW (megawatt) PEM (proton-exchange membrane) electrolyzer supply contract for Fortescue’s green hydrogen production Gibson Island Project in Brisbane, Queensland, Australia, is subject to final negotiations and approvals and Fortescue’s final investment decision (FID) on that project. An FID is expected by the end of December 2023. Once operational, the plant is expected to produce approximately 385,000 [metric] tons of green ammonia a year from the green hydrogen produced onsite through the 550 MW hydrogen electrolysis facility.

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Caliche CEO talks hydrogen and CO2 storage expansion

Following the acquisition of assets in Texas and California, Caliche Development Partners CEO Dave Marchese discusses opportunities for growth in the hydrogen and C02 storage market.

Caliche Development Partners II has made a pair of acquisitions with the aim of expanding into growing hydrogen and CO2 storage markets in Texas and California, CEO Dave Marchese said in an interview.

The company, which is backed by Orion Infrastructure Capital and GCM Grosvenor, this week announced the purchase of Golden Triangle Storage, in Beaumont, Texas; and the anticipated acquisition of Central Valley Gas Storage, in Northern California – two regions with increasing demand for storage to support variable power loads, natural gas liquefaction, and high penetrations of renewable resources.

Caliche and seller Southern Company did not use financial advisors for the transaction. Caliche used Willkie Farr as its law firm for the financing and the transactions.

Marchese, who has a private equity background and first worked on a successful investment in a fuel cell company in the year 2000, has also racked up years of experience investing in and operating underground storage assets. The Caliche team developed and sold a natural gas liquids and helium storage business – called Coastal Caverns – earlier this year.

“We know how to put things underground and keep them there, including very small molecules, and we have relationships with many of the customers that are using hydrogen today,” he said.

Roughly a third of the industrial CO2 emissions on the Gulf Coast come from the Golden Triangle area, a region in Southeast Texas between the cities of Beaumont, Port Arthur, and Orange. Much of this CO2 comes from the steam methane reformers that are within 15 miles of Caliche’s newly acquired Golden Triangle asset, Marchese said. The site is in similar proximity to pipelines operated by the air companies – Air Products, Air Liquide, and Praxair – that run from Corpus Christi to New Orleans.

“We’re within 15 miles of 90% of the hydrogen that’s flowing in this country today,” he added. “Pipeline systems need a bulk storage piece to balance flows. We can provide storage for an SMR’s natural gas, storage for its hydrogen, and we can take away captured CO2 if the plant is blue.”

The Golden Triangle site, which sits on the Spindletop salt dome, has room and permits for nine caverns total, with two currently in natural gas service. Three of those caverns are permitted for underground gas storage. “We could start a hydrogen well tomorrow if we had a customer for it,” Marchese said.

The Central Valley assets in Northern California are also positioned for expansion, under the belief that the California market will need natural gas storage for some time to support the integration of renewables onto the grid, he said. Additionally, the assets have all of the safety, monitoring and verification tools for sequestration-type operations, he added, making it a good location to start exploring CO2 sequestration in California. “We think it’s an expansion opportunity,” he said.

“Being an operator in the natural gas market allows us to enter those other markets with a large initial capital investments already covered by cash flowing business, so it allows us to explore incrementally the hydrogen and CO2 businesses rather than having to be a new entrant and invest in all the things you need to stand up an operation.”

Caliche spent $186m to acquire the two assets, following a $268m commitment from Orion and GCM. The balance of the financial commitment will support expansion.

“We’re capitalized such that we have the money to permit, build, and operate wells for potential CO2 sequestration customers,” he said. “The relationship with these stable, large investors also meets the needs of expansion projects: if somebody wanted not only a hydrogen well but compressors as well, we have access to additional capital for underwritten projects to put those into service.”

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Exclusive: Monarch Energy targeting green hydrogen FID in 2024

Monarch is moving forward with several green hydrogen projects in the Gulf Coast region, most notably a 500 MW project near Beaumont, Texas and a 300 MW project near Geismar, Louisiana.

Green hydrogen developer Monarch Energy aims to take its first final investment decision as soon as next year, CEO Ben Alingh said in an interview.

Monarch is moving forward with several green hydrogen projects in the Gulf Coast region, most notably a 500 MW project near Beaumont, Texas and a 300 MW project near Geismar, Louisiana.

Alingh said the company is seeking to advance the projects to FID by late 2024 and early 2025. Monarch has not engaged a project finance banker yet, he said.

The company recently announced a $25m preferred equity investment and $400m project equity commitment from LS Power.

The proceeds of the preferred equity raise will fund pre-FID aspects of Monarch’s 4.5 GW green hydrogen development platform: overhead, project development, interconnection, land, permitting, and engineering.

The $400m commitment, meanwhile, is earmarked for project equity investments in Monarch’s pipeline of projects. Under the arrangement, the projects will be dropped into a new entity, Clean Hydrogen Fuels, LLC, where LS Power provides the capital and Monarch provides the project, Alingh said.

“On a project-by-project basis the projects will be transferred to Clean Hydrogen Fuels if they are selected,” he said. The Clean Hydrogen Fuels entity is jointly owned by Monarch and LS Power.

Monarch did not use a financial advisor for the capital raise. Clean Energy Counsel served as Monarch’s law firm.

For both the Beaumont and Geismar facilities, Monarch has signed MoUs with Entergy to supply long-term renewable power. Monarch is engaged with industrial users of hydrogen in each location as potential offtakers. It plans to deliver hydrogen via local Monarch-developed hydrogen pipelines that it is developing with EPC partners, he said.

“We endeavor to be as close to our end user as possible with our electrolyzer project, to limit development and execution risk on delivery,” he said. For the volumes of Monarch’s projects, trucking solutions are not on the table, he said, as it would simply require too many trucks.

The company has additional production facilities under development in Freeport, Texas, as well as four other locations in Texas, according to the ReSource project database.

Monarch is also interested in end markets for hydrogen derivatives like methanol and ammonia, but Alingh notes that every project “starts with one core focus, and that is making the cheapest green hydrogen possible.”

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Government money still top of mind for early movers in US hydrogen

Gaining access to funding from government and other agency sources is top of mind for many developers seeking to de-risk their projects and reach FID. But only hydrogen, ammonia, and other clean fuels projects exhibiting “the best in the business” are garnering support from government financing agencies and commercial lenders, experts say.

The US Department of Energy came out this week with the news that it was not yet ready to release the long-awaited winners of its $8bn hydrogen hubs funding opportunity, as Secretary of Energy Jennifer Granholm noted Monday at the Hydrogen Americas Summit in Washington, DC.

The delay disappointed many in the industry, who are also waiting for crucial guidance from the IRS on rules for clean hydrogen tax credits.

Gaining access to funding from government and other agency sources is top of mind for many developers seeking to de-risk their projects and reach FID. But only hydrogen, ammonia, and other clean fuels projects exhibiting “the best in the business” are garnering support from government financing agencies and commercial lenders.

Speakers on a financing panel at the summit yesterday pointed to the successful FID of the Air Products-backed NEOM green hydrogen project in Saudi Arabia as an effective project finance model, where major sponsors working together helped to de-risk the proposal and attract support from export credit agencies and global banks.

In the US, large players like ExxonMobil (Hydrogen Liftoff Hub), NextEra (Southeast Hydrogen Network), and Chevron (ACES Delta) have applied for DOE hydrogen hubs funding, according to the results of a FOIA request, joining major utilities and other oil and gas companies like bp and Linde in the running for funds.

In addition to inadequate regulatory guidance, some developers have already started grumbling that the proposed government assistance will not be enough to meet the scale of decarbonization needs. And the nascent clean fuels project finance market still needs to sift through techno-economic challenges in order to reach its potential, according to comments made yesterday on a panel called Financing Clean Hydrogen.

Leopoldo Gomez, a vice president of global infrastructure finance at Citi, sees a big role for the project finance framework for hydrogen facilities undertaken by independent project developers as well as strategics looking to strike the appropriate risk allocation for new projects.

And Michael Mudd, a director on BofA’s global sustainable finance team, said hydrogen projects are similar in many ways to established facilities like power and LNG, but with additional complexities, like understanding the impact of intermittent power and how to appropriately scale technologies.

Credibility

This year, Pennsylvania-based Air Products along with ACWA Power and NEOM Company finalized and signed an $8.5bn financing agreement for NEOM the project, which will build 4 GW of renewables powering production of up to 600 tons per day of hydrogen. The National Development Fund and the Saudi Industrial Development Fund kicked in a total of $2.75bn for the project, with the balance covered by a consortium of 23 global lenders.

“It is very important from the financing side to make sure the parties that are at the table are the best in the business, and that’s what we’re seeing with the projects that are able to receive either commitments from the DOE Loan Programs office or from commercial lenders and export credit agencies,” Gomez said.

Highly credible engineering firms are also critical to advance projects, and the EPCs themselves might still need to get comfortable integrating new technologies that add more complexity to projects when compared to power generation or LNG projects.

“The bottom line is that having someone that’s very credible to execute a complex project that involves electrolyzers or carbon capture or new renewable power generation within the parameters of the transaction” is critical for providing risk mitigation for the benefit of investors, Gomez added.

Funding sources

Additional funding sources are intended to be made available for clean fuels projects as part of the Inflation Reduction Act, the panelists said.

Most notably, tax credit transferability and the credits in section 45Q for carbon capture and sequestration and 45V for clean hydrogen are available on a long-term basis and as a direct-pay option, which would open up cash flows for developers.

“If you can use [tax credit transfers] as a contract, you can essentially monetize the tax credits in the form of debt and equity,” Mudd said. And if a highly rated corporate entity is the counterparty on the tax transfer, he added, the corporate rating of the buyer can be used to leverage the project for developers that don’t have the tax capacity.

Still, section 45V is potentially the most complex tax credit the market has ever seen, requiring a multi-layer analysis, according to Gomez, who advised patience among developers as prospective lenders evaluate the potential revenue streams from the tax credit market.

“First and foremost we’ll be looking at cash flows driven by the offtake contract, but it will be highly likely that lenders can take a view on […] underwriting 10 years of 45V at a given amount,” Gomez added.

Crucial guidance on how to conduct a lifecycle emissions analysis is still outstanding, however, making it difficult to bring all project parties to the table, according to Shannon Angielski, a principal at law and government relations firm Van Ness Feldman.

“It’s going to hinge on how the lifecycle analyses are conducted and how you have some transparency across states and borders” regarding the potential for a green premium on clean hydrogen, she added.

Agency support

In Canada, the Varennes Carbon Recycling plant in Quebec has received CAD 770m of provincial and federal support, primarily from the Canada Infrastructure Bank and the province of Quebec, noted Amendeep Garcha of Natural Resources Canada.

Around CAD 500m of funding from the Canada Infrastructure bank is also going to support hydrogen refueling infrastructure, Garcha said, with the aim of establishing a hydrogen highway that will form the basis of the hydrogen ecosystem in Quebec.

Pierre Audinet, lead energy specialist from World Bank Group, noted how the international development agency was stepping in to provide support for projects that might otherwise not get off the ground.

“In the world where I work, we face a lot of scarcity of capital,” he noted, adding that the World Bank has backed the implementation of clean fuels policies in India with a $1.5bn loan.

Additionally, the World Bank has supported a $150m project in Chile, providing insurance and capital for a financing facility that will reduce the costs of electrolyzers. Chile, while it benefits from sun and wind resources, said Audinet, is less competitive when it comes to transportation given its geographic location.

The agency is also working to help the local government in the Northeastern Brazil port of Pecem. Shared infrastructure at the port will help reduce risks for investors who have taken a stake in the port facilities, Audinet said.

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