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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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Strata Clean Energy acquires green H2 potential

The acquisition of Crossover Energy Partners offers Strata proficiencies in the development of technologies like green hydrogen.

Strata Clean Energy, the North Carolina-based clean energy generation and storage developer, has acquired Phoenix-based Crossover Energy Partners, according to a press release.

Crossover offers Strata customer origination and power offtake competencies and proficiencies in the development of new technologies like green hydrogen. The company develops end-to-end energy transition products for utilities and large energy users.

The combining of these platforms grows Strata’s development pipeline to more than 15 GW.

Strata is purchasing 100% of Crossover’s assets and interest in its development platform. CEO Sabino Dias and President Michael Grunow will take on senior roles within Strata, and all Crossover employees will merge with the Strata platform.

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Fortescue buys Phoenix hydrogen project for $24m

FFI has invested $24m to acquire the Phoenix Hydrogen Hub from an affiliate of Nikola.

Fortescue Future Industries (FFI) has made its first major move in the United States following the passage of the Inflation Reduction Act, investing $24m to acquire a 100% interest in Phoenix Hydrogen Hub, LLC (PHH), according to a news release.

FFI is acquiring PHH from an affiliate of Nikola Corporation.

PHH is developing a proposed green hydrogen project located near Phoenix, in the city of Buckeye, Arizona. Phase One of the PHH project is planned to be an 80 MW electrolyzer and liquefaction facility, capable of producing up to 12,000 tonnes of liquified green hydrogen annually, which can displace the equivalent of 10 million gallons of diesel consumption per year. The PHH project has further capacity to scale up production to help meet future demand.

FFI CEO Mark Hutchinson said FFI’s investment in the PHH has the potential to create hundreds of jobs. First production of green hydrogen from the PHH project is expected by the middle of this decade.

“FFI is actively expanding its U.S. presence and strengthening its position as a leading global developer of green energy production and technology,” Mr Hutchinson said.

“This investment by FFI will greatly strengthen one of the country’s first and most important hydrogen ecosystems and it is a significant milestone in creating the all-important local connective infrastructure to accelerate the use of green hydrogen,” he added in the news release.

Nikola provides zero-emissions transportation and energy supply and infrastructure solutions.

Nikola, whose trucks are manufactured in Coolidge, Arizona, will be a potential customer of liquified green hydrogen from the hub to support the deployment of its heavy-duty, zero-emission hydrogen fuel cell electric vehicles and hydrogen refuelling stations in California and the U.S. Southwest.

“Nikola’s priority is to see more zero-emission trucks on the road and this investment by FFI will greatly strengthen one of the country’s first and most important hydrogen hubs,” said Nikola Corporation President and CEO, Michael Lohscheller.

The large-scale deployment of hydrogen as a zero-emission fuel into the transportation sector is expected to benefit not only from the hydrogen tax credit in the Inflation Reduction Act, but also state level incentives such as the Low Carbon Fuel Standard in California.

Buckeye Mayor, Eric Osborn said: “Buckeye is committed to attracting clean energy businesses to the city, especially near the Sustainable Valley area. This facility adds to our ‘green’ portfolio making Buckeye the perfect location for similar technologies to expand and grow in our community.”

Sandra Watson, President and CEO of the Arizona Commerce Authority, said: “FFI’s investment further establishes Arizona as a national hydrogen leader. FFI will advance Arizona’s efforts to create a clean hydrogen ecosystem and build upon initiatives among industry and academia, including the Southwest Clean Hydrogen Innovation Network (SHINe), which is focused on developing a Southwest clean hydrogen hub.

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Williams and Daroga sign MoU to find offtake options

The companies will identify long-term end-use customers for clean hydrogen and offtake options for environmental attributes generated by hydrogen production in Wyoming.

Williams has signed a memorandum of understanding (MOU) with Daroga Power to identify long-term end-use customers for clean hydrogen and offtake options for environmental attributes generated by hydrogen production in Wyoming.

Williams plans to leverage its nationwide assets for the blending, storage and transportation of clean hydrogen to local and regional markets, including the Pacific Northwest via the company’s 4,000-mile bi-directional Northwest Pipeline transmission system that passes through Wyoming.

Deliveries of hydrogen could begin as soon as 2025.

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NanoScent seeking new investor to complete blended funding round

NanoScent is seeking a new investor to satisfy the contingencies of a combined EUR 8m investment from existing investors and the European Innovation Council.

NanoScent, an Israel-based technology firm, is seeking a new investor to help solidify an equity investment from the European Innovation Council, CEO Oren Gavriely said in an interview.

To satisfy the contingencies of a combined EUR 8m investment from existing investors and the EIC, NanoScent must bring on a new investor at EUR 2m, Gavriely said.

The ideal investor will have complementary capabilities that can ramp up the revenue stream, Gavriely added. Producers and suppliers of gasses and chemicals for industrial use would make sense.

The money will be used to further develop the proprietary VOCID Purity in-line sensor controller, which measures hydrogen quality by monitoring the cleanliness of gas lines. The technology is oriented towards producers and end-users like fuel cell stations, who will be responsible for the integrity of the hydrogen. The product will be rolled out at the end of 1Q23.

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NanoScent has 20 employees, Gavriely said. So far the company has relied on the expertise of its board, which includes one former investment banker, for financial advisory services. That could change in the future as the company grows.

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Carbon credit project developer planning equity raise

A Texas-based carbon credit firm is preparing to sell credits from its first project in the US southeast and planning its first equity raise in 2024.

Sky Harvest Carbon, the Dallas-based carbon credit project developer, is preparing to sell credits from its first project, roughly 30,000 acres of forest in the southeastern US, while looking toward its first equity raise in 2024, CEO and founder Will Clayton said in an interview.

In late 2024 the company will seek to raise between $5m and $10m in topco equity, depending on the outcome of grant applications, Clayton said. The company is represented by Scott Douglass & McConnico in Austin, Texas and does not have a relationship with a financial advisor.

Sky Harvest considers itself a project developer, using existing liquidity to pay landowners on the backend for timber rights, then selling credits based on the volume and age of the trees for $20 to $50 per credit (standardized as 1 mtpy of carbon).

The company will sell some 45,000 credits from its pilot project — comprised of acreage across Virginia, North Carolina, Louisiana and Mississippi – in 2024, Clayton said. The project involves 20 landowners.

Clayton, formerly chief of staff at North Carolina-based renewables and P2X developer Strata Clean Energy, owns a controlling stake in Sky Harvest Carbon. He said he’s self-funded operations to date, in part with private debt. The company is also applying for a multi-million-dollar grant based on working with small and underrepresented landowners.

“There’s a wall of demand… that’s coming against a supply constraint,” Clayton said of companies wanting to buy credits to meet carbon reduction goals.

Sky Harvest would be interested in working with companies wanting to secure supply or credits before price spikes, or investors wanting to acquire the credits as an asset prior to price spikes, Clayton said.

“Anybody who wants to go long on carbon, either as an investment thesis or for the climate benefits to offset operational footprint, it’s a great way to do it by locking supply at a low cost,” he said.

A novel approach to credit definition

Carbon credits on the open market vary widely in verifications standards and price; they can cost anywhere from $1 to $2,000.

“There’s a long process for all the measurements and verifications,” Clayton said.

There are many forestry carbon developers paying landowners for environmental benefits and selling those credits. Where Sky Harvest is unique is its attempt to redefine the carbon credit, Clayton said.

The typical definition of 1 mtpy of CO2 is problematic, as it does not gauge for duration of storage, he said. Carbon emitted into the atmosphere can stay there indefinitely.

“If you’re storing carbon for 10, 20, 30 years, the scales don’t balance,” Clayton said. “That equation breaks and it’s not truly an offset.”

Sky Harvest is quantifying the value of carbon over time by equating volume with duration, Clayton said.

“If you have one ton of carbon dioxide going into the atmosphere forever on one side of the scale, you need multiple tons of carbon dioxide stored on the other side of the scale if it’s for any time period other than forever,” he said, noting that credit providers often cannot guarantee that the protected trees will never be harvested. Sky Harvest inputs more than 1 ton per credit, measured in periods of five years guaranteed storage at a time. “We compensate for the fact that it’s not going to be stored there forever.”

Monitoring protected land is expensive and often difficult to sustain. Carbon markets work much like conservation easements, but those easements often lose effect over time as oversight diminishes (typically because of staffing or funding shortages at the often nonprofit groups charged with monitoring).

“That doesn’t work in any other industry with real physical commodities,” Clayton said. “The way every other industry works is you pay a fund delivery. That’s our measure-as-you-go approach.”

A similar methodology has been put forward by the United Nations and has been adopted in Quebec, Clayton said.

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California biomass-to-hydrogen firm in Series A

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Mote Inc. is aiming to finish a Series A round, raising between $12m and $15m, by the end of the year, CEO Joshuah Stolaroff said in an interview.

The company does not have a relationship with a financial advisor and has been conducting the raise in-house, he said. Moving forward the company will need a financial advisor.

The Series A will provide some 18 months of technology development runway, plus engineering and design on the first project in Bakersfield, Kern County. That will require some $800m in debt and project equity to start in the next year.

A second project in Sacramento is in the pre-Feed stage. That development is the subject of a recently secured grant from the Sacramento Municipal Utility District.

“We need big partners to do it on any meaningful scale,” Stolaroff said of biomass-to-hydrogen. Investors tend to be technology VCs with little or no knowledge of project finance, and infra funds looking for no-risk projects. “We fall somewhere in between.”

Part of the Arches H2 hub in California, Mote has ambitions to expand to other areas of the US with good biomass supply and CO2 storage, like the southeast and Gulf Coast, Stolaroff said. The company would also like to expand internationally.

“We are a great deal right now,” he said of the Series A,” adding that a Series B or project equity round will follow shortly.

Majority equity is held by the company’s six employees, Stolaroff said. There are also seed investors that hold equity.

Abundant feedstock and a growing offtake market

Mote’s three primary feedstocks are agricultural and forestry reside and urban green waste. California produces some 45m tons of it per year and the number nationwide is about half-a-billion, Stolaroff said.

Mote is confident for demand from hydrogen customers, Stoaroff said. Transportation is expected to be a strong demand source by the time Mote is operational. The Arches hub also has connections with municipal users, filling stations and the ports of LA and Long Beach.

“We are all planning for growth,” he said.

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