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Waste-to-hydrogen developer to close $100m capital raise this month

Raven SR's C-round of financing is being run by two bulge-bracket banks, and the firm has received widespread interest from private equity and corporate strategics.

Raven SR, a US waste-to-hydrogen developer, is working on a $100m capital raise that’s expected to wrap up this month, according to four sources familiar with the matter.

Raven’s C-round of financing is being run by Barclays and Bank of America. The firm has received widespread interest from private equity and corporate strategics.

Raven CEO Matt Murdock said on the sidelines of the Hydrogen Americas event in Washington D.C. that he was hoping to have the raise done by Thanksgiving.

Headquartered in Wyoming with projects in California and Spain, the company uses a steam/CO2 reforming process that transforms municipal solid waste, organic waste and methane into clean fuels.

In August, 2021, Raven closed on a $20m strategic investment from Chevron U.S.A., ITOCHU Corporation, Hyzon Motors Inc. and Ascent Hydrogen Fund. Samsung Ventures made a strategic investment earlier this year, allowing the company to expand into the Asia-Pacific market.

The company has partnered with INNIO to use its Jenbacher engines to provide renewable power and heat to Raven SR’s first waste-to-hydrogen production facility at the Republic Services West Contra Costa Sanitary Landfill in Richmond, California.

Raven SR plans to bring the plant online in the first quarter of 2023, initially processing up to 99.9 tons of organic waste per day and producing up to 2,000 metric tons per year of hydrogen.

In Aragón, Spain, Raven SR is aiming to bring a second project online in 2023 that will produce 1,600 metric tons per year of renewable hydrogen from approximately 75 tons of organic solid waste per day.

Raven SR recently announced the election of Mark Gordon of Ascent Fund and Michael Hoban of Chevron New Energies to its Board of Directors.

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Calumet subsidiary Montana Renewables inks supply and offtake agreement with Macquarie

Montana Renewables is developing a renewable hydrogen facility that will supply hydrogen to a plant producing renewable fuels.

Calumet Specialty Products Partners has closed two transactions that together fund the working capital needs of Montana Renewables LLC (MRL), including a supply and offtake agreement with Macquarie Commodities and Global Markets, according to a news release.

The Macquarie supply and offtake agreement provides inventory monetization for renewable feedstocks and products, as well as intermediation services connected with the purchase of renewable feedstocks.

Simultaneously, a $90m asset backed loan revolving credit facility was executed with Wells Fargo Bank, NA, secured by accounts receivables and open blenders tax credit refunds.

“Now that Montana Renewables has commenced operations, these transactions ensure that our working capital needs are met going forward,” said Bruce Fleming, EVP Montana Renewables. “Third party inventory financing has been in the MRL plan since day one, and we are pleased to execute on the plan as we launch operations.”

Once fully operational, Montana Renewables, based in Great Falls, Montana, will use waste feedstocks to produce low-emission alternatives that directly replace fossil fuel products including Renewable Hydrogen, Renewable Diesel (RD) and Sustainable Aviation Fuel (SAF).

Montana Renewables is developing a renewable hydrogen facility that will supply hydrogen to the plant’s hydrocracker.

In August, 2022, Warburg Pincus agreed to invest $250m in MRL in the form of a participating preferred equity security, which values MRL at a pre-commissioning enterprise value of $2.25bn. Stonebriar Commercial Finance has invested an additional $350m through a pair of sale and leaseback contracts on top of its existing $50m commitment to MRL. The sale and leaseback transactions carry an approximate 12.3% cost of capital and offer certain strategic early termination options. Concurrent with these transactions, the $300m convertible investment from Oaktree Capital Management L.P. in MRL has been retired.

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Equatic releases whitepaper on carbon dioxide removal

A fledgling company with a relationship with Boeing is marketing a process for seawater electrolysis to capture and store CO2 while producing hydrogen.

Carbon removal company Equatic has developed a process that relies on seawater electrolysis to capture and store CO2 while producing clean hydrogen, according to a news release.

A white paper written with consultation from EcoEngineers outlines Equatic’s approach to quantifying and verifying the carbon removal process.

Equatic operates two pilots in Los Angeles and Singapore. The company sells carbon removal credits and recently announced a pre-purchase option agreement with Boeing.

Under that agreement, Equatic will remove 62,000 metric tons of carbon dioxide and will deliver 2,100 metric tons of carbon-negative hydrogen to Boeing.

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Royal Caribbean testing biofuel blends in cruise ships

The cruise vacation provider is testing biofuel blends in several of its ships out of Europe.

Royal Caribbean Group, the vacation cruise provider, has completed more than 12 consecutive weeks of biofuel testing in Europe, according to a news release.

In Barcelona, Royal Caribbean International’s Symphony of the Seas became the first ship in the maritime industry to successfully test and use a biofuel blend to meet part of her fuel needs.

The company confirmed onboard technical systems met operational standards, without quality or safety concerns, demonstrating the biofuel blend is a reliable “drop in” supply of lower emission energy that ships can use to set sail.

The company began testing biofuels last year and expanded the trail this summer in Europe to two additional ships. The biofuel blends tested were produced by purifying renewable raw materials like waste oils and fats and combining them with fuel oil.

The biofuel blends tested are accredited by International Sustainability and Carbon Certification (ISCC), which verifies reductions of fuel emissions, the release states.

 

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Turnt up about turndown ratios

Optimizing electrolysis for renewables depends not just on how far you can turn the machine up, but how far you can turn it down. We asked electrolyzer makers: how low can you go?

Optimizing electrolysis for renewables depends not just on how far you can turn the machine up, but how far you can turn it down.

A consensus is growing around the importance of turndown ratios for electrolyzers, with a variety of use cases for green hydrogen requiring the machines to be run at low levels during periods of high power pricing.

Proton exchange membrane (PEM) electrolyzers are known for their ability to quickly ramp production up and down, but manufacturers of all stripes have begun to tout their technologies’ turndown ratios, with implications for capital costs and the levelized cost of producing hydrogen from renewable power.

Simply put, some electrolyzer plant operators will likely seek to lower hydrogen production during periods of high power pricing, since the cost of electricity is the largest operating expense. But cycling the electrolyzers completely off and on can lead to added system degradation, giving importance to the ability of the machines to run at low levels.

A study from the National Renewable Energy Laboratory (NREL) analyzes a US grid buildout through 2050, noting favorable locations and seasonality for power pricing as something of a guideline for green hydrogen development. The study notes that the lowest achievable turndown ratio is a main factor in minimizing hydrogen levelized cost along with the number of hours a system can operate at that minimum level – something that applies to all types of electrolyzers.

“When you start to look at hourly costs from the data in different locations, you see that all of this renewable buildout is going to create opportunities in given locations where you going to have a lot of renewable generation and not a lot of load on the system and that’s going to drive the cost for that energy down,” said Alex Badgett, an author of the study at NREL.

To be sure, the fast-moving technological environment for electrolysis leaves open the possibility for efficiency gains and disruptive innovation. And a variety of factors – balance of plant, energy efficiency, system degradation – also influence plant economics. But the lowest possible turndown ratios will drive opportunities for green hydrogen developers, Badgett said.

ReSource reviewed available spec sheets for electrolyzer providers and asked every maker of PEM and SOEC systems to detail the turndown capabilities of their machines. Alkaline electrolyzers were left out of the analysis given their more limited load flexibility, as their separators are less effective at preventing potentially dangerous cross-diffusion of gasses. Some manufacturers are fully transparent regarding turndown ranges while others declined to comment or did not reply to inquiries.

‘Not trivial’

In designing projects, developers are analyzing hourly energy supply schedules and pairing the outlook with what is known about available technology options.

“Some electrolyzers like to operate at half power, and others like to operate at full power, and in any given system, you can have between 10 and 50 electrolyzers wired and plumbed in parallel,” said Mike Grunow, who leads the Power-to-X platform at Strata Clean Energy.

“Our thought process even goes down to: let’s say you have to operate the H2 plant at 25% throughput. Do you operate all of the electrolyzers at 25%, or do you turn 75% of the electrolyzers off and only operate 25% at full power?”

The difference in the schemes, he added, is “not trivial as each technology has different efficiency curves and drivers of degradation.”

Different use cases for the hydrogen derivative, meanwhile, lead to different natural selection of technologies, Grunow said, adding that the innovation cycle is now happening every 12 months, requiring a close eye on advances in technology. 

Electrolyzer start-up Electric Hydrogen, a maker of PEM electrolyzers, is commercializing a 100 MW system that can turn down to 10%, according to Jason Mortimer, SVP of global sales at the company.

HyAxium, another start-up, can turn its system down to 10%, according to its materials. Norway-based Hystar, which recently announced plans to build a plant in the US, also promotes a 10% turndown ratio.

A more established PEM electrolyzer provider, Cummins, advertises turndown ratios of 5% for its machines. Sungrow Power, a China-based manufacturer, similarly advertises 5% for PEM electrolyzers.

Siemens Energy has a minimum turndown ratio per stack of 40%, but for a single system it can be less in exceptional cases, according to Claudia Nehring, a company spokesperson.

“We focus on large systems” – greater than 100 MW – “and currently consider this value to be appropriate, taking into account the optimization between efficiency, degradation and dynamics, but are working on an improvement,” she said via email.

ITM Power declined to provide details but said its turndown capabilities are “to be expected” for a market leader in this technology. Materials from German-based H-Tec Systems note a modulation rate down to 10%.

Additional PEM makers Nel, Ohmium, Elogen, H2B2, Hoeller Electrolyzer, Plug Power, Shanghai Electric, and Teledyne Energy Systems did not respond to requests for information.

PEM alternatives

Other forms of electrolysis can also ramp dynamically. And some project developers point to PEM’s use of iridium, part of the platinum metals family, as a drawback due to potential scarcity issues.

Verdagy, for example, has developed an advanced alkaline water electrolysis (AWE) system called eDynamic that it says takes the best of PEM and alkaline technologies while designing out the downsides.

The company’s technology “addresses the barriers that limited traditional AWE adoption by using single-element cells that can operate efficiently at high current densities,” executives said in response to emailed questions. 

“The ability to operate at very high current densities, coupled with a balance of stack and balance of plant optimized for dynamic operation, allow Verdagy’s electrolyzers to operate across a very broad range spanning 0.1-2.0 A/cm2,” they said.

In other words, the machine can turn down to 5%, part of the design that enables operators “to modulate production to take advantage of time-of-day pricing and/or fluctuations in energy production.”

Meanwhile, German-based Thysenkrupp Nucera, another maker of advanced water electrolyzers, advertises a 10% turndown ratio.

SOEC

A relatively new electrolysis technology, the solid oxide electrolyzer cell has also proven to be capable of low turndown ratios. Solid oxide electrolysis is particularly attractive when paired with high-temperature industrial processes, where heat can be captured and fed back into the high-temperature SOEC process, making it more efficient.

Joel Moser, the CEO of First Ammonia, said he chose SOEC from Denmark-based Haldor Topsoe in part because the machines can be turned completely off with no degradation, as long as you keep them warm.

“Generally speaking we expect to ramp up and ramp down between 100% and 10%,” he said. “We can turn them off as long as we keep them warm, and then we can turn them right back on.”

Still, SOEC systems are not without challenges.

“Low stack power and high operating temperature, which in turn requires more ancillary equipment to operate the electrolyzer, are widely viewed as the main drawbacks of SOEC technology,” according to a report from the Clean Air Task Force, which explores SOEC technology and its commercial prospects. “SOEC systems are also considered to have a shorter operating life due to thermal stress.”

Additional makers of SOEC machines Bloom Energy, Ceres, Elcogen, Genvia, SolydERA, and Toshiba did not respond to inquiries.

At NREL, researchers are watching for more automation and scale in the electrolyzer production process to bring costs down. Increasing efficiency through balance-of-plant improvements is another opportunity to reduce system costs.

In addition, more analysis of how large electrolyzer projects will impact the future electrical grid is required, according to Badgett.

The NREL team modeled the hourly marginal cost at any given time in any location in the US, but the model assumes that the electrolyzer takes energy without impacting the cost of energy.

“When we start to get to gigawatt-scale electrolysis,” he said, “that’s going to significantly impact prices, as well as how the grid is going to build out.”

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Exclusive: Middle market flagship fund to target e-fuels, renewables

A new $1.5bn US-focused flagship fund focused on middle market companies is in discussions with new and existing LPs now and will consider e-fuels and other sustainable molecules in its deployment.

Energy Impact Partners, the New York-based investment firm, is in discussions with new and existing LPs to raise a $1.5bn flagship fund focused on the middle market, according to two sources familiar with the matter.

The raise is being done without a financial advisor, the sources said. Once complete, it will target platforms and assets in the $40m to $50m range.

While the fund will be broadly focused on renewables, e-fuels and other sustainable fuels companies will be considered, one of the sources said.

The investment manager has invested in clean fuels via equity positions in Electric Hydrogen, Terragia and Metafuels, among others.

EIP did not respond to requests for comment.

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London-based hydrogen fund expanding in US

A UK-based investor in early-stage hydrogen companies has completely allocated its first two funds and is looking to grow its presence in the US.

AP Ventures, the London-based venture capital and private equity firm, will need new advisory relationships and offices in the US as it looks for investors and deployment opportunities there, Managing Partner Andrew Hinkly said in an interview.

The company has fully allocated its first two funds with 12 LPs, Hinkly said.

Fund 1 ($85m) is fully deployed with two of the LPs. Two realizations have come from that fund to date: the sale of United Hydrogen Group in Tennessee to Plug Power and the sale of Hyatt Hydrogen to Fortescue Future Industries.

Fund 2 ($315m) is fully allocated with 12 LPs, including the two from Fund 1. The portfolio includes 21 companies across the hydrogen value chain (ammonia for transport, liquefaction, electrolyzer production, compressor technology, etc.) at the seed, Series A and Series B stages.

“We believe we have a very differentiated set of capabilities and experiences because we are singularly focused on the hydrogen value chain,” Hinkly said.

The firm’s LPs include AngloAmerican, Equinor, Implats, Mitsubishi, Nyso Climate Investments, Pavilion Capital, Plastic Omnium, Public Investment Corporation, Sparx, Sumitomo, and Yara International.

Strategic advice need apply

In the near-term AP Ventures can offer deal flow, opportunities within portfolio companies for various professional services, and an understanding of the progression of hydrogen businesses for later-stage investors, Hinkly said.

Transactions to date have been conducted bilaterally with external legal counsel, Hinkly said. AP Ventures has yet to engage a financial advisor for that purpose.

“If you want to know about hydrogen and hydrogen deal flow, AP Ventures sees most of it,” Hinkley said. “We bring with us an ecosystem of fairly regular co-investors who are similarly interested in hydrogen.”

Co-investors include Amazon, Mitsuibishi, Chevron and Aramco.

Some of the firm’s more mature companies will take on strategic consulting services as they prepare for larger fundraising, Hinkly said.

“Clearly there are a series of advisory services that our portfolio companies require as they raise capital or subsequently look to acquire or be acquired,” he added.

Later-stage investors are keen to understand the development of AP’s portfolio, Hinkly said. Topco equity and larger-scale infrastructure investors have collaborative relationships with the firm as they prepare to acquire its portfolio companies in the future.

“We have a common interest in the continued development and maturity of the companies we’re investing in,” Hinkly said. “We have an ever-increasing roster of later-stage private equity investors who have a desire to maintain a dialog with us and to be introduced to our portfolio companies on a regular basis.”

New world opportunities

US portfolio companies could be in greater need of strategic advisory services in the near term than some of AP’s European holdings, Hinkly said.

The firm is looking to establish offices in the US with an eye on Denver and Houston, Hinkly said.

Greater support for hydrogen in the US under the IRA means European companies within AP Ventures’ portfolio are also looking to establish themselves in the US.

In terms of a target market, AP Ventures is particularly interested in Texas, which Hinkly said he expects will be the hydrogen capital of the world. Existing infrastructure, human capital and enormous wind and solar resources pair well with a willingness to build out the industry there, he said.

AP will continue investing in the full hydrogen value chain as it has been for years, identifying weak spots in the chain to strengthen the industry, Hinkly said. But moving forward, the firm would like to invest in carbon capture utilization and storage as well.

Scaling up with the industry

As the hydrogen industry grows and its portfolio companies scale, there is significant opportunity for AP Ventures to grow and provide more financing, Hinkly said.

“There is a huge requirement for capital and we are knowledgeable, very knowledgeable, of where good opportunities exist,” he said.

The nature of the firm’s early contracts gives them preferential access to those opportunities in some cases as well. Whether that would be best done directly with a new fund or partnership with a firm with complementary skills is an open question.

“That strategic question is one that’s frankly ahead of us this year.”

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