January 20, 2022 • Paul Rodden • Season: 2022 • Episode: 83
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In episode 083, The Blackstone Group to drop $600 million in New Mexico. Fortescue to start shipping green hydrogen to Germany and JP Morgan talks long term investments on hydrogen. All of this on today’s hydrogen podcast.
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Transcript:
The Blackstone Group to drop $600 million in New Mexico Fortescue to start shipping green hydrogen to Germany and JP Morgan talks long term investments on hydrogen. All of this on today’s hydrogen podcast.
So the big questions in the energy industry today are, how is hydrogen the primary driving force behind the evolution of energy? Where is capital being deployed for hydrogen projects globally? And where are the best investment opportunities for early adopters who recognize the importance of hydrogen? I will address the critical issues and give you the information you need to deploy capital. Those are the questions that will unlock the potential of hydrogen in this podcast will give you the answers. My name is Paul Rodden and welcome to the hydrogen podcast.
In an article from the Albuquerque journal, Kevin Robinson Avila writes $600 million project puts New Mexico town at center of hydrogen debate. He writes a parade of state officials including Governor Michelle Lujan Grisham have toured the coal fired Escalante generating station near Grants since last summer to learn firsthand about industry plans to convert the facility into a hydrogen based power plant. The $600 million effort could make Escalante the nation’s first successful coal to hydrogen conversion project, elevating New Mexico and the tiny town of Prewitt, where the plant is located into a leadership role and hydrogen development in the US and beyond.
Texas based NewPoint Gas LLC and natural gas pipeline operator Tallgrass Energy plan to buy Escalante this year from the tri state generation and transmission Association, which shut down the plant in 2020. The project is well funded through the Blackstone Group, a global investment firm was $731 billion in assets under management. Blackstone owns Tallgrass Energy, and it’s looking to invest in hydrogen projects to gain a dominant role in the rapidly emerging clean hydrogen industry, which the US and other countries are aggressively pursuing to help decarbonize the global economy. This is according to Newpoint gas CEO Wiley Rhodes. He continues by saying Blackstone has enormous resources to commit to developing hydrogen including Escalante and they have big plans for New Mexico. This is a great opportunity for Prewitt and the state of New Mexico to be the first it’s something entirely new. That in turn has generated enthusiastic support from Lujan Grisham and her cabinet which is promoting a slate of new tax incentives in the legislative session that begins Tuesday to help jumpstart hydrogen development.
Now just some details about the plant. New point is working with government officials to establish co2 standards and adequate measurement systems to effectively demonstrate emission reduction this according to Rhodes, he continues by saying we believe we can produce hydrogen with tremendous reductions in carbon intensity to address environmental concerns, while also pursuing a huge opportunity to create jobs. Balancing it all out is the challenge and we’re working on it. The benefits go beyond hydrogen based electric generation, including potential to set up quote green cement production on site and sell hydrogen to natural gas utilities and long haul trucks to lower carbon emissions in transportation, and in residential and commercial energy use again according to Rhodes. Hydrogen based generation, however, remains the primary focus providing 24/7 backup power for utilities to replace coal and natural gas fired electricity.
EH2Power will install a steam methane reformer to extract hydrogen from methane and air purification system to provide purified oxygen for the SMR process and carbon capture technology to sequester the co2. The EH2Power partners originally estimated about $400 million to fully modify the plant, but the price tag is climbed to 600 million, in part because they now plan to do more things there including low carbon emissions, cement production. And doing that means installing a hydrogen kiln and upgrading the facilities coal pulverizer to mash up alternative materials. In fact, they’ll add environmental Bang to the buck by recycling retired wind turbine blades, pulverizing them for cement production. According to roads, we discovered that the aggregate material from the blades is great feedstock so we’ll bring them in by rail or truck and turn them into cement. Even if we can’t sell it in New Mexico. There’s a market for that in California. Escalante has close proximity to the southern transcontinental railway and interstate 40 will help facilitate material shipments into the plant and distribution of hydrogen products to market.
Okay, so more big hydrogen news coming out of New Mexico. And there are some key points in this article that I really want to focus in on the first being the location, the Escalante plant is in a prime location for energy generation, and has easy access to multiple feedstocks and can distribute by rail or highway. The second key takeaway to me in this are the operators and their financial support. The fact that NewPoint Gas is a part of this isn’t surprising. They’re a slam dunk company when it comes to gas treating and gas processing services. But the fact that Tallgrass energy which is a pipeline company is looking to invest in this should give others midstream operators, some ideas for how they can start getting into the hydrogen game themselves. And the best part about that is that Blackstone is backing Tallgrass.
Now, Blackstone is a massive private equity firm. So the fact that they’re investing into this project and hydrogen at large should give other investors who deem hydrogen is too risky pause. Conversely, this isn’t a slam dunk project. There is still a good sized opposition in New Mexico to any kind of hydrogen development using hydrocarbons. Now, I still believe that this project will be completed. The only question that I have is when. Next Fortescue future industries a global green energy and green industry company based in Australia and Covestro, a world leading Germany based supplier of high tech polymer materials intend to enter into a long term agreement for the supply of green hydrogen and its derivatives including green ammonia, according to a Memorandum of Understanding FFI and Covestro will formalize an agreement under which FFI will supply Covestro with the equivalent of up to 100,000 tonnes of green hydrogen per year. The arrangement will enable Covestro to reduce its greenhouse gas emissions by up to 900,000 tonnes of co2 per year by replacing grey hydrogen and its derivatives with green.
The deliveries are earmarked for three potential locations, Asia, North America and Europe and could commence by 2024 FFI and Covestro view the non binding MOU as the first step towards a broader strategic partnership to accelerate the green energy transition, particularly in energy intensive industry. FFI Chairman Dr. Andrew Forrest AO said, this is a groundbreaking collaboration which reinforces the power of green hydrogen to accelerate the decarbonisation of some of the most energy intensive industries around the world. FFI and Covestro share the belief that green hydrogen and green ammonia will play a crucial role in enabling companies to reach their climate targets and preventing runaway global warming. We look forward to working with Covestro to supply their green hydrogen needs and collaborating with Germany to enable it to become the world leader in global decarbonisation green hydrogen and ammonia.
Dr Markus Steilemann CEO of Covestro said We are delighted that FFI shares our circular economy vision and is willing to take courageous steps to foster the urgently needed market ramp up for green hydrogen. Our collaboration with FFI underlines our ambition to pioneer the transition towards a circular economy in a climate neutral production. Green hydrogen and its derivatives play a key role for the chemical industry, both as an alternative feedstock and a source of clean energy. He concludes with the transition towards green hydrogen and its derivatives will be an important step forward in our efforts to offer more sustainable products that also reduce the carbon footprint of our customer industries. Covestro uses hydrogen and its derivatives as feedstock in the production of highperformance polymers.
As a part of a broader Circular Economy strategy, Covestro committed itself to completely transition toward the use of hydrocarbon free alternative raw materials, and renewable energies. The partnership with FFI is an important milestone toward this goal. So even more news now from Fortescue, exporting of green hydrogen around the world, this time to three potential locations being North America, Asia and Europe. And what’s really amazing about that is how fast that it’s going to be starting up potentially by 2024, which we’re used to hearing timeframes of 20 and 30 years 2024 is right around the corner. And lastly, an article from proactive investors. Oliver Hail writes hydrogen remains a long term investment opportunity, says JPMorgan, as of January 2022 26 countries have national hydrogen strategies in place, of which half were launched in the past year, and many include electrolyzer capacity targets.
Hydrogen is expected to remain a long term investment opportunities it says JP Morgan, after a challenging year for alternative energy stocks. The hydrogen hype from 2020 is clearly behind us. The investment bank said in a note to clients on Monday with a tough past year not completely erasing the benefits of 20 rally, but seeing several stocks significantly underperformed the market yet JP Morgan reiterated its support for hydrogen as a long term investment opportunity due to the fact that the aspirational political momentum has not slowed down. With policy frameworks slowly but surely establishing the conditions for the emergence of a low co2 Hydrogen market. In December of 2021. The European Union published a new gas and hydrogen proposals to follow up the fit for 55 package from July. And the new proposals legislative proposals were outlined to decarbonize the EU gas market by facilitating the uptake of renewable and low carbon gases, including hydrogen, including an aim to significantly reduce natural gas use in homes and businesses.
A key element of this transition is establishing a competitive hydrogen market with dedicated infrastructure. While the United States currently lags Europe and Asia and clean hydrogen development, JP Morgan said the gap is closing helped by a positive policy landscape driving the h2 transition. Looking to Asia hydrogen proliferation is being driven by the decarbonization rhetoric, such as those heard from the APAC clean energy ecosystem, while elevated costs for green hydrogen remain a key hurdle. The endless believe economies of scale and technological advancement will make hydrogen application economical and 10 to 15 years. In the meantime, they noted that China’s still lacks a national hydrogen strategy. However, local initiatives and clusters as well as businesses are driving the momentum.
The JPMorgan analysts said they remain cautious on the European hydrogen electrolyzer original equipment manufacturers. Quote, given rapidly increasing manufacturing capacity globally, could depress industry utilizations and thus margins with a neutral rating for ITM power and continental rival Nel ASA at underweight. Okay, so JP Morgan’s assessment of the global hydrogen market. Now, obviously, there are dozens of other factors that can come into play that can affect this outlook, one of the major ones being the United States and its hydrogen Earthshot initiative. If there is a party change this year, or in 2024, will those policies still stay in place? And it’s also true that China is still a main factor in this whole thing. They don’t have a hydrogen plan, but the country is continually in the news about the projects and developments there. Now, do I believe that economies of scale and technological advancement will make green hydrogen and hydrogen in general as an application economical in 10 to 15 years? Personally, I think that’s a definite I have a feeling that in less than five years hydrogen will be economical. And it is very possible that in 15 years, green hydrogen will be economical also, this all due to economies of scale.
Alright, that’s it for me, everyone. If you have any questions, comments or concerns about today, or if you would like to let me know about something about this last global issue, come and visit me and my website at thehydrogenpodcast.com or you can always email me at info@thehydrogenpodcast.com. I would love to hear from you. And as always, take care. Stay safe. I’ll talk to you later.
Hey, this is Paul. I hope you liked this podcast. If you did and want to hear more, I’d appreciate it if you would either subscribe to this channel on YouTube, or connect with your favorite platform through my website at www.thehydrogenpodcast.com. Thanks for listening. I very much appreciate it. Have a great day.
