JANUARY 24, 2024

Greetings from the Amtrak. It’s Bill Spindle, on my way to have a look at the Commonwealth Fusion Systems facility being built in Devens, Massachusetts — but that’s for a future newsletter.

In today’s edition, Amena uses Cipher’s Cleantech Tracker to examine hydrogen projects in the United States, particularly Texas and Louisiana. I take a look at Virtual Power Plants and the big year ahead for them in 2024. And Anca checks in on how the European Union is doing with renewables so far this year.

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Send your energy photos, story tips and more to news@ciphernews.com.

Illustration by Nadya Nickels and Samson Awosan.

Everything is bigger in Texas, including the hydrogen

BY: AMENA H. SAIYID

In a few years’ time, a renewable hydrogen facility spanning 300 acres — about twice the size of Disneyland — is set to begin operating in Texas’ Matagorda County along the Gulf of Mexico.

Planned by international clean energy company HIF Global, the mega-scale project is estimated to cost more than $6 billion. Once it’s up and running, the plant will produce a projected 300,000 metric tons of hydrogen a year to make a cleaner burning, close to carbon neutral shipping fuel known as eMethanol.

It is the second largest clean hydrogen project announced in the United States, according to Cipher’s new Cleantech Tracker. Only a $6.6 billion project from ExxonMobil that aims to produce hydrogen from natural gas with carbon capture and storage near Houston is larger.

In fact, Texas is the site of nearly half of the nation’s largest such projects exceeding $1 billion in investments, Cipher’s tracker finds. When combined with investments in Louisiana, the two states are responsible for about 75% of the total announced spending in this emerging technology.

President Biden’s administration has pledged to produce 50 million metric tons of clean hydrogen by 2050, five times the amount of hydrogen produced currently in the U.S. by unabated oil and gas. Proponents are aiming for clean hydrogen to replace fossil fuels in industries like steel manufacturing and heavy-duty transportation.

Investment in clean hydrogen surged in 2022 and was on track to do the same in 2023 following federal support in the form of subsidies and grants for the nascent industry in the 2021 Infrastructure Investment and Jobs Act and the Inflation Reduction Act.

Expect this trend to continue after the Biden administration finalizes its rules for which projects will receive the most valuable tax credits from the IRA. Although in the short term, experts say some projects could be shelved due to the strictness of the draft rules, released last month.

The clean hydrogen economy is attracting investors in Texas for a lot of the same reasons the state has been ground zero for all types of energy before it. The state is the top producer of oil and gas in the U.S. and is second only to California at adding energy storage and wind and solar energy.

Texas, along with neighboring Louisiana, already has dedicated infrastructure for producing hydrogen from fossil fuels that can provide the backbone upon which to build a clean version of the industry, experts said.

“No other region has this advantage,” Ken Medlock, senior director of the Center for Energy Studies at Rice University’s Baker Institute of Public Policy, told Cipher in an email.

The region has large tracts of land to spare for new wind and solar farms, relatively easy permitting processes, a large skilled labor force, proximity to energy intensive industries that can use clean hydrogen, an established network of hydrogen pipelines and three of the largest ports in the nation, said Mona Dajani, global co-head of the energy, infrastructure and hydrogen practices at the law firm Baker Botts.

A group of companies also won $1.2 billion in federal funds as part of the 2021 infrastructure law to develop a hub on Texas’ Gulf Coast of hydrogen producers and consumers to further accelerate the use of this clean molecule.

Despite the high-dollar investments, developing a clean hydrogen economy in Texas will be “a plus, but not a great plus” to the state’s overall economic growth because making hydrogen is very similar to what industries there have been doing for a very long time, said Ed Hirs, an economist and energy fellow with the University of Houston.

Making clean hydrogen — either from splitting water with renewable energy or from natural gas equipped with carbon capture and storage — is drawing the lion’s share of investment among emerging technologies aimed at cleaning up the economic sectors considered hardest to decarbonize, according to Cipher’s tracker.

Read the full article on Cipher’s website.

Lunchtime Reads and Hot Takes

Danish Investors Sketch Idea for $160 Billion Offshore ‘Energy Islands’ — Bloomberg
Anca’s take: The article touches on the challenges that come with building these island projects and how to transport the power back to shore. We also wrote about this issue last year!

Reading, Writing, Math… and Climate Change? — The New York Times
Jillian’s take: This article covers an effort in New York to incorporate climate change into school curriculums. More training for teachers on climate and energy topics would help them feel more comfortable integrating these ideas into their lessons.

Exxon files lawsuit against investors’ climate proposal — Reuters
Anca’s take: The investors want Exxon to set Scope 3 targets (to reduce emissions produced by users of its products). Exxon is the only one among the five Western oil majors that does not have such targets.

What’s next for the committee-passed carbon tariff bill? — E&E News (paywall)
Amena’s take: The committee vote not only indicates GOP support for a Senate vote, but I think it also lays the groundwork for the passage of two other bills seeking border carbon taxes on imports.

How Texas’ power grid weathered the latest freeze — Axios
Jillian’s take: Renewables and batteries have helped make the Texas grid more resilient following a deadly winter storm in 2021. But the work to protect the grid from extreme temperatures is far from over.

You Switched the Lights On. Traders Made Billions of Dollars. — Bloomberg
Bill’s take: A small group of little-known companies in rural Denmark are revolutionizing the way electricity is traded in Europe. An intriguing look at how ever more renewables — combined with state-of-the-art financial markets technology — have led to radical changes in the way electricity is bought and sold on the continent.

John Kerry’s America First climate legacy — POLITICO
Anca’s take: The article argues Kerry sought to paper over the political shortcomings of the biggest carbon polluter in history, while telling the world to do more to cut carbon.

South African City Built on Coal Confronts an Uncertain Future — Bloomberg
Amena’s take: No question, Secunda faces economic headwinds. But this story doesn't mention whether this town will be able to tap into the $8.5 billion pledged to South Africa to wean the country off coal.

Global coal exports and power generation hit new highs in 2023 — Reuters
Bill’s take: Coal use might peak globally before 2030, but the decline will be slow, if it comes at all, without cheap funding for developing countries to replace it — a critical challenge for the world this year.

For truckers driving EVs, there’s no going back — The Washington Post
Jillian’s take: Truckers driving relatively short distances are loving electric vehicles, but charging and range are still issues for longer haul trucking. Some companies are also having a hard time finding qualified technicians that can service their vehicles.

More of what we're reading:

• Nuclear power generation to reach record high next year, IEA forecasts — The Financial Times

• China Goes All In on Green Industry to Jolt Ailing Economy — The Wall Street Journal
• Supreme Court appears ready to erode Chevron doctrine — E&E News (paywall)

After centuries worrying about energy supply, the world turns its attention to demand

Illustration by Samson Awosan.

BY: BILL SPINDLE

Modern energy systems have long focused on supply — essentially how to generate enough energy exactly when it’s needed. But that’s changing fast as the other side of equation, energy demand, expands rapidly.

Beginning this year, two factors will drive increased focus on the ways energy is consumed: new attention to efficiency and the rise of technology allowing fine-tuned, granular control over how and when electricity is used. The most prominent manifestation of these two trends is the Virtual Power Plant, or VPP in energy industry parlance.

With customer consent, virtual power plants orchestrate connections with potentially millions of devices in businesses and homes, from electric vehicles and solar panels to washing machines and water heaters. These systems channel electricity use away from popular hours toward periods when cheap and clean renewables dominate the power supply.

To help sidestep power outages, utilities have traditionally paid large power consumers, like industrial manufacturers, to dial down their energy use during demand peaks for heat during cold snaps or air conditioning during heat waves. Now, utilities are able to also use virtual power plants to dial down or redirect demand from smaller consumers, like households. In the future, VPPs could allow utilities to better control a fleet of devices and leverage that digital network to reduce the need for expensive new power plants and transmission lines.

“Eighty to ninety percent of our customer base could be in a demand response program by the end of the decade,” said Thomas Smith, product development manager at Puget Sound Energy, a utility that operates near Seattle.

That would mean around a million residences and businesses in the utility’s service area, up from just a few thousand early last year, would essentially pool their power resources to substantially transform how the company delivers energy.

That sort of growth reproduced across thousands of utilities in the United States alone could relieve some of the stress the energy transition is beginning to heap onto the nation’s electrical grid as electric vehicles and heat pumps edge into mainstream use.

These virtual power systems are part of a larger transformation of the power sector, and overall energy system, globally.

Read the full article on Cipher’s website.

Europe maintains renewables momentum in electricity generation

Source: The Fraunhofer Institute • The original data comes from the European Network of Transmission System Operators for Electricity. Renewables include: solar, onshore and offshore wind, hydropower and biomass. Fossil fuels include: coal, oil, natural gas, non-renewable waste.

BY: ANCA GURZU

Renewable energy sources have maintained their strong performance so far this year in the European Union, generating 41% of the bloc’s electricity through the first half of January, according to a continuously updated dataset.

The performance is a testament to the bloc’s accelerated embrace of renewables in response to the energy security crisis that followed Russia’s invasion of Ukraine in early 2022.

Onshore and offshore wind made up more than half of the energy coming from renewables in Europe in recent weeks, shows data from the EU’s electricity network association, ENTSO-E, compiled by German think tank the Fraunhofer Institute.

The strong start to the new year follows a record-breaking 2023, when the EU generated about 43% of the bloc’s power production from renewables, up from 37% in 2022.

At the same time, the share of fossil fuels in the EU’s energy mix dropped from around 39% in 2022 to below 32% in 2023, according to the ENTSO-E data.

While the EU is moving in the right direction to clean up its grid, the bloc will be challenged in coming years to speed up the decarbonization of other sectors, such as transport, agriculture and industry. All three areas are key to meeting the EU’s wider climate ambitions.

The picture is also more nuanced at the national level.

For example, Austria got over 78% of its power needs from renewables in early January, with about half of that amount coming from hydropower. Meanwhile, Bulgaria met only about 16% of its power needs from renewables during the same period, relying more heavily on nuclear (43.5%) and coal and gas (40%).

The data is provided for free by the Fraunhofer Institute and is searchable by country, day, week, month and year.

AND FINALLY...
Pub charging

Cipher associate editor Jillian spotted this rentable power bank station at a pub in Bangalore, India in December. Presumably, patrons can use the portable chargers to power up their phones while visiting and having a drink. She’s never seen this type of station anywhere else before, but says it seems like a great idea!

Each week, we feature a photo that is somehow related to energy, the thing we all need but don’t notice until it’s expensive or gone. Email your ideas and photos to news@ciphernews.com.

Editor’s note: In addition to supporting Cipher, Breakthrough Energy also supports and partners with a range of entities working to tackle climate change, including nonprofits, corporations, startups and research firms. For more information on Cipher’s editorial policy, click here.