Big-Name Investors Pour Billions Into Clean Hydrogen Projects

By July 14, 2022 6   min read  (1152 words)

July 14, 2022 |

Fuel Cells Works, Big-Name Investors Pour Billions Into Clean Hydrogen Projects

The newest wager is on a Nebraska startup trying to upend the burgeoning industry of clean hydrogen with a process that uses natural gas but traps carbon by producing an ingredient vital for everyday products like car tires.

Investors including BlackRock Inc. BLK -1.15% and NextEra Energy Inc. NEE 0.39% are putting more than $300 million into Monolith, valuing the company at more than $1 billion. The investment adds to a summer flood of money that is trying to turn hydrogen into a pillar of the energy transition.

In the past month, Indian billionaire Gautam Adani’s conglomerate said it would partner with TotalEnergies SE to invest $50 billion in green hydrogen over the next decade. BP PLC took a large stake in a more-than $30 billion project in the Australian outback.

Shell PLC said it would build Europe’s largest renewable hydrogen plant. And startups in the sector raised hundreds of millions from the likes of TPG Inc. and Inc.

Despite this year’s stock-market volatility, investors have plowed money into areas seen as vital for minimizing global warming such as removing carbon from the atmosphere and making better batteries. The cash came even though shares of publicly traded companies like battery maker QuantumScape Corp. are down by 50% or more this year.

Rob Hanson, CEO said.

Monolith’s plant is in Hallam, Neb., near cornfields—a reminder of the connection between farmers and cheap, clean hydrogen, which can be converted into ammonia used in fertilizers.

Analysts have long hoped that hydrogen could be used in sectors that are hard to wean from fossil fuels. These include shipping and trucking, commodity production and aviation. But costs were too high and there wasn’t enough renewable energy to produce the needed hydrogen.

It continues to mainly come from combining natural gas and steam for uses in chemical refining and to make the ammonia that goes into fertilizers.

Pressure on companies to lower their carbon footprints and falling prices for wind and solar power have shifted the economics of green hydrogen. Fossil-fuel and fertilizer shortages following Russia’s invasion of Ukraine unleashed the recent frenzy.

Many companies use machines to split water into hydrogen and oxygen, eliminating the carbon emissions associated with hydrogen production. That process will remain expensive and inefficient until the industry matures, analysts say.

Monolith aims to avoid those challenges. Instead of splitting water, its plant in Hallam, Neb., runs on renewable electricity to heat natural gas and turn it into hydrogen and carbon black, a material that goes into everyday products like rubber and paints. Making two products uses power efficiently and allows Monolith to be cost competitive, the company says.

Making carbon black rather than burying the carbon underground also makes the process unique. Many energy companies have proposed producing hydrogen from natural gas, then capturing and storing the carbon associated with it. Carbon capture and storage is currently expensive and impractical in many cases.

Monolith’s hydrogen is produced with about 95% less emissions than conventional methods. The company hopes to use gas from landfills and animal waste or produced from plants to increase that figure. With enough of that gas, the process could remove more carbon from the atmosphere than it produces.

The hydrogen industry is where wind and solar were several years ago, before technology improved and costs fell, Chief Executive Rob Hanson said. “It’s becoming a real sector now,” he said. “It is the latest one that has gotten over that real initial phase of acceptance.”

A former solar-industry engineer, Mr. Hanson co-founded Monolith a decade ago, when few companies were looking to produce hydrogen from natural gas in this manner.

A former solar-industry engineer, Mr. Hanson co-founded Monolith a decade ago, when few companies were producing hydrogen in this way. Now, several upstarts and industry giants such as BASF SE are pursuing similar techniques.

Monolith’s plant near Nebraska’s cornfields highlights the connection between farmers and cheap, clean hydrogen, which can be converted into ammonia used in fertilizers, he said.

Monolith’s fundraising is being led by TPG’s climate fund and Decarbonization Partners, a joint venture between BlackRock and Singapore’s Temasek Holdings Ltd. Past backers NextEra, South Korean conglomerate SK Group and Mitsubishi Heavy Industries Ltd. also invested. That makes it one of the largest startups in the sector.

Meghan Sharp, global head of Decarbonization Partners, said: “They’re ahead of the competition and ready to scale.”

Monolith expects to meet conditions tied to a previously announced $1 billion loan from the U.S. Energy Department by the end of the year and complete its first large facility by 2026. Several other projects with partners are in the works, Mr. Hanson said.

Governments are bolstering spending from the private sector. Last year’s bipartisan U.S. infrastructure bill included billions for hydrogen. The Energy Department recently lent $500 million to a Mitsubishi unit and a project developer to develop a green hydrogen project in Utah that would include underground storage in vast caverns.

The caverns could store hydrogen for months and be tapped to stabilize the electricity grid in the Western U.S. when the wind isn’t blowing and sun isn’t shining, the companies say. Long-term energy storage is another potential application of hydrogen being explored during the war in Ukraine.

Amir Sharifi, chief investment officer of Hy24, a $1.7 billion fund dedicated to the sector, said:

What has happened has changed the paradigm and made the question of economics less of a ‘10 years away’ question.

“It’s already there in some places.”

A Monolith employee collects a sample of carbon black for quality testing. Carbon black goes into a number of everyday products including rubber tires. Simultaneously producing clean carbon black and hydrogen allows Monolith to be cost competitive in both markets and efficiently use renewable power, the company says.

Many analysts say hydrogen has an advantage over other technologies because there is a fossil-fuel based market today and other infrastructure that could be repurposed.

But some scientists are wary of relying on hydrogen that isn’t produced from clean power and say that some companies overstate its potential.

Hydrogen’s usage should generally be limited to heavy industries while renewables power less-intense activities, many analysts say. Hydrogen accounts for about 6% of emissions reductions in the International Energy Agency’s projections for achieving net-zero by 2050.

Mark Jacobson, a professor of civil and environmental engineering at Stanford University, said: There’s definitely a role for hydrogen.  “It’s just not as big as the fossil-fuel industry would hope.”

Appropriate hydrogen applications result in a massive industry, proponents say. Monolith’s large plant would produce about 50,000 tons a year, a drop in the bucket of a roughly 100-million-ton industry.

“It’s just these huge end markets,” Mr. Hanson said. “That’s why we’re going to need all types of solutions.”


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