AIMCo and OTPP Invest in World's Largest Green Hydrogen Platform

Utah's 6Park News reports AIMCo, GIC, Manulife and Ontario Teachers' Pension Plan support Utah's mega green hydrogen project:

Founded in 1998, Houston-based Haddington Ventures, LLC oversees a portfolio of U.S. conventional and renewable energy businesses. Haddington Ventures, LLC has formed Haddington ESP I, LP to provide construction capital for projects developed by Advanced Clean Energy Storage Joint Venture (ACES Delta, LLC), which will be a massive green hydrogen platform. With this equity financing, construction can begin in June 2022 and hydrogen center operations are scheduled to begin in 2025. Investors in Haddington ESP are Alberta Investment Management Corporation (AIMCo), GIC Private Limited, Manulife Financial Corporation ( Manulife) and Ontario Teachers. ‘ Board of the Pension Plan. In addition to the investors’ $650 million initial capital commitment, they have additional rights to increase their collective investment to $1.5 billion.

ACES Delta is developing the Green Hydrogen Storage Facility near Delta, Utah, with electrolyzer capacity to produce up to 100 metric tons per day of green hydrogen under a long-term contract with the Intermountain Power Agency (IPA). IPA is made up of 23 Utah municipalities and owns the Intermountain Power Project (IPP). IPP supplies power to IPA members, six rural electric cooperatives and municipal utilities in Southern California, including Los Angeles, Burbank and Glendale.

Haddington ESP’s seed funding will fund a project to use renewable energy resources to power 220 megawatts of electrolysers that will split water into hydrogen and oxygen. The resulting carbon-free green hydrogen will be stored in salt dome storage caverns and made available on demand to IPA, which intends to use the hydrogen in its combined cycle natural gas plant to generate electricity for its project participants. 

ACES Delta is a joint venture between Mitsubishi Power Americas, Inc. and Utah-based Magnum Development LLC, a managed portfolio company of Haddington Ventures under Haddington Energy Partners III. The Haddington/Magnum team brings expertise in the development, construction and operation of underground salt storage, while Mitsubishi Power Americas brings expertise and technology support for electrolyzers and other power-related items.

Advisers

Legal representation for Haddington ESP investors was provided by Sidley Austin LLP, while Haddington Ventures was represented by Willkie Farr & Gallagher LLP.

In May 2022, the US Department of Energy made a conditional commitment of approximately $500 million in debt financing to Advanced Clean Energy Storage I, LLC.

AIMCo, OTPP, GIC and Manulife put out a press release on this deal:

Haddington Ventures, LLC has formed Haddington ESP I, LP to provide construction equity for projects developed by the Advanced Clean Energy Storage Joint Venture (ACES Delta, LLC), which will be the largest green hydrogen platform in the world upon completion. With this equity funding, construction can begin in June 2022, and hydrogen hub operations are scheduled to commence in 2025.

The investors in Haddington ESP are Alberta Investment Management Corporation (AIMCo), GIC, Manulife Financial Corporation (Manulife) and Ontario Teachers’ Pension Plan Board (Ontario Teachers’). In addition to the investors’ initial $650 million equity commitment, they have additional rights to increase their collective investment to $1.5 billion.

“This is a pivotal investment for western states seeking to meet their aggressive decarbonization goals,” said John Strom, Managing Director of Haddington Ventures. “The ACES Delta hub will be larger than any existing green-hydrogen production and storage site by a factor of 10, which is the scale needed for electric utilities. The project uniquely leverages readily scalable electrolyzer technologies with multiple large salt dome storage caverns to make a meaningful environmental contribution.”

ACES Delta is developing the green hydrogen storage hub near Delta, Utah, with electrolyzer capacity to produce up to 100 metric tonnes per day of green hydrogen under a long-term contract with the Intermountain Power Agency (IPA). IPA is comprised of 23 Utah municipalities and owns the Intermountain Power Project (IPP). IPP supplies power to the IPA members, six rural electric cooperatives, and municipal utilities in Southern California, including Los Angeles, Burbank and Glendale.

The initial funding from Haddington ESP will finance a project to use renewable energy resources to power 220 megawatts of electrolyzers that will split water into hydrogen and oxygen. The resulting zero-carbon green hydrogen will be stored in salt-dome storage caverns and made available on demand to IPA, which intends to utilize the hydrogen in its combined-cycle natural gas plant to generate electricity for its project participants.

Construction of the initial phase of the hub, which is now underway, will help create up to 400 local construction jobs throughout the 3-year construction cycle, and will contribute significant property tax revenue to the local county services such as law enforcement, infrastructure, and others.

ACES Delta is a joint venture between Mitsubishi Power Americas and Magnum Development, a managed portfolio company of Haddington Ventures. The Haddington/Magnum team brings experience in underground salt storage development, construction, and operation while Mitsubishi Power Americas brings experience and technological support for the electrolyzers and other power related elements. For additional information, please visit aces-delta.com.

“AIMCo is excited to be participating in the ACES Delta Platform alongside strategic partners, which are aligned in supporting the Delta site becoming a key hydrogen production & storage hub for the Western US. Hydrogen is expected to play a vital role in meeting many industries and stakeholders' current and future decarbonization goals. We see the long-term contracted nature of the initial Project fitting well within the strategic objectives of our client’s portfolios and the potential for future investment in this growing sector."

Ben Hawkins, Head, Infrastructure, Renewables & Sustainable Investing AIMCo

“We firmly believe that green hydrogen will play a key role in decarbonization in the US, where long-duration storage will be essential for the higher penetration of renewable power, and to meet fluctuating inter-season power demand. As a long-term investor, we are pleased to partner with this strong group of likeminded developers and equity partners to position ourselves well for the growing hydrogen economy.”

Ang Eng Seng, Chief Investment Officer of Infrastructure for GIC

“Manulife is thrilled to expand its longstanding investment relationship with Haddington Ventures and partner alongside these strategic investors in projects developed by ACES Delta. We believe ACES Delta is uniquely positioned to build a large-scale green hydrogen production and storage platform to serve growing customer demand. This investment supports our objectives to help facilitate the decarbonization of energy sources and grow our $42 billion portfolio of green investments.”

Adam Wise, Head of Natural Resources and Sustainable Solutions, Manulife

“We’re proud to be investing in one of the largest and most advanced green hydrogen projects in the U.S.. Ontario Teachers’ is committed to decarbonization and the energy transition and we believe green hydrogen production and storage will play an essential role in this transition. We see the ACES Delta platform as the beginning of a long-term partnership with a top-quality developer.”

Chris Ireland, Managing Director, Greenfield and Renewables at Ontario Teachers’

Legal representation to Haddington ESP investors was provided by Sidley Austin LLP, while Haddington Ventures was represented by Willkie Farr & Gallagher LLP.

About Alberta Investment Management Corporation

Alberta Investment Management Corporation, AIMCo, is one of Canada's largest and most diversified institutional investment managers with more than CAD $168 billion of assets under management, as at December 31, 2021. AIMCo invests globally on behalf of 32 pension, endowment and government funds in the Province of Alberta.

The AIMCo Infrastructure group manages a portfolio of over CAD $10.5 billion in investments, comprised primarily of long-term equity positions in OECD-based infrastructure assets. These assets typically provide essential services to the public and are either regulated or have highly contracted revenues with the potential for long-term capital appreciation. AIMCo infrastructure investments are intended to match long duration real return asset characteristics with inflation-indexed pension liabilities.

About GIC

GIC is a leading global investment firm established in 1981 to secure Singapore’s financial future. As the manager of Singapore’s foreign reserves, GIC takes a long-term, disciplined approach to investing and is uniquely positioned across a wide range of asset classes and active strategies globally. These include equities, fixed income, real estate, private equity, venture capital and infrastructure. Its long-term approach, multi-asset capabilities and global connectivity enable it to be an investor of choice. GIC seeks to add meaningful value to its investments. Headquartered in Singapore, GIC has a global talent force of over 1,800 people in 10 key financial cities and has investments in over 40 countries.

About Manulife

Manulife Financial Corporation is a leading international financial services provider that helps people make their decisions easier and lives better. With our global headquarters in Toronto, Canada, we provide financial advice and insurance, operating as Manulife across Canada, Asia, and Europe, and primarily as John Hancock in the United States. Through Manulife Investment Management, the global brand for our global wealth and asset management segment, we serve individuals, institutions, and retirement plan members worldwide. At the end of 2021, we had more than 38,000 employees, over 119,000 agents, and thousands of distribution partners, serving over 33 million customers. Our principal operations are in Asia and Canada, and the United States, where we have served customers for more than 160 years. We trade as 'MFC' on the Toronto, New York, and the Philippine stock exchanges and under '945' in Hong Kong. In the previous 12 months we made CAD$32.7 billion in payments to our customers.

Not all offerings are available in all jurisdictions. For additional information, please visit manulife.com.

About Ontario Teachers’

Ontario Teachers' Pension Plan Board (Ontario Teachers') is a global investor with net assets of C$241.6 billion as at December 31, 2021. We invest in more than 50 countries in everything from equities to real estate to infrastructure and venture growth, to deliver retirement income for 333,000 current and retired teachers in Ontario.

With offices in Hong Kong, London, San Francisco, Singapore and Toronto, our more than 350 investment professionals bring deep expertise in industries ranging from agriculture to artificial intelligence. We are a fully funded defined benefit pension plan and have earned an annual total-fund net return of 9.7% since the plan’s founding in 1990. At Ontario Teachers’, we don’t just invest to make a return, we invest to shape a better future for the teachers we serve, the businesses we back, and the world we live in. For more information, visit otpp.com and follow us on Twitter @OtppInfo.

About Haddington Ventures

Founded in 1998, Haddington Ventures, LLC oversees a growing portfolio of successful conventional and renewable energy businesses that are bringing innovative new infrastructure to the U.S. energy sector. Haddington’s unique combination of industry knowledge, investment experience and operational expertise provides an important advantage in identifying and creating value in its investment opportunities. Generally, Haddington invests in companies whose businesses support the vast operating and infrastructure requirements driven by the growing demand for energy.

A little more context before I get into it.

Back in April, Jeff St-John of Canary Media reported that a massive green hydrogen hub in Utah wins $504M federal loan guarantee:

One of the biggest proposed green hydrogen projects in the U.S. has won a $504.4 million conditional loan guarantee from the U.S. Department of Energy’s Loan Programs Office, putting the $1-billion-plus project a step closer to building hundreds of megawatts of hydrogen production capacity in Utah. 

The Advanced Clean Energy Storage (ACES) project, launched in 2019, plans to build 220 megawatts of electrolyzers that will use carbon-free electricity to convert water to up to 100 metric tons of hydrogen a day. That hydrogen will be stored in two massive underground salt caverns near the town of Delta, Utah, capable of storing up to 5,500 metric tons of hydrogen, or enough to generate 300 gigawatt-hours of electricity. 

The ACES project is a joint venture of Mitsubishi Power Americas, a subsidiary of Japan’s Mitsubishi Heavy Industries that makes turbines and other energy industry equipment, and Magnum Development, the owner of the salt caverns where the hydrogen is to be stored. These are some of the only underground salt dome formations in the U.S. outside of the Gulf Coast region. The salt domes in the Gulf Coast store vast amounts of oil and fossil gas, including the U.S. Strategic Petroleum Reserve, and they’ve also been targeted for hydrogen production and storage.

In terms of its scale, ACES matches some of the bigger green hydrogen projects being developed in Europe, Australia and the Middle East. Haddington Ventures, financial adviser for the ACES project and equity sponsor of Magnum Development, is now securing $650 million in equity financing, according to Mitsubishi Power Americas’ Tuesday announcement.

Hydrogen produced in ways that limit or eliminate carbon emissions could be a vital replacement for fossil fuels for hard-to-decarbonize industries such as shipping, aviation, steelmaking and cement production. But ACES is targeting its initial green hydrogen production for another use: replacing fossil gas as a fuel to generate electricity. 

ACES’ first customer will be the Intermountain Power Agency, which operates a coal-fired power plant that supplies roughly half of its electricity to municipal and cooperative utilities in Utah. The other half goes to the far-off municipal utility Los Angeles Department of Water and Power (LADWP).

The Intermountain plant is being converted to an 840-megawatt turbine designed to run on a blend of 70 percent natural gas and 30 percent hydrogen starting in 2025, with a plan to convert it to 100 percent hydrogen by 2040. That could provide LADWP with always-available carbon-free generation to help meet its goal of reaching net-zero carbon emissions by 2035. 

Intermountain is one of the more advanced efforts to tap hydrogen as an energy-storage resource for power grids that are converting to carbon-free generation. One of the biggest challenges for decarbonizing the grid is how to cover the gaps when solar and wind power aren’t producing enough to meet electricity demand — including days- or weeks-long lulls that utility-scale lithium-ion battery farms can’t cost-effectively cover.

Utah produces less than 4 percent of its electricity from renewable resources today. But PacifiCorp, the Berkshire Hathaway Energy–owned parent company of Rocky Mountain Power, Utah’s main investor-owned utility, is planning to build solar and wind power across its six-state territory, including Utah. 

The ACES project is also at the center of a sprawling plan for a Western U.S. hydrogen production, storage and pipeline network being envisioned by the Western Green Hydrogen Initiative, a consortium of 11 Western states, two Canadian provinces, Mitsubishi, LADWP and utility Dominion Energy. 

Why DOE’s Loan Programs Office is supporting green hydrogen

The DOE’s Loan Programs Office has now conditionally approved three loans or loan guarantees since the start of the Biden administration, and two of them have been for hydrogen projects. The first was in December, when LPO conditionally approved a $1.04 billion loan to Monolith, a company seeking to expand its Nebraska facility that uses renewable energy to power a pyrolysis process that converts fossil gas to hydrogen, which is initially intended for conversion to ammonia for fertilizer production. Instead of emitting carbon into the atmosphere, Monolith’s process yields a solid carbon byproduct that can be used in industrial processes such as making tires. 

DOE has made carbon-free hydrogen research, development and commercialization a major focus. The bipartisan infrastructure law passed last year includes $8 billion to fund four clean-hydrogen production hubs. It also directs $500 million to clean hydrogen demonstration projects and $1 billion to research advances in the electrolyzers that use electricity to split water into oxygen and hydrogen. 

Jigar Shah, head of DOE’s Loan Programs Office, said in a Tuesday statement that making hydrogen via electrolysis using renewable electricity costs about $5 per kilogram today. That’s roughly four to five times the cost of making hydrogen via steam reforming of methane from fossil gas, the carbon-emitting process that currently produces the vast majority of the world’s hydrogen, which is used primarily for refining, fertilizer production and other industrial processes. The aim of the new loan guarantee for the ACES hub is to help bring that $5-per-kilogram price point down to about $1 per kilogram, the target that DOE has set with its Hydrogen Shot program.

Using hydrogen to decarbonize heavy industry, transport and energy generation will dramatically increase global demand for cost-effective production at much larger scales than today. ​“While industries are beginning to implement clean hydrogen to reduce emissions, many hurdles remain for deploying it at scale,” Shah said in the statement.

LPO’s mission is to provide loans or loan guarantees to lower the cost of capital for technically proven but underdeveloped technologies ranging from renewable energy, electric vehicles, batteries and battery materials to transmission grids, carbon-capture systems and nuclear power. 

Shah has said that the U.S. must scale up its ​“climate-change solutions deployment” investment from about $200 billion a year today to closer to $1 trillion per year to meet the Biden administration’s goal of halving economywide carbon emissions from 2005 levels by 2030. 

The International Energy Agency has projected that the world will need about 850 gigawatts of electrolyzer capacity by 2030 to stay on the narrowing pathway to net-zero carbon emissions by 2050. The ACES project represents less than one-quarter of 1 percent of that global target — an indication of the enormity of the investment needed in the decade ahead.

Also in April, Sonal Patel of Power Magazine reported on how ACES Delta’s giant Utah salt cavern hydrogen storage project gets $504M conditional DOE loan guarantee:

The Advanced Clean Energy Storage Project, a much-watched project under development in Delta, Utah, that is shaping up to be the largest renewable hydrogen energy hub in the U.S., has garnered a conditional commitment for a $504.4 million loan guarantee from the Department of Energy’s (DOE’s) federal loan guarantee program.

The conditional loan guarantee commitment issued on April 26 is for the Advanced Clean Energy Storage I, the first phase of a massive undertaking by ACES Delta, which is a joint venture comprising Magnum Development (Magnum), Mitsubishi Power, and Haddington Ventures, to create a new pathway for decarbonization of the Western U.S. grid.

The project envisions producing up to 100 metric tonnes per day of hydrogen from water and renewable energy sources using a 220-MW alkaline electrolyzer bank manufactured by Norwegian firm HydrogenPro—one of the largest deployments of its type to date. That hydrogen will be stored in two gigantic solution-mined caverns sited in the only salt dome in the Western U.S.

Capable of storing a combined 300 GWh of energy, the storage facility will provide long-term seasonal energy storage to Intermountain Power Plant’s (IPA’s) Intermountain Power Plant (IPP) near Delta, Utah, a coal-fired plant that is slated to be repowered with two Mitsubishi Power advanced M501JAC power trains as an 840-MW combined cycle power plant by 2025.

A Power-to-Power Project

The 1986–opened IPP’s two coal-fired units, a combined 1,800 MW, currently average about 13 TWh each year, power that is delivered over 2.4-GW AC and DC lines to IPA’s 35 municipal utility participants, which are primarily in Utah and Southern California. Catering to state clean energy targets—including California’s 100% clean electricity target by 2045—IPA in 2019 signed a pioneering contract with Lake Mary, Florida–based Mitsubishi Power Americas that commercially guarantees the M501JAC units will be able to combust a mix of 30% hydrogen and 70% natural gas when they come online in 2025. Mitsubishi Power told POWER that progress continues to develop a second-generation combustion system that will enable the JAC units to achieve 100% hydrogen fueling by 2045.

The DOE’s Loan Programs Office (LPO) lauded the project’s selection for its potential to “safely and cost-effectively produce and store hydrogen.” LPO Director Jigar Shah on April 26 noted the selection, which is just one of nearly 80 active applications across a variety of technology sectors submitted to the DOE office since March 2021, supports the Biden administration’s efforts to tamp down renewable hydrogen costs by about $5/kilogram as well as “expand the use of clean hydrogen in the industrial sector and beyond.”

The ACES Delta project becomes the DOE’s third offered conditional loan guarantee under the Biden administration. LPO in December offered a $1 billion conditional loan guarantee to Monolith, a 2012-established firm that has developed a methane pyrolysis process to convert natural gas into hydrogen and high-purity carbon black using renewable energy. On April 18, it offered to conditionally lend up to $107 million to Syrah Technologies to expand its capacity to produce critical materials for lithium-ion batteries at the Syrah Vidalia Facility in Louisiana.

Shah on Tuesday highlighted the ACES Delta project’s potential to reduce curtailment of renewable energy in the Western U.S., as well as reduce criteria air pollutant emissions, such as ozone precursors and particulate matter, as well as greenhouse gases (GHGs). That’s consistent with the primary goal of the Title XVII Program, which was established in the 2005 Energy Policy Act, the DOE noted.

“Financially supporting the Project would help bring hydrogen to market and into greater use, thereby reducing overall national emissions of air pollutants and human-caused GHGs,” it added. However, while the conditional commitment demonstrates the DOE’s intent to finance the project, “several steps remain, and certain conditions must be satisfied before the Department issues a final loan guarantee,” Shah noted on Tuesday.

A Massive and Urgent Undertaking

According to Michael Ducker, senior vice president of Hydrogen Infrastructure for Mitsubishi Power Americas and president of Advanced Clean Energy Storage I, the project (which is referenced by its full name for trademarking reasons) has made rapid progress since its unveiling in May 2019. Since the project was unveiled, ACES Delta has set out to obtain necessary state and local permits and approvals for the project, as well as prepare the project design and cost estimate. The DOE assessed these factors as it made its conditional commitment, Ducker noted.

The ACES Delta project is now in the final stages of debt and equity closing. While Haddington Ventures, the financial advisor for the project and equity sponsor of Magnum Development, is securing $650 million through its Equity Syndication Program, ACES Delta expects financial close of the loan guarantee in the second quarter of 2022, Ducker said.

The hub has also secured all major contracts, including for offtake with IPA, engineering, procurement, and construction (EPC) contractors, as well as major equipment suppliers and operations and maintenance (O&M) providers. Engineering giant Black & Veatch is slated to provide EPC services, while Mitsubishi Power will provide all hydrogen equipment integration, including the 220 MW of electrolyzers, gas separators, rectifiers, medium voltage transformers, and distributed control system. NAES Corp., an O&M service firm, will initially provide the O&M services for the plant and will oversee the current projected team of 20 plant-related personnel. WSP, another engineering giant, will provide EPC management services for the development of the two large salt cavern storage facilities, leveraging decades of experience in its development of more than 200 salt caverns around the world.

Construction Has Begun

These milestones, reached with extraordinary speed for such a massive project, have already allowed ACES Delta to break ground at the project site. “Construction has begun,” Ducker confirmed. “That’s because we’re keeping with the schedule at IPA and the other online date for their power plant, for the hydrogen-capable gas turbines in 2025,” he said.

This year, IPA plans to begin upgrading the IPP with Mitsubishi Power’s M501JAC gas turbines, heat recovery steam generators, and steam turbines in each of the plant’s combined-cycle units. In tandem, Mitsubishi Power’s “multi-cluster” combustor technology that could enable 100% hydrogen combustion at the project’s heavy-duty JAC gas turbines is under validation and will be commercialized at the newly unveiled Takasago Hydrogen Park in Japan. “To sync up schedules with us constructing the caverns and the hydrogen production, we need to start now,” Ducker noted. 

Construction of the Advanced Clean Energy Storage project will entail building a hydrogen generation facility, where the electrolyzers will produce and compress hydrogen for delivery and storage in the caverns. The electrolyzers from HydrogenPro (a company in which Mitsubishi Power’s parent company Mitsubishi Heavy Industries (MHI) is an investor) will be housed in above-ground mechanical units with low-profile cooling towers and other associated facilities.

The project also includes the construction of ancillary support facilities, such as the O&M building; an electrical distribution and high-voltage transmission system with a substation and switchyard facilities; water and brine delivery systems with pumps, filtration, and pipelines; standard water treatment facilities to provide demineralized water for the electrolysis modules; demineralized water storage tanks; raw water tanks for process water; firewater storage tanks; cooling towers to support rejection of heat generated during the process; plant instrumentation; and a hydrogen gas delivery system with filtration and dehydration units and quality and flow measurement facilities.

The most time-consuming task within the project construction scope, however, relates to building the two caverns, which are purpose-built and engineered to store hydrogen. The salt dome sprawls over 4,800 acres directly adjacent to the IPP power plant near Delta, Utah. The two storage caverns envisioned as part of the first phase of the Advanced Clean Energy Storage Project will be built about a mile away from the electrolyzers.

“In accordance with the geo-mechanical design, the dimensions of each cavern are anticipated to be approximately 220 feet in diameter and approximately 1,200 feet in height. The tops of the caverns will range in depth between 3,500 and 4,100 feet below the ground surface (bgs), and the bases of the caverns will range in depth from 4,700 to 5,300 feet bgs,” the LPO’s environmental assessment (EA) for the Advanced Clean Energy Storage Project says.

“A salt cavern takes roughly two years to construct,” Ducker said. “The best way to think about that site is as a big block of salt. What we do is drill into that salt with conventional drilling practices,” he explained. “It’s literally just drilling a well down, and then we inject water. Water dissolves salt, and then based on where we put the ‘stringer,’ you basically keep dissolving the salt, bringing that water out, putting new fresh water in.” The caverns will require large evaporation ponds that will contain brine solution. But the technique, while slow, is deliberate, Ducker noted. It “entails no exotic materials,” he said. It’s “literally just time and water.”

Rendering of an Advanced Clean Energy Storage salt cavern. The Advanced Clean Energy Storage project envisions producing up to 100 metric tonnes per day of hydrogen from water and renewable energy sources using a 220-MW alkaline electrolyzer bank. The hydrogen will be stored in two gigantic solution-mined caverns sited in the only salt dome in the Western U.S. Courtesy: Mitsubishi Power

The LPO’s EA suggests the project is designed with features that include “equipment and material selection appropriate for the hydrogen gas generation and handling process.” These include minimum distances between certain hydrogen generation and handling equipment, the installation of a facility-wide leak detection and emergency shutdown system, and emergency and fire response and suppression measures. A Safety in Design (SID) analysis and preliminary Process Hazard Analysis (PHA) were also completed for the project’s front-end engineering design. “The analyses were completed to determine the applicable regulatory requirements for preventative design features and measures and active and passive fire protection systems to incorporate into the facility design,” the EA says. A final PHA will also be completed as part of the final facility design.

Hydrogen Hub Part of a Larger Vision

Completion of the first phase of the Advanced Clean Energy Storage project will inform future phases, as well as provide more insight on future infrastructure needs for a potential expansion. “We really see this as the first phase of our hub, and so over time, we’re looking to add additional projects,” Ducker said. “Some may be for power applications and long-duration storage, like we’ve got for [the first phase]. They may be for other heavy industries.”

Ducker said that while ACES Delta has focused on “getting this first piece done,” developers have envisioned what the whole site could look like through the next several decades. A “2050 vision” plan, for example, projects that up to 70 caverns, each of which could store up to 5,500 metric tonnes of hydrogen, “would be necessary to help support the arbitrage and storage that’s across all verticals, not just power,” he said. “It’s looking at heavy industries and everything else.” The site itself can support up to 100 caverns,” he noted, which could “adequately support” the entire 2050 needs for hydrogen in the West. 

Millard County, a sparsely populated basin and range area within the Sevier Desert in western Utah, is notably cultivating an energy project cluster that could ultimately support the Advanced Clean Energy Storage hydrogen hub’s role in a wider scale effort to decarbonize the West, or provide crucial regional reliability. Magnum, for example, has received approval from the Federal Energy Regulatory Commission (FERC) for a gas storage project that would include the construction and operation of a natural gas storage facility, along with a 62-mile-long natural gas header pipeline. A construction schedule is as of yet undetermined, however.

FERC notably also recently prepared a final environmental impact statement for another pipeline project, the Delta Lateral Project, Kern River Gas Transportation Co.’s proposed 36-mile-long pipeline, which could deliver a firm 140,000 dekatherms of natural gas per day from Opal, Wyoming to the IPP. IPP has said it will use the new pipeline to provide the natural gas that it will initially use to generate power. Finally, Energy Capital’s 300-MW ECG Utah Solar 1 Project, is slated to be completed by 2024, potentially transmitting power to the IPP.

But according to Ducker, the ACES Delta project shines for its unique potential, which is to serve as a crucial demonstration for technology integration, with a minimal technology risk, of an end-to-end solution to produce, store, and convert renewable hydrogen for the Western U.S. The project’s regional significance has been heralded by the Western Green Hydrogen Initiative,  a network of 11 western states and two Canadian provinces (along with Florida, Ohio, and Louisiana), whose mission is to scale renewable hydrogen production and use while avoiding costly transmission build-out.   

The overall project, whose costs have been estimated at $1 billion, will offer a valuable service, Ducker added. “We really don’t look at this as on a dollar-per-kilogram basis because it’s just like with batteries,” he said. “When you’re looking at lithium-ion batteries, you don’t think about it as a fuel, you think about it as storage,” he noted. “So when we look at the overall project, at least as ACES has assessed it, we see the ability for the overall decarbonization goals at a 20% lower cost of electricity than if hydrogen long-duration energy storage weren’t in the mix.”

The project, Ducker predicted, will be competitive. “When we look at the production costs—if we break out just the production piece or salt cavern piece—it is competitive with today’s technologies, and what’s been put out there already,” he said.

What else? Back in 2020, Tim Hornyak of CNBC reported that an $11 trillion global hydrogen energy boom is coming., here’s what could trigger it. I note this part:

The Advanced Clean Energy Storage (ACES) project aims to build a storage facility for 1,000 megawatts of clean power, partly by putting hydrogen into underground salt caverns. Last year, Mitsubishi Power, a maker of gas turbines, and Magnum Development, which owns salt caverns for liquid fuel storage, announced the project will combine technologies such as renewable hydrogen, solid-oxide fuel cells, and compressed air energy storage. The storage facility would initially have enough energy to power 150,000 households for one year. Scheduled to be operational by 2025, the first phase of the Advanced Clean Energy Storage project will provide 150,000 MWh of renewable power storage capacity, nearly 150 times the current U.S. installed lithium-ion battery storage base, according to Mitsubishi Power.

The project will also help address a problem with renewable energy production: fossil-based energy must be used immediately because grids lack storage capacity, which can mean curtailment of renewables in times of low demand. Having large-scale renewable energy reserves on tap can accelerate the shift to clean power. If former Vice President Joe Biden is elected president next month, he may funnel up to $1.7 trillion over 10 years into measures to boost renewables and accelerate the adoption of electric vehicles.

Green hydrogen is hydrogen produced with renewable power and zero emissions. With the cost of renewables like solar power falling, green hydrogen is being touted as one part of the energy mix that will lead toward decarbonization, with applications ranging from consumer and industrial power supplies to transportation and spaceflight. By 2050, U.S. demand for hydrogen could jump to 22 million to 41 million metric tons per year, up from 10 million today, according to a study released this month by the U.S. Department of Energy’s National Renewable Energy Laboratory.

After decades of false starts, hydrogen technology is poised to take off as falling production costs, technological improvements, and a global push toward sustainability converge, according to Bank of America. The firm believes this will generate $2.5 trillion in direct revenue — or $4 trillion if revenue from associated products such as fuel cell vehicles is counted — with the total market potential reaching $11 trillion by 2050.

Major firms such as BP, Siemens Energy, Shell and Air Liquide are interested in green hydrogen production, but part of the challenge is where to store energy so it can be ready when needed. That’s where a project like Advanced Clean Energy Storage can help.

Making holes in the ground

“California curtailed between 150,000-300,000 MWh of excess renewable energy per month through the spring of 2020, yet saw its first rolling blackouts in August because the grid was short on energy,” says Paul Browning, CEO of Mitsubishi Power Americas. “Long-duration energy storage projects like ours that are designed to shift excess energy from periods of oversupply, like California in the spring, to periods of undersupply, like California in late summer, are critical to ensure similar events are avoided as we continue to make significant strides towards deep decarbonization.”

Storing fuel in salt caverns isn’t new, but hydrogen’s growing role in decarbonization has revitalized interest in the concept. The U.S. Strategic Petroleum Reserve has long stored emergency crude oil in underground salt caverns on the Gulf Coast, and notes they cost 10 times less than aboveground tanks and 20 times less than hard rock mines. The Reserve has 60 enormous caverns, typically 200 feet in diameter and 2,500 feet tall, and one “large enough for Chicago’s Willis Tower to fit inside with room to spare.”

Caverns can be created in salt domes by drilling into the salt dome and injecting the rock with water, which dissolves the salt. The resulting brine is extracted, leaving a large cavity. The next step is storing hydrogen in the cavern. Hydrogen electrolyzers can convert water into hydrogen by using renewable energy from solar and other sources. The hydrogen can then be stored, and reconverted to electricity when needed.

In the Advanced Clean Energy Storage project, some will power the adjacent Intermountain Power Project, a coal-fired plant operated by the Los Angeles Department of Water and Power that will be converted to hydrogen and natural gas, which produces almost half the carbon dioxide of coal, by 2025. It’s scheduled to be all green hydrogen by 2045. If the initial phase of the project is successful, the salt dome’s vast capacity could be exploited further.

“The formation has the potential to create up to 100 caverns, each one capable of holding 150,000 MWh of energy,” says Browning. “It would take 40,000 shipping containers of batteries to store that much energy in each cavern.”

I am providing my readers with a good background to really understand and appreciate the scale and scope of this project and why this is another great investment on energy transition which AIMCo, OTPP, GIC and Manulife are all taking part of.

Once completed, the green hydrogen storage hub near Delta, Utah, will have an electrolyzer capacity to produce up to 100 metric tonnes per day of green hydrogen under a long-term contract with the Intermountain Power Agency (IPA), which is comprised of 23 Utah municipalities and owns the Intermountain Power Project (IPP).

The key here is what John Strom, Managing Director of Haddington Ventures, states: 

“This is a pivotal investment for western states seeking to meet their aggressive decarbonization goals. The ACES Delta hub will be larger than any existing green-hydrogen production and storage site by a factor of 10, which is the scale needed for electric utilities. The project uniquely leverages readily scalable electrolyzer technologies with multiple large salt dome storage caverns to make a meaningful environmental contribution.” 

Scaling an existing green-hydrogen production and storage site by a factor of 10 needed for electric utilities is no easy feat.

In fact, if you read this 2020 report from the International Renewable Energy Agency (IRENA), Green Hydrogen Cost Reduction: Scaling Up Electrolysers to Meet 1.5°C  Climate Goal, you will gain a deeper appreciation of what is involved. 

From the Executive Summary:

Importantly, the largest single cost component for on-site production of green hydrogen is the cost of the renewable electricity needed to power the electrolyzer unit:

This renders production of green hydrogen more expensive than blue hydrogen, regardless of the cost of the electrolyser. A low cost of electricity is therefore a necessary condition for producing competitive green hydrogen. This creates an opportunity to produce hydrogen at locations around the world that have optimal renewable resources, in order to achieve competitiveness.

But that's not enough. The report also states up to 85% of green hydrogen production costs can be reduced in the long term by a combination of cheaper electricity and electrolyzer capex investment, in addition to increased efficiency and optimized operation of the electrolyzer.

The report also states this:

Gaps in cost and performance are expected to narrow over time as innovation and mass deployment of different electrolysis technologies drive convergence towards similar costs. The wide range in system costs is expected to remain, however, as this is very much dependent on the scale, application and scope of delivery. For instance, a containerised system inside an existing facility with existing power supply is significantly lower cost than a new building in a plot of land to be purchased, with complete water and electricity supply system to be included, high purity hydrogen for fuel cell applications and high output pressure. Normally, numbers for system costs include not only cell stack, but also balance of stacks, power rectifiers, the hydrogen purification system, water supply and purification, cooling and commissioning – yet exclude shipping, civil works and site preparations.

Anyway, there is a lot of technical jargon in this report but it's well worth reading it here to understand how costs of producing green hydrogen are coming down.

Another report worth reading is this one here from the Global Infrastructure Investor Association (GIIA) on Catalysing Hydrogen Investment. 

GIIA is a membership body representing the leading investors and advisers in global infrastructure and it includes many of the largest Canadian pension investment managers, including AIMCo and OTPP.

Here is the Foreword from Lawrence Slade, CEO of GIIA:

And read the introduction and first few pages:

Interestingly, the report states:

While green hydrogen dominates discussions about electrolysis-based pathways, nuclear-powered production also holds promise. Nuclear power plants produce electricity and heat in a stable manner, which means that they can be paired with electrolysers (e.g. solid oxide) that operate at high temperatures and provide increased efficiencies. The baseload nature of nuclear power also means that the electrolysers can operate most of the time, improving the economics over those connected to intermittent supplies from renewables. Moreover, the nuclear option can provide production at gigawatt-scale. However, the sector is heavily regulated, so developing a nuclear hydrogen plant concept is likely to take years and the high capital costs of nuclear plants will also pose a challenge to competing with other production pathways.

And on storage, I note this:

There are various things that need to be considered when studying hydrogen as an energy storage option, including the scale and capital cost of the storage receptacle as well as the operating costs and energy losses in the associated processes. These depend on the scale and technology used to convert the hydrogen back to electricity, e.g. fuel cells, gas turbines, combustion engines or boilers. 

The main drawback of using hydrogen for electricity storage is the relatively large amount of energy that is wasted at each stage of the thermodynamic cycle. The “round trip efficiency” of the cycle refers to the amount of useful electricity ultimately generated divided by the total energy required to produce, store and reconvert the hydrogen. For hydrogen, the round trip efficiency can be in the order of 30% depending on the application, whereas for lithium-ion batteries, the charge/discharge cycle is about 85-90% efficient. 

There are multiple other types of energy storage technologies available as well, including pumped hydro, compressed or liquefied air storage, flywheels, supercapacitors and others. Considering the possible competition, investments that rely heavily on revenues from balancing demand and supply on the electricity grid need to be considered very carefully. The associated technology risks are likely to remain high.

Anyway, take the time to read the entire report here, it is truly excellent and well worth reading why investors are increasingly honing their attention on hydrogen (blue, green, yellow, pink and grey).

In this comment, I am just provided you with a glimpse of why hydrogen is a hot topic among investors and why this investment by AIMCo, OTPP, GIC and Manulife into the ACES Delta hub is well worth tracking as this looks like the future of hydrogen storage.

In addition to the investors’ $650 million initial capital commitment, they have additional rights to increase their collective investment to $1.5 billion.

Ben Hawkins, Head, Infrastructure, Renewables & Sustainable Investing AIMCo is very clear:

“We firmly believe that green hydrogen will play a key role in decarbonization in the US, where long-duration storage will be essential for the higher penetration of renewable power, and to meet fluctuating inter-season power demand. As a long-term investor, we are pleased to partner with this strong group of likeminded developers and equity partners to position ourselves well for the growing hydrogen economy.”

And so is Chris Ireland, Managing Director, Greenfield and Renewables at Ontario Teachers’:

“We’re proud to be investing in one of the largest and most advanced green hydrogen projects in the U.S.. Ontario Teachers’ is committed to decarbonization and the energy transition and we believe green hydrogen production and storage will play an essential role in this transition. We see the ACES Delta platform as the beginning of a long-term partnership with a top-quality developer.”

When I covered AIMCo's record 14.7% gain in 2021, I had a chance to talk to with AIMCo's Co-CIOs, Sandra Lau and James Barber.

James Barber told me:

 "We have done a lot of work around climate change and energy transition. We want to be investment led, we think our energy department is going to expand by more than 50% over the coming decades. And so, we are not going to turn off our lights, the heating and stop traveling, It's going to be a massive transition in terms of the structure of the economy. So, there's a lot of uncertainty. We don't have all the answers but in those circumstances where the landscape is going to change meaningfully, there is lots of uncertainty. That means the reward for good hard research and due diligence is more pronounced and there will be plenty of opportunities but there will also be plenty of risks around that. For us at AIMCo, how do we capture and navigate those opportunities and risks in a very proactive, investment led manner. This will be pivotal to our success. So we are spending more time in this space looking at all kinds of things like hydrogen, storage, carbon capture, etc."

You would expect Alberta's pension fund to be very much honed into what is going on across traditional and new forms of energy, it only makes sense.

Alright, let me wrap it up there.

Below, a discussion with Steffen Schmitz, Hydrogen Power Storage & Solutions East Germany e.V., DBI Gas- und Umwelttechnik GmbH on green hydrogen in East German salt caverns.