Global hydrogen prices, news & market analysis

24/10/21

Japan’s Chubu eyes exporting CO2 to Australia for CCS

Osaka, 21 October (Argus) — Japanese utility Chubu Electric Power is considering exporting CO2 to Australia for carbon capture and storage (CCS), as it accelerates efforts to decarbonise industries surrounding Nagoya port in central Japan. Chubu on 21 October agreed with Japanese upstream firm Inpex's subsidiary Inpex Browse E&P to explore the possibility of establishing a CCS value chain, including capturing CO2 in Japan then transporting it from Nagoya port to Western Australia's offshore Bonaparte basin. Further details, including a timeline and potential export volumes, are still unknown. Inpex in 2022 was awarded a greenhouse gas (GHG) storage assessment permit in the Bonaparte basin, together with TotalEnergies CCS Australia and Australian firm Woodside Energy. Operator Inpex aims to reduce GHG emissions from its Ichthys LNG project through this potential CCS site, which is expected to begin operations in the April 2030-March 2031 fiscal year and store more than 10mn t/yr of CO2. Moomba CCS project The deal came after Chubu on 18 October signed an initial agreement with Australian independent Santos, to assess the feasibility on transporting CO2 from Nagoya port to Santos' Moomba CCS project in the onshore Cooper basin of South Australia state. The CCS site has already been commissioned , but it is unclear when Chubu is targeting to export CO2 to the site, which has a full 1.7mn t/yr storage capacity depending on gas production. Details will be decided in future discussions, a Chubu spokesperson said. Chubu and Santos are also planning to study the use of renewable energy, such as geothermal power, to supply energy for other decarbonisation projects in the Copper basin which Santos is developing. Production of hydrogen and synthetic methane, or so-called e-methane, could be such options, the spokesperson told Argus. These are Chubu's first attemmpt to develop CCS projects in Australia, with the company also on course to establish similar CCS value chains between Nagoya port and Indonesia's Tangguh under a collaboration with BP . Diversification of CO2 export destinations would be necessary, as there is a risk to conducting CCS projects only in Indonesia, said the spokesperson. Chubu and BP completed the feasibility study in March and expanded their partnership in August by signing the next-stage agreement to evaluate cost optimisation across the CCS value chain and business models to enable commercial CCS projects. Nagoya is Japan's biggest port by cargo volume and located near steel, automotive, aircraft, machine and manufacturing plants, Chubu previously said. The port aims to reduce its CO2 emissions by 46pc by 2030-31 against 2013-14 levels, as industries around the port account for 3pc of Japan's total emissions, the company added. Japanese firms have intensified their efforts to develop CCS projects, as well as carbon capture, utilisation and storage (CCUS) projects, actively seeking international partnerships. This is driven by Japan's reliance on fossil fuels to ensure energy security and foster economic growth, which necessitates exporting CO2 because of limited domestic storage sites. Japan's parliament in May allowed the government to ratify the 2009 amendment to the International Maritime Organization's London Protocol that will allow the export of CO2. Japan hopes to commercialise CCS operations that Japanese firms are involved in from 2030-31. But there is growing pressure from the ministry of trade and industry that Japan should accelerate CCS projects, in order to not fall behind in the global market. By Motoko Hasegawa Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Tax credit delay risks growth of low-CO2 fuels

Tax credit delay risks growth of low-CO2 fuels

New York, 15 October (Argus) — A new US tax credit for low-carbon fuels will likely begin next year without final guidance on how to qualify, leaving refiners, feedstock suppliers, and fuel buyers in a holding pattern. The US Treasury Department this month pledged to finalize guidance around some Inflation Reduction Act tax credits before President Joe Biden leaves office but conspicuously omitted the climate law's "45Z" incentive for clean fuels from its list of priorities. Kicking off in January and lasting through 2027, the credit requires road and aviation fuels to meet an initial carbon intensity threshold and then ups the subsidy as the fuel's emissions fall. The transition to 45Z was always expected to reshape biofuel markets, shifting benefits from blenders to producers and encouraging the use of lower-carbon waste feedstocks, like used cooking oil. And the biofuels industry is used to uncertainty, including lapsed tax credits and retroactive blend mandates. But some in the market say this time is unique, in part because of how different the 45Z credit will be from prior federal incentives. While the credit currently in effect offers $1/USG across the board for biomass-based diesel, for example, it is unclear how much of a credit a gallon of fuel would earn next year since factors like greenhouse gas emissions for various farm practices, feedstocks, and production pathways are now part of the administration's calculations. This delay in issuing guidance has ground to a halt talks around first quarter contracts, which are often hashed out months in advance. Renewable Biofuels chief executive Mike Reed told Argus that his company's Port Neches, Texas, facility — the largest biodiesel plant in the US with a capacity of 180mn USG/yr — has not signed any fuel offtake contracts past the end of the year or any feedstock contracts past November and will idle early next year absent supportive policy signals. Biodiesel traders elsewhere have reported similar challenges. Across the supply chain, the lack of clarity has made it hard to invest. While Biden officials have stressed that domestic agriculture has a role to play in addressing climate change, farmers and oilseed processors have little sense of what "climate-smart" farm practices Treasury will reward. Feedstock deals could slow as early as December, market participants say, because of the risk of shipments arriving late. Slowing alt fuel growth Recent growth in US alternative fuel production could lose momentum because of the delayed guidance. The Energy Information Administration last forecast that the US would produce 230,000 b/d of renewable diesel in 2025, up from 2024 but still 22pc below the agency's initial outlook in January. The agency also sees US biodiesel production falling next year to 103,000 b/d, its lowest level since 2016. The lack of guidance is "going to begin raising the price of fuel simply because it is resulting in fewer gallons of biofuel available," said David Fialkov, executive vice president of government affairs for the National Association of Truck Stop Operators. And if policy uncertainty is already hurting established fuels like biodiesel and renewable diesel, impacts on more speculative but lower-carbon pathways — such as synthetic SAF produced from clean hydrogen — are potentially substantial. An Argus database of SAF refineries sees 810mn USG/yr of announced US SAF production by 2030 from more advanced pathways like gas-to-liquids and power-to-liquids, though the viability of those plants will hinge on policy. The delay in getting guidance is "challenging because it's postponing investment decisions, and that ties up money and ultimately results in people perhaps looking elsewhere," said Jonathan Lewis, director of transportation decarbonization at the climate think-tank Clean Air Task Force. Tough process, ample delays Regulators have a difficult balancing act, needing to write rules that are simultaneously detailed, legally durable, and broadly acceptable to the diverse interests that back clean fuel incentives — an unsteady coalition of refiners, agribusinesses, fuel buyers like airlines, and some environmental groups. But Biden officials also have reason to act quickly, given the threat next year of Republicans repealing the Inflation Reduction Act or presidential nominee Donald Trump using the power of federal agencies to limit the law's reach. US agriculture secretary Tom Vilsack expressed confidence last month that his agency will release a regulation quantifying the climate benefits of certain agricultural practices before Biden leaves office , which would then inform Treasury's efforts. Treasury officials also said this month they are still "actively" working on issuing guidance around 45Z. If Treasury manages to issue guidance, even retroactively, that meets the many different goals, there could be more support for Congress to extend the credit. The fact that 45Z expires after 2027 is otherwise seen as a barrier to meeting US climate goals and scaling up clean fuel production . But rushing forward with half-formed policy guidance can itself create more problems later. "Moving quickly toward a policy that sends the wrong signals is going to ultimately be more damaging for the viability of this industry than getting something out the door that needs to be fixed," said the Clean Air Task Force's Lewis. By Cole Martin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Chinese steel investment needs to avoid lock in: CBI

Chinese steel investment needs to avoid lock in: CBI

Singapore, 15 October (Argus) — Chinese investment in steel assets needs to be aligned with a Paris-compatible scenario to avoid locking in emissions and stranded assets, according to a report by non-profit Climate Bonds Initiative (CBI). Almost 80pc or 730.8mn t/yr of China's existing coal-based blast furnace capacity will need to be retired or require reinvestment by 2030, CBI said in its report released last week. Steel asset lifetimes often exceed 40 years, so "investment decisions made today can lock in billions of tons of emissions and potentially billions of dollars in stranded assets", CBI added. Steel production currently accounts for around 8pc of global CO2 emissions, and almost 50pc of global steel output is from China, CBI said. China's steel sector is estimated to require at least 1.6 trillion yuan ($226bn) in fixed asset investment for decarbonisation by 2050, according to a joint report by CBI and US-based Rocky Mountain Institute (RMI) earlier this year. Of the Yn1.6 trillion, 33pc should go to energy efficiency, 23pc for electric arc furnaces, 18pc for direct iron reduction (DRI), 14pc for carbon capture, utilisation and storage (CCUS), 7pc for blast furnace hydrogen injection, and 5pc for pellet manufacturing. Green bonds Steel companies can obtain financing through labelled green bonds from various categories at the project level, including energy efficiency, heat recycling, waste and resource recycle, green hydrogen, biomass, and CCUS. A total of Yn4.46 trillion of labelled green bonds had originated from China in domestic and overseas markets as of the end of 2023, according to CBI. But Chinese steel firms had only issued 23 green bonds totalling Yn3.5bn and six sustainability-linked bonds totalling Yn1.6bn by the end of last year, representing 0.1pc of the total Chinese labelled bond market. This Yn5.1bn falls very short of the estimated Yn1.6 trillion needed to decarbonise the Chinese steel sector. CBI asserts that the labelled bond and loan market can supply the required capital, but issuers operating in the steel sector must be encouraged to price deals with the recommended transparency and credibility. Recommendations Several Chinese provinces have already issued provincial-level transition finance guidance, including major steel-producing Hebei province this year. But China's national-level transition finance guidance remains under development. CBI thus recommends that the national transition taxonomy further align provincial guidelines and "enhance interoperability" between Chinese and international transition taxonomies, incentivise low-carbon production methods, customise financing for small-to-medium companies, and enhance entity-level transition plans. CBI also suggests that banks incentivise companies to enhance the quality of their information disclosure and integrate such incentives into their transition frameworks. The non-profit also urged steel companies to issue credible transition plans, which should include Paris-aligned emission-reduction targets and clear capital expenditure plans. Lastly, CBI notes that policies should support hydrogen infrastructure and supply chain development to accelerate green hydrogen deployment for high-emitting sectors. This is especially as current financing to decarbonise heavy industrial sectors have mainly been for mature technologies, such as raising energy efficiency. But green hydrogen can reduce over 90pc of steel production emissions, and steady development in hydrogen infrastructure and supply chain will cut costs and accelerate the steel transition. CBI also flagged public sector steel procurement as an avenue through which the country can boost demand for green steel, especially since Chinese public authorities buy about 350mn t/yr of steel, which causes around 689mn t/yr of CO2 emissions. Green public procurement (GPP) policies in China would also have a global impact, with steel public procurement demand in China three times that of India's total steel demand of 100mn t/yr. CDI suggests that the Chinese government accelerate adopting national-level standards to ensure consistent embodied emissions reporting, as GPP policies will only be effective when implemented with standardised methodologies. By Tng Yong Li Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

China's Hubei releases hydrogen development draft plan

China's Hubei releases hydrogen development draft plan

Mumbai, 14 October (Argus) — China's Hubei province has released a draft plan to accelerate development of its hydrogen industry by 2027, and is seeking industry feedback. The province seeks to double the scale of its hydrogen industry by that time, with a target output value of 100bn yuan ($13.7bn), according to the draft. The plan aims to promote technological breakthroughs, enhance industrial and supply chains and build a hydrogen storage and transportation network. It envisions the city of Wuhan as the core of Hubei's hydrogen industry, and it aims to establish a national hydrogen equipment centre focused on electrolysers and fuel cells. It promotes renewable hydrogen technologies, such as biomass-based hydrogen production. Hubei plans to explore pilot projects for hydrogen-blended pipelines and pure hydrogen pipelines, while prioritising construction of hydrogen refuelling stations. For transportation-related hydrogen projects, the province will provide subsidies covering up to 20pc of equipment costs, with a maximum of Yn10mn per project. The province already has 100 hydrogen refuelling stations and hydrogen production capacity of 1.5mn t/yr, according to the draft, although the vast majority, if not all, of this will be from fossil fuels with unabated emissions. To support innovation, the province offers a one-time subsidy of Yn10mn for hydrogen-related technology centres and Yn5mn for national labs and research centres. Additionally, it plans to establish a provincial hydrogen energy innovation project database, focusing on technologies like solid-state hydrogen storage and solid oxide fuel cells. For major projects, a subsidy of up to 10pc of investment is offered, capped at Yn5mn per project. The plan does not specify what counts as a major project. The province will also support key manufacturers of fuel cell components and promote fuel cell use in vehicles, ships, and power stations, according to the draft. Hubei plans to establish a provincial hydrogen energy industry alliance and encourage stakeholders to participate in setting industry standards. By Akansha Victor Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

India industries confident of 2030 renewable energy aim