Inside the insane $6 billion plan to turn wind into gasoline

She’s serious, says former LNG executive Meg Gentle, and some smart money agrees with her, including from Porsche and Baker Hughes.

nauthorized the southern tip of Chilean Patagonia, The Haru Oni ​​eFuels Pilot Plant is located on the windswept Strait of Magellan at the foot of a wind turbine. The factory produces greener gasoline. It starts by taking wind power to power electrolyzer machines, which separate hydrogen from water. The hydrogen is then attached to the recycled carbon dioxide, in reactions that generate synthetic hydrocarbons—indistinguishable from fossil-derived gasoline.

Sure, carbon dioxide still escapes from the back of any car that runs out of this manufactured fuel, but it’s a start. Porsche AG, the investor, is excited about the potential to market this chemically identical “fuel” (e for electricity) to drivers who want both internal combustion and a cleaner climate conscience. It plans to get the most publicity out of every gallon, first using it to pollute racing teams.

Why build a new green fuel plant in remote Patagonia? First, the strong winds arose when cold air in Antarctica met warm air from the Pacific Ocean. The turbines there can achieve 75% operating efficiency versus 45% on average for wind farms in Texas. Second, HIF Global’s major shareholder, Santiago, Chile AME, is already developing solar farms in the vast Atacama Desert, and is looking to erect thousands of wind turbines in Patagonia. That would be enough to produce billions of gallons of fuel a year and turn Chile into the unlikely exporter of millions of gallons a year of greener gasoline made from Patagonian winds—the same ones that blew Magellan’s ships 500 years ago across the strait carrying his car. name.

But Patagonia isn’t the easiest place to build logistically, which is why HIF aims to build its first world-class plant in Texas — close to chemical plants and refineries. Al-Haramain Foundation CEO Meg Gentle was captivated by the idea when she heard about it in 2021 from Chairman Cesar Norton. Gentle, 48, had just gotten out of the LNG business, having served 15 years at leading LNG export company Cheniere Energy, followed by four years as CEO of LNG rival Tellurian Energy.

Gentle left Tellurian in late 2020, intending to make it easier and run her family’s investment office, Gemstone Investments, for a while. I agreed to put some money behind HIF (which stands for Highly Innovative Fuel). “I started out as an investor. Soon it was ‘Meg, can you help us’ with this or that.” Her job for the past two years has been to plan, permit and contract for a $6 billion plant in Matagorda County, Texas that will make 200 million gallons of green fuel a year—the equivalent of taking 400,000 cars’ emissions off the road.

Cute feels back in her element. At Cheniere, it raised $40 billion in capital to build a half-dozen plants in Texas and Louisiana that now cool and export about 7 billion cubic feet of gas per day — 60% of US LNG exports, and 5% of total domestic supply. It is not afraid of cost or complexity. “Many of the elements that we tie together are exactly the same as LNG.”

Bechtel came to this $6 billion estimate through front-end engineering. Even if costs rise, Gentle doesn’t think HIF will have trouble raising enough capital to build it. It’s a green wave paradox – the world needs to make such massive investments in low-carbon infrastructure that mega projects may be easier to finance than small projects.

“The demand for these projects is boundless, and would be addressed much better by projects of this scale,” says Andrew Ellenbogen, Managing Director at EIG. EIG, which manages $24 billion, first invested in HIF’s parent company in 2015 to build solar farms and gas power generation in Chile.

Ellenbogen has such confidence in the fuel’s potential to “tackle hard emissions” that EIG was in it even before the Democrats passed the inflation bill last year, with $500 billion or so in green subsidies, including the possibility for developers to create tax credits on software. Qualified green that can reach 60% of the invested capital. “The credits impact is huge,” Ellenbogen says, but gravy on top of it. We will invest with or without them.

So it makes sense that the HIF Project is already a big-name crowd eager to deliver on green promises. Porsche has invested $100 million in HIF Global. Baker Hughes, another investor, is involved in a $260 million equity injection in 2022. To address the largest predictable crisis, Gentle already has hundreds of electrolyzers booked from Siemens. The Patagonia plant leveraged ExxonMobil for methanol-to-gasoline technology. “Knowing who your partners are and how to build these blocks together is probably the most important lesson for me throughout the entire Cheniere and Tellurian journey,” says Gentle.

Naturally, there is an element of betting on coming here. It takes about 20 pounds of carbon dioxide to make a gallon of this fuel. The technology to capture carbon dioxide directly from the air started making headlines five years ago, but it’s still very expensive, at about $250 per ton.

Baker Hughes last year acquired startup Mosaic Materials in order to accelerate development of its CO2-capturing MOFs — like air filters designed at the molecular level to capture CO2 from the air. According to Alessandro Bresciani, senior vice president at Baker Hughes, the materials “capture carbon dioxide in ambient conditions and require relatively low energy to release carbon dioxide,” resulting in a lower cost of ownership.

Nice stuff, but Gentle says costs should be closer to $100 a ton (before generous federal tax breaks under the Inflation Cut Act). So initially, they’ll use other sources of recycled carbon dioxide, says CEO Cesar Norton. Baker Hughes declined to share any predictions about how many years of iteration it will take to reach that price point.

Gentle and the HIF team chose the site in Matagorda County, Texas for easy access to its most important component: electricity. The plant will have a 24/7 continuous electrical demand of 2,000 megawatts, which is enough to power about a million homes. Good thing it lies along a high-voltage transmission corridor that was overdone in anticipation of the unrealized expansion of the South Texas Nuclear Power Plant.

Securing dedicated supplies of renewable electricity is critically important if projects like this are really intended to reduce emissions rather than increase them, says Cy McGeady, associate fellow at the Center for Strategic and International Studies. There is a triple set of concerns known as ‘matching time, extras and deliverability’. In short, you don’t want to run the electrolyzer when the wind stops blowing because the electricity most likely comes from fossil fuel generators. And you don’t want to use existing renewable energy projects to power the electrolyzer, because then you’re cannibalizing someone else’s low-carbon energy supply. As for deliverability, “You can’t build a wind farm in Nebraska for your plant in Texas,” says McGeady. Right now, the Treasury Department sets out the rules that developers must follow if they want access to the full range of tax credits. Stricter rules will add a lot of costs and slow application rollout. Which is why McGeady warns, “The economy is very speculative until we get guidance from the Treasury.”

To make sure HIF’s share of wind power is put on the grid, Gentle says they’ll need to buy out the production of wind farms with a maximum capacity of 5,000 megawatts (remember, wind only blows 45% of the time). This would require a dedicated electrical production of 1,000 500-foot turbines. All to make an alternative fuel for it Just 400,000 cars, while the US has 276 million cars on the road. Is it reasonable to go to all these problems to extend the era of internal combustion? “It’s worth the effort because with the fuel you can operate the existing fleet of cars on a CO2-neutral basis,” says Porsche spokesman Hermann Josef Steben.

Gentle (a graduate of James Madison University and MBA from Rice University, who previously worked at Anadarko Petroleum) thinks it will start with a cost of about $5 a gallon to produce the fuel — about twice the cost of regular gasoline. This is expensive, though, and the fuel will run a low-carbon premium. how much? At least 30 cents a gallon considering recent California CO2 dam and trading prices are about $30 a metric ton (2,200 lb). In addition to gasoline, HIF plans to sell a large portion of Matagorda’s initial production as freight fuel, to fleet owners struggling to meet tough new international rules on emissions. She says future factories will make jet fuel.

Initially, when Gentle left the LNG business, amid faltering progress on the Tellurian Driftwood LNG project, it said it was looking to invest in hydrogen-based fuels, but quickly decided the challenges of transporting raw hydrogen would be overwhelming. For example, putting natural gas into a tanker ship for export requires it to be cooled to -260°C and converted into a liquid. “When I work in the LNG business, when I knew that in order to transport hydrogen on a ship it had to be much colder, near absolute zero, I immediately knew that wouldn’t happen” because the extra costs and difficulty of containing such a small molecule make it impractical. . “The boil is much higher than LNG. As with anything you have to keep unatmospherically cold, you have to scrape it or you lose it.” This attracted them to so-called hydrogen carriers, such as ammonia (NH3) or synthetics such as fuels that are easier to transport.

While developing the Matagorda site, HIF Global is also working on one in Tasmania, which will export carbon dioxide from the forest products industry. They will add more plants in Patagonia as they build wind turbines, says Norton, who began his career working on a power plant in Buenos Aires and for more than two decades has been a leader in building natural gas, wind and solar power in South America. Norton envisions investing tens of billions of dollars in southern Chile to capture its “strong, continuous winds” as the primary raw material for green products. He calls it the “Power-to-X” model.

Gentle envisions investing hundreds of billions in technology over the coming decades, with HIF Global aiming for dozens of projects that can remove the emissions impact of 5 million cars. Why not? A lot has been invested in LNG projects in North America over the past decade. Even a $6 billion plant that produces the equivalent of 14,000 barrels a day is a drop in the 100 million barrels a day bucket of the global oil market (and once complete it would be a tasty acquisition for a major oil company).

“This is a solution now, today, really,” she says. “If you’re trying to deploy large amounts of capital, you can’t do it $20 million at a time. You have to have scale.”

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