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Zero Parks – The hydrogen JV of New Fortress Energy

New Fortress Energy intends to launch Zero Parks, a Joint Venture with Fortress Transportation and Infrastructure ($FTAI), which is managed by Fortress Investment Group, the same parent company as New Fortress Energy. 

In the last 12 months, NFE has launched Zero, its division focused on hydrogen alternatives to fossil fuels.  At the beginning, NFE looked mainly at green hydrogen technologies and invested in an Israel-based electrolyser company. Although, in parallel, it also worked on blue hydrogen. In the last conference call (1Q21), Wes admitted that “green hydrogen businesses are not commercially viable today.” So, NFE it is going to focus on Blue Hydrogen, announcing two initiatives for clean fuels

But before getting into more details about the hydrogen initiatives of NFE, let’s explain a little bit about the different ways of producing hydrogen.

Ways of producing hydrogen

Brown hydrogen is created through coal gasification. 

Grey hydrogen is the process of producing hydrogen from natural gas throwing off carbon waste. 

Blue hydrogen uses carbon capture and storage for the greenhouse gases produced in the creation of grey hydrogen. Related to this type of hydrogen is Ammonia fuel, which can be burned in thermal power stations without releasing carbon emissions. … Blue ammonia is a feedstock for blue hydrogen, a version of the fuel made from fossil fuels with a process that captures and stores C02 emissions

Green hydrogen is the ultimate clean hydrogen resource – uses renewable energy to create hydrogen fuel. For example, water electrolysis used to produce long-duration hydrogen energy storage requires a lot of energy. That energy could come from renewables.

Aligned with that view, Wood Mackenzie has predicted that green or low-carbon hydrogen / green hydrogen will become cost-competitive by 2040

feedstocks to produce hydrogen

Regarding the picture, Brown and Grey hydrogen would come from coal, Blue hydrogen from gas and Green hydrogen from water.

What is Zero Parks – New Fortress Energy

Zero Parks is the new JV of NFE, which could make a final investment decision (FID) in the next two to three months for 2 projects, one to develop renewable fuels and another for a blue ammonia project.

The renewable fuels project would create renewable diesel from repurposed materials such as animal fats, used cooking oil and other biomass, while the other would focus on steam methane reforming (SMR) and carbon capture to create blue hydrogen, instead of using renewable power to create green hydrogen.

The Renewable Energy Group ($REGI) would be comparable for the first project. Regarding blue ammonia, there are a few companies looking into it including $GLNG (Golar LNG), although at a very early stage. Blue ammonia has a huge potential in the shipping market, so they expect to get the customer base from this sector

Zero Parks first projects: blue ammonia and renewable fossil-free

In order to carry out these projects, NFE is partnering with FTAI as it provides three critical needs:

  • Efficient logistics for feedstock supply
  • Access to land in key markets. 
  • Access to low-cost tax-exempt financing that enables NFE to find investments quickly and efficiently. 
FTAI partnership with NFE

The site of the projects is FTAI’s terminal in Beaumont, Texas. CAPEX estimated between $200MM and $300MM. Each project have a two-year development timeline.

Zero parks by New Fortress Energy new projects

Jefferson is well-connected terminal to all modes of transportation, plenty of space for additional development, and the track record of obtaining low-cost financing in the tax-exempt markets. Consequently, NFE expects to finance both projects largely with tax exempt debt requiring minimal equity investment, which should in turn result an extremely attractive equity returns

The technology for both projects is already available. The focus right now is on feedstock. NFE is focused on securing the offtake for the projects (The expect to do that in the coming months). Once the fuels are created, they need to be moved just like any other fuel, (by pipeline, barge, truck…) So it needs to use the Jefferson infrastructures.

Apart from these two projects, NFE says that they are evaluating more than 10 individual projects. They do expect to do several over the next six to 12 months.

The situation of the JV with FTAI is at an early stage, they did the LOI, regarding that FTAI provides land, access to their terminals and operational support and NFE provides all the technical and commercial activities. 

The company would be 75% for NFE, 25%, for FTAI.

The Blue Ammonia Transition 

While moving to fully green hydrogen may be the eventual end-game of 2050 commitments, the more immediate, compelling and realistic economic proposition lies first with the adoption of blue ammonia, which can help reduce many industries’ carbon footprint while laying the groundwork for further decarbonization gains. 

Blue ammonia holds extra promise as it can be produced, stored and transported using the large-scale ammonia infrastructure currently in existence. A gas at room temperature, ammonia’s stability facilitates deployment via multiple modes of transport thereby expanding its reach. In addition to existing import and export terminals, a considerable portion of the existing LPG fleet is capable of transporting ammonia. 

Utilization of this infrastructure will be critical as new hydrogen-powered technologies including combustion turbines and fuel cells (in particular) are deployed in regions where production of, or easy access to green hydrogen, will lag. 

Zero (NFE) – Long Ridge project

NFE is also partnering with Long Ridge Energy Terminal (also the parent company is Fortress) and GE Gas Power to help transition Long Ridge’s 485 MW combined-cycle power plant in Hannibal, Ohio, to run on carbon-free hydrogen. By the end of 2021, Long Ridge plans to begin producing carbon-free power by blending hydrogen into the natural gas that fuels the plant. 

Over the next decade, it will work with GE to ensure the plant can burn 100% hydrogen. 

Commercial operations are planned for November 2021, Long Ridge will be the country’s first purpose-built hydrogen-burning power plant and the world’s first to blend hydrogen in a GE H-class gas turbine. The plant’s GE 7HA.02 combustion turbine can initially burn from 15% to 20% hydrogen by volume in the gas stream, and can transition to 100% hydrogen over time. Black & Veatch will help design and execute the plant’s integration for hydrogen blending to ensure safe and reliable industrial practices.

New Fortress Energy & Mission Zero emissions

We still do not know how to fit the Long Ridge project into Zero Parks. As of today, the only source of information is the company so we will need to wait until more information is provided. We cannot make any valuation & estimation of revenue at this point in time.

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