Latest news with #GlobalEnergyTransition2025
Reuters
30-04-2025
- Business
- Reuters
US carbon capture storage hit by inflation, Trump
Summary Investment in large U.S. carbon capture storage facilities has been dented by inflation and Trump's spending freeze, impeding greener pathways for cement and other industries. April 30 - Carbon capture utilisation and storage (CCUS) is seen as a key tool to reduce carbon emissions from industrial operations and power plants, but making the leap to larger commercial projects is proving challenging. CCUS allows CO2 to be captured from burning fossil fuels and either stored or utilised in other industrial processes. Carbon capture technology is particularly useful in hard-to-abate sectors, such as cement, steel and chemical production. Tax credits introduced by the Biden administration helped to spur early projects but the future of support under President Donald Trump is uncertain. CCUS must be widely deployed at scale to become more economical and larger commercial projects are few and far between. Most operational CCUS projects are based on enhanced oil recovery in the oil industry. CHART: Sources of US CO2 emissions in 2022 While some customers are prepared to pay a premium for decarbonised products, CCUS requires large investments and attracting investors is difficult. Many companies have funded first of a kind projects from their own balance sheets, a spokesperson for energy technology firm Baker Hughes told Reuters Events. 'There is an established investment infrastructure and fundraising capability for traditional oil and gas and LNG projects, but for CCUS, clean power and other new technologies — it is far more challenging,' the spokesperson said. 'For unproven technology at scale, external funding is simply not there except for in very rare circumstances.' Join hundreds of senior executives across energy, industry and finance at Reuters Events Global Energy Transition 2025. Soaring power demand for AI and data centers may offer some additional pathways for CCUS projects. Last month, Baker Hughes signed a partnership with Frontier Infrastructure to develop integrated CCUS, gas-fired power and data center projects across the United States. "By integrating gas-fired energy with the potential for permanent carbon storage, we are creating a direct, reliable power solution tailored to evolving industrial needs," Frontier CEO Robby Rockey said in a statement. Tax credits The Biden administration boosted investment in CCUS projects by issuing 45Q tax credits and direct grants to encourage investment. The credits offer $85 per ton of CO2 sequestered providing wage and apprenticeship standards are met and they spurred the announcement of more than 270 projects that "span the carbon management value chain" and are at different levels of technology readiness, Christian Flinn, Public Policy Manager for the Carbon Capture Coalition, told Reuters Events. However, inflation has eroded the value of the tax credits and pushed up project prices. Developers face roughly 30% higher capital costs due to post-pandemic inflation, high interest rates and permitting difficulties, Howard Herzog, Senior Research Engineer with the MIT Energy Initiative, said. 'The optimism that the Bipartisan Infrastructure Bill and the Inflation Reduction Act generated is all but gone,' he said. Credits alone do not offer enough support for many projects, including most of the 90 U.S. cement plants in operation, according to Peter Findlay, Director, CCUS Economics at Wood Mackenzie. Wood Mackenzie forecasts U.S. CCUS capacity will double to 104 million tonnes a year by 2034. 'Increased and more certain incentives to decarbonise would spur this number higher," Findlay said. Funding unclear The Biden administration's Infrastructure Investments and Jobs Act has already spurred $1.7 billion of federal and private investment in CCUS projects, said Flinn. The act provides funding for CCUS power generation and industrial demonstration projects, CO2 pipelines and four regional Direct Air Capture Hubs. In December 2024, the Department of Energy (DOE) opened applications for $750 million of funding for commercial scale projects at one coal-fired plant or two industrial facilities; $450 million for large-scale CCUS pilot projects; and $100m for the design of CO2 transport and storage infrastructure. DOE said it had begun negotiations with Calpine over part financing the addition of 2 million tonnes a year CCUS capacity at its 896 MW gas combined heat and power facility in Baytown, Texas. However, the fate of the support announced in December is uncertain as a result of the Trump administration's spending review. For exclusive insights on the energy transition, sign up to our newsletter. State initiatives can also drive investment, such as California's low carbon fuel standard, and pressure on large companies by shareholders also plays a role, Herzog noted. The Trump administration may opt to keep the 45Q credit as many CCUS projects are in Republican states and the financing required is relatively small, Findlay said. DOE grant programs may be more at risk, he warned. Cement leaders CCUS is playing a growing role in decarbonising the global cement industry. The technology is essential for the cement industry to meet net zero, a spokesperson for German multinational Heidelberg Materials told Reuters Events. CCUS could account for 36% of global carbon reduction towards net zero carbon concrete by 2050, according to a roadmap set out by the Global Cement and Concrete Association. Heidelberg Materials has proposed a CCUS project at its Mitchell cement plant in Indiana that would supply 2 million tonnes of CO2 a year for storage or use from 2030. Test well drilling began in January with $8.9 million funding from the DOE's CarbonSAFE project. Heidelberg will open its first large scale CCUS facility this year at its Brevik plant in Norway in Northern Europe. The project will be able to capture 400,000 tonnes/year of carbon and was made possible by strong government support, the availability of co-funding and social acceptance for CCUS technology in Norway, the company spokesperson noted. The public sector plays an important role 'in ramping up green markets and accelerating the shift to climate-friendly products by adapting its procurement procedures," the spokesperson said. U.S. federal legislation over the past decade laid the groundwork for CCUS deployment but this must 'mark the beginning, not the end, of necessary efforts to build the portfolio of available federal policies for carbon management technology deployment," Flinn said.
Reuters
14-04-2025
- Business
- Reuters
US steel tariffs set to hike costs, lead times in clean power
April 14 - Last month, President Donald Trump raised steel and aluminum tariffs by 25%, ending all country exemptions, in addition to higher tariffs on China already hitting the clean power sector. The Trump administration expanded the list of derivative products subject to tariffs, covering a broader range of manufactured goods, including items used by the energy industry. In a rapidly evolving tariff war, Trump on April 9 abruptly paused an additional hike in tariffs on global trading partners for 90 days, leaving an additional baseline 10% tariff on all imports from all countries in place, on top of the tariffs on steel and aluminium and tariffs imposed on individual countries like China, Canada and Mexico. The U.S. is the world's largest steel importer, excluding the European Union, with a total of 26.2 million tons of imported steel in 2024, up 2.5% from 2023, according to the U.S. Steel Imports Report from the U.S. Department of Commerce's International Trade Administration (ITA). Finished steel imports accounted for 23% of domestic consumption in 2024, according to the American Iron and Steel Institute. "From an energy perspective the impact will certainly be large, as we don't currently have the capacity to manufacture everything domestically," Lynlee Brown, partner in Ernst & Young LLP's Global Trade practice, told Reuters Events. CHART: Top sources of US steel imports Steel and aluminum are widely used in power grid projects, wind farms and solar farms. Affected components include cables, wires, conductors, generators, substations, transformers, energy storage systems, wind and transmission towers, solar racking and infrastructure. Transmission and wind power projects may be the most affected by the new tariffs due to large amounts of steel and aluminium required. "Tariffs are inherently inflationary and will drive up both domestic and imported steel prices," said Earl Simpkins, partner at PwC. "Overall, the supply chain will face increased costs and extended lead times as companies prioritize securing reliable supply and pricing stability," he said. Costs jump Building domestic production capacity can take time and broad tariff implementation across sectors without a strategic approach is likely to hurt American consumers and communities, according to Vanessa Sciarra, vice president of Trade & International Competitiveness for the American Clean Power Association (ACP). 'Just as other major sectors understand, history shows building a robust supply chain doesn't happen overnight,' Sciarra said in a statement. 'The policy whiplash from these tariffs will ultimately undermine the ability to realize a domestic supply chain and will constrain efforts to deliver energy security and reliability for Americans.' Join hundreds of senior executives across energy, industry and finance at Reuters Events Global Energy Transition 2025. Supply chain companies may try different valuation and classification cost methodologies to mitigate the impacts of tariffs on their product prices, but not every company will be able to absorb the tariff-related costs. The combination of tariff changes issued by the Trump administration could increase the total tariff burden for the Energy, Utilities and Resources Industry from $400 million a year to approximately $53 billion a year, according to PwC's US Tariff Industry Analysis. This does not include the latest universal 10% hike on a large number of countries. CHART: US annual clean power installations New tariffs on steel and aluminum will make it "more expensive to deploy wind in the US," according to Endri Lico, analyst of Wind Supply Chain & Technology, Power & Renewables at WoodMackenzie. The higher tariffs on metals alone could increase the cost of wind power projects by 1%, Lico said. 'The challenge is not only on the steel tariffs but also on all the tariffs that the new administration imposes," he noted. Uncertainty hurts President Trump's tariffs and reforms to energy policies will create uncertainty that affects decision-making and strategies in clean power deployment, according to David Victor, Professor of innovation and public policy at the University of California at San Diego's School of Global Policy and Strategy. "These tariffs will raise the costs of some of the technologies, so that will slow down the energy transition, but I think the much bigger impact is the uncertainty and the anxiety that is going to happen over the longer term," he said, referring to logistics and supply chain disruptions as industries try to adapt to the shifting tariff and policy scenarios. For exclusive insights on the energy transition, sign up to our newsletter. Developers are becoming more cautious about making significant financial commitments, Benjamin Snowden, Clean Energy and Environmental lawyer at Fox Rotshchild, said. Regulated contract structures like power purchase agreements (PPAs) should be adapted to account for changes to tariffs and other market drivers, Snowden said. These can be adapted at state or network level. Contract changes could include clauses that allow developers to terminate contracts under certain circumstances or price adjustment clauses that allow renegotiation following tariff and tax policy shifts that materially affect project costs. "We need to evolve our contract structures to have a more nuanced way to allocate risk that protects rate-payers, ensures reliability, and makes it possible to build these projects," Snowden said.
Reuters
06-03-2025
- Business
- Reuters
US clean power investors see strong outlook despite gas plant rush
The rapid uptake of AI and cloud computing is rapidly increasing U.S. electricity demand and raising the need for 24/7 power supply solutions. Solar, wind and battery storage have dominated new power installations but data centers need a steady supply of power both day and night, requiring either dispatchable power plants or a combination of generation technologies. The growing use of electric vehicles will also require more overnight power supply as owners take advantage of lower power prices. Power demand from data centers is predicted to reach 325 to 580 TWh in 2028, compared with 176 TWh in 2023, the U.S. Department of Energy (DOE) said in December. Data centers are representing a growing share of power demand, shifting the overall shape of demand and opening up new opportunities for power generators. Virginia has the greatest concentration of data centers, hosting 536 facilities of which the vast majority are in a tiny area just west of Washington DC, according to the Data Center Map website. By 2030, data centers will require 50% of Virginia's power generation, compared with 26% in 2023, the Electric Power Research Institute (EPRI) said. Solar and wind are the cheapest form of power in many parts of the U.S. but the rising need for 24/7 power has spurred a flurry of new gas-fired power generation projects. In one example, Entergy plans to build its first gas-fired plant in Mississippi for half a century and the 754 MW facility is set to supply Amazon data centers from 2028. CHART: US planned power generation installations in 2025 For renewable energy developer RWE Clean Energy, the fundamentals of the U.S. market remain unchanged, Andrew Flanagan, CEO of RWE Clean Energy, told Reuters Events. RWE group owns gas-fired capacity in Europe but is yet to invest in U.S. gas plants. Broad-based demand growth in the coming years will "require the deployment of all available energy resources 'as part of an all-of-the-above energy strategy," Flanagan said. U.S. power demand is set to grow by at least 1.5 to 2.5% per year over the next 15 years, 'driven by data center demand, the relocation of industry and manufacturing back to the U.S. and broad-based electrification,' he said. Join hundreds of senior executives across energy, industry and finance at Reuters Events Global Energy Transition 2025, opens new tab. In one example, Arizona utility Salt River Project (SRP) aims to double the generating capacity on its power system over the next ten years to meet growing demand in the Phoenix metropolitan area, in part due to new data centers, an SRP spokesperson told Reuters Events. SRP has committed to cut carbon emissions by 82% by 2035 in its Integrated System Plan, by adding renewables, energy storage and gas-fired capacity, while retiring 1,300 MW of coal capacity. Dispatchable power Utilities and developers are seeking to build gas-fired plants to supply data centers as 'firm capacity is valued more than intermittent capacity," Patrick Finn, Senior Analyst, North America Power Markets at Wood Mackenzie, told Reuters Events. Blackstone Energy Transition Partners announced in January that it would acquire Potomac Energy Center, a 774 MW gas plant in Loudoun County, Virginia to supply local data center requirements. The plant is close to 130 existing data centers. Virginia utility Dominion Energy recently lowered its renewable energy forecast to 80% of power production within 15 years, down from 95% previously, and the company is now building a new 1,000 MW gas-fired power plant in Chesterfield County. MAP: Change in US commercial sector power demand by state Despite the surge in gas plant activity, 'renewables are still a valuable piece of the puzzle' so it makes sense for clean power developers to identify areas with large load growth, Finn said. The need for 24/7 supply boosts the business case for battery storage, although the deployment of batteries will face tariff and supply chain challenges as most are imported from China or other Asian countries, Tom Atkinson, Portfolio Manager, AXA Investment Managers, told Reuters Events. Many Big Tech companies have ambitious zero carbon goals but several are also looking to develop new nuclear plants as they seek dispatchable power capability. Anything that provides 'firm and clean capacity would be ideal', including long duration energy storage and nuclear small modular reactors, Finn said. Deployment speed While some utilities are seeking gas-fired power capacity, overall the outlook for clean power developers remains positive as solar and wind are faster to develop, have fewer supply chain constraints, and are cheaper than new gas capacity in much of the U.S., Atkinson said. Tech groups are seeking fast deployment of power resources to meet soaring AI demand and solar and wind can be built faster than gas-fired plants. Some companies are even partnering with power developers to co-locate power generation and data centers and speed up development. To minimise development times, solar and wind developers must find suitable land areas and navigate bottlenecks in grid capacity that can delay grid connections. A lack of skilled labour can also be a challenge. Surging demand from tech groups is accelerating clean power activity - download our exclusive report, opens new tab. President Donald Trump has injected fresh uncertainty into the clean energy sector by freezing federal funds pending a review and issuing policies that promote fossil fuel development, but years of cost reductions in clean power have bolstered the underlying fundamentals. Trump has also thrown his support behind a $500 billion pledge by tech groups and investors to develop infrastructure for AI facilities. Meanwhile, a lot of clean power deployment is being driven at state level, through Renewable Portfolio Standards (RPS) that require energy providers to supply a stated minimum of zero carbon power. The RPS directives 'remain binding and instruct the technology mix of new capacity," Atkinson said. "We do not think they are vulnerable to federally led change," he said.
Reuters
12-02-2025
- Business
- Reuters
US hydrogen credit ruling allows developers to move forward
Summary Final tax credit guidelines from the Biden administration reward cleaner hydrogen projects regardless of technology but President Trump's spending review hangs over energy infrastructure buildout. February 12 - On January 3, the administration of former President Joe Biden introduced a tiered system to distribute production tax credits (PTCs) for clean hydrogen producers, regardless of whether they use renewable energy, nuclear or natural gas with carbon capture. "Green" hydrogen is produced using renewable energy and electrolyzers, which turn electricity into hydrogen through the process of electrolysis. Most hydrogen supplied to date has been "grey" hydrogen produced from gas-based steam methane reforming, while "blue" hydrogen is produced from gas and carbon capture technologies which lower the carbon footprint. The cost of green hydrogen is currently far higher than the cost of grey hydrogen and the PTCs aim to accelerate wider deployment of clean hydrogen technology and drive down costs. The Biden administration aimed to reduce the cost of clean hydrogen to $1/kg by 2031, compared with estimates of around $5/kg in 2022. CHART: US estimated clean hydrogen demand at threshold prices The 45V rules mean green hydrogen projects using clean power from plants built within 36 months of the hydrogen facility becoming operational qualify for a full tax credit of $3.00 per kilogram (kg) of hydrogen. The requirement to source clean power from newly constructed plants aims to ensure green hydrogen projects do not hamper efforts firmly underway to decarbonize wider electricity supply. For hydrogen projects, it could mean higher costs than sourcing power from older renewable energy facilities or the grid. To meet this requirement, hydrogen plants could also source power from nuclear plants at risk of retirement, up to 200 MW per reactor, or from existing renewable energy generation in states that meet strict clean electricity standards and emissions caps. Only Washington and California currently meet these criteria. The clean energy sector is digesting fresh market uncertainty following President Donald Trump's flurry of executive orders last month, but for hydrogen developers, the 45V guidance is a crucial step forward. Many developers had paused projects until the final rules were published. 'The Treasury's final guidance on 45V is a step forward in providing clarity for the hydrogen industry to move ahead with planned projects,' said Sachin Nijhawan, CEO of thyssenkrupp nucera, an electrolyzer manufacturer. Join hundreds of senior executives across energy, industry and finance at Reuters Events Global Energy Transition 2025. Green fuel developer HIF Global told Reuters Events that it expects that its planned green hydrogen plant in Matagorda County, Texas will qualify for the full credit. The $6 billion facility would produce 1.4 million tons per year of e-methanol by combining CO2 captured from the atmosphere with green hydrogen from wind power. "This final rule allows us to take the necessary next steps to work toward [Final Investment Decision] on our eFuels facility in Matagorda County,' Lee Beck, SVP Global Policy & Commercial Strategy at HIF Global, said. 'Having a regulatory framework in place is preferable to not having rules; in that state of uncertainty, a project cannot move forward." Technology agnostic The final 45V rules are less strict than an earlier version which only provided tax credits to the cleanest forms of hydrogen production. The final guidance is technology agnostic, allocating tax credits based on a sliding scale tied to the emissions associated with the production of hydrogen. Producers of blue hydrogen using natural gas and carbon capture can qualify for some credits, providing that their emissions remain under 4 kg of CO2e per kg of hydrogen produced. Although green hydrogen 'stands to benefit significantly under 45V ... the rules create a structured framework for clean hydrogen production, aimed at supporting developers across all pathways,' Nijhawan told Reuters Events. The guidance drew mixed responses from stakeholders. The American Clean Power Association said that 45V contains 'unnecessarily stringent requirements' that could derail projects, including "burdensome time matching standards" that require simultaneous production of clean electricity and hydrogen. The Fuel Cell and Hydrogen Energy Association said the rules are 'extremely complex.' The American Petroleum Institute, a fossil-fuel industry association, celebrated the rules as a 'clear step forward' and said it would work with the new administration to continue advancing policies that are 'technology neutral.' For exclusive hydrogen insights, sign up to our newsletter. The 45V compliance criteria would require stringent monitoring to ensure low emissions along the natural gas supply chain. It is unclear whether the Trump administration will seek to strictly regulate and monitor methane emissions. Earthjustice, an environmental group, said that the guidance largely supports the production of clean hydrogen but includes loopholes that could allow 'dirty' hydrogen producers to receive tax credits if not monitored appropriately. According to S&P Global Commodity Insights, about a dozen large-scale clean hydrogen projects had secured capital by end-2024 and 'the vast majority of that pending capacity is for hydrogen produced with carbon capture technology,' which suggests that many blue hydrogen projects do not require federal aid to get going. Trump disrupts Since taking office on January 20, President Trump has issued a string of presidential decrees to boost fossil fuel output and upend some of Biden's clean energy policies. This included a freeze on spending on federal loans and funds pending a review, including $7 billion earmarked for seven regional hydrogen hubs. The Biden administration last year started allocating funds to the hubs, which aim to kickstart regional hydrogen infrastructure across the U.S. It is unclear whether the Trump administration will look to modify the 45V rules. 'The hydrogen industry is more focused on the freeze of federal monies that has caused them to stop working on hydrogen hub projects," said Conrad Schneider, a senior director at the Clean Air Task Force (CATF). "Until it is clarified that the freeze does not apply to them, the tax credits are kind of moot,' Schneider added. Further changes to the 45V rules would add fresh uncertainty to the industry, warned CATF attorney Veronica Saltzman. 'The best and most likely thing the Trump administration can do is to just leave things alone,' Saltzman said. Despite the uncertainty caused by Trump's funding freeze, in the long run Trump's pro-business policies will likely lead to deregulation that would favor the hydrogen industry, Andy Marsh, CEO of Plug Power, a green hydrogen developer and electrolyzer manufacturer, told Reuters Events. There is strong demand for all types of hydrogen and the "Trump administration policy of energy dominance is actually good for the industry because part of that dominance is being able to provide green fuels as well as blue fuels,' Marsh said.
