POWER-TO-X

All eyes on Utah following Chevron U-turn

Chevron has bought into the ACES Delta green hydrogen production and storage plant in US state Utah. This will be a good case study for how to use hydrogen-filled salt caves as a form of long-duration energy storage.

RICHARD HEAP

September 19, 2023

  • Chevron has joined a green hydrogen production and storage project in Utah
  • It plans to invest $10bn in emissions-reduction plants between 2021 and 2028
  • UK’s Royal Society says hydrogen salt caves are attractive for energy storage

This month, US oil and gas giant Chevron has bought into a huge green hydrogen production and storage facility in Delta, Utah. Are you feeling déjà vu yet?

This is not the first time Chevron has committed to this project. In September 2021, it agreed to buy a stake in project company Advanced Clean Energy Storage Delta (ACES Delta), as part of its strategy to invest $10bn by 2028 in ventures to reduce greenhouse gas emissions. Of that, $2.5bn was for ‘green’ and ‘blue’ hydrogen.

However, Chevron pulled out of the deal in June 2022 because it said it “no longer meets our requirements”. This called into question its power-to-X investment plans.

But now, 14 months later, the deal is done. The company’s subsidiary Chevron New Energies has acquired 100% of Magnum Development from private equity investor Haddington Ventures. This has given Chevron a 78% stake in the ACES Delta joint venture between Magnum and Mitsubishi Power Americas.

The ACES Delta development is set to start commercial operations in mid-2025 and create 100 metric tonnes of green hydrogen each day, which will be stored in two salt caverns. The developers said this would make it the world’s biggest green hydrogen storage facility, and mean it can be used for “seasonal, dispatchable” energy.

Chevron is not the project’s first big-name investor. Canadian pension fund Ontario Teachers’ invested in the scheme in 2022; and the project has also received $500m support from the US Government. But this month’s deal has drawn our focus to Chevron’s green hydrogen investment plans and salt caverns for energy storage.

Chevron investments

ACES Delta is not Chevron’s first move into the hydrogen sector. The company currently produces around 1million tonnes of hydrogen annually via its traditional fossil-based business, and has worked in the retail hydrogen business since 2005. This hydrogen is mostly derived from fossil fuels, but it shows that the company has a track record of handling, storing, transporting and selling the fuel.

This is not even the company’s first green hydrogen investment of 2023.

In January, Chevron announced a collaboration with renewable fuels firm Raven SR and electric vehicle producer Hyzon Motors to commercialise operations at a green waste-to-hydrogen in Richmond, northern California. Chevron owns a 50% stake in the facility, which is set to turn organic waste and landfill gas into hydrogen that will be sold for local hydrogen transportation, to replace conventional fuels. Commercial operations are due to start by March 2024. Chevron owns a 50% stake in the facility.

Chevron is also a founding member of the HyVelocity Hub project being developed along the Gulf Coast in Louisiana and Texas. The scheme is set to produce ‘clean’ hydrogen, and take advantage of strong hydrogen infrastructure in the Gulf Coast region. There are currently 48 hydrogen production plants creating 3.5million tonnes of hydrogen annually, and transporting it via 1,000 miles of hydrogen pipelines.

However, ACES Delta is arguably the most interesting of them all.

First, the development partners already have an off-taker for the hydrogen produced by the scheme. Securing off-takers has been difficult for green hydrogen firms elsewhere in the world, but this is where Chevron’s record in fossil-based hydrogen gives it the edge as it is experienced in selling hydrogen as a fuel. Its main off-taker at ACES Delta is the Intermountain Power Agency (IPA), which is a group of municipal utilities and electric cooperatives in six US states.

The IPA plans to use hydrogen from ACES Delta to support its IPP Renewed plan, whereby it is looking to retire coal plants in California and Utah to transition the sites towards renewables and greener fuels. ACES Delta will supply other hydrogen to utility, transport and industrial off-takers in the western US. It has multiple routes to market.

Second, we are intrigued by the idea that ACES Delta represents a “seasonal” form of energy storage. Storing fuel produced in the warmer months to save it for when it is most needed during the winter is an established model in the natural gas industry, but this shows green hydrogen can play a similar role. We see a multitude of energy storage companies touting their long-duration storage technologies, but the ability to convert renewable power and use it between seasons is highly attractive.

The use of salt caverns to store hydrogen isn’t new. Chevron has stored hydrogen underground in a former salt mine, at the Chevron Phillips Clemens Terminal in Texas, since the 1980s. But this shows that the company believes it can be economic in the green hydrogen sector too.

The UK’s Royal Society has analysed the potential for hydrogen as a form of long-duration energy storage in this analysis, published in September 2023. It said: “Storing hydrogen in solution-mined salt caverns will be the best way to meet the long-term storage need as it has the lowest cost per unit of energy storage capacity.”

And third, this deal shows that green hydrogen and power-to-X will play an important role in helping Chevron to embrace the energy transition. Some will say it is doing so too late. Others will criticise the fact that the company’s $10bn low-carbon investment plan from 2021 to 2028 is on average only $1.25bn each year, representing a tiny slice of the firm’s annual profits ($35.5bn in 2022) and capital expenditure ($12bn in 2022). Nevertheless, this shows that the firm is moving in a greener direction.

This promises to be an interesting case study as the project take shape.

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