Making our role in the green hydrogen industry publicly available.
We’ve stated in previous posts that one of our keys to unlocking the chicken-and-egg dynamics affecting the green hydrogen evolution is developing a model that fosters collaboration by building trust and transparency. We’re now applying the same logic to our strategy.
NewBalance Energy identifies, partners with, and supports the most promising green hydrogen projects by investing capital and off-taking their future production to provide leading organizations with competitive and reliable hydrogen supplies.
We built a team of world-class experts, including leading consultancy firms E4tech and ERM, to develop a set of production due diligence protocols and processes that assess and ensure the quality of every step of a project life cycle from feasibility studies to construction. We call it NewBalance’s Hydrogen Production Qualification Standards (HPQS). Through the HPQS, we can provide off-take partners with a transparent and predictable roadmap focused on de-risking critical supply chain variables such as technology selection and value chain components. This work is the centerpiece of our strategy as it builds a shared understanding for production to emerge and allows hydrogen strategies to integrate the supply chain evolution.
We chose South America as our regional production focus, Antofagasta and Magallanes valleys in specific, because of their superior natural resources. Considering that the cost of electricity amounts to ~60% of the production cost of green hydrogen, production projects in these valleys could produce at half the price compared to other routes, including transportation.
Our HPQS ensure that the other ~40% remains within the most competitive and that the entire supply and value chains grow robust.
Green Hydrogen Production
As production projects qualify to become part of our portfolio through the HPQS, our partnership and support come in two ways: providing an early off-take proposal and investing capital to accelerate their path to a financial investment decision. We aim to take those actions as early as possible in the life cycle of a project since the timing of both is critical to their future success.
The off-take proposal is tied to the HPQS to reduce the risks associated with every step in the life cycle of a project and add predictability to the future volumes of hydrogen that we will be purchasing and delivering to our off-take partners.
Our capital investment aims to fund remaining feasibility studies, infrastructure, value chain components, or engineering designs. We work with each project to identify open critical elements across their path to a financial investment decision and operate with them to solve them. In exchange for our capital contribution and our early off-take commitment, we get interests in the production of the property. We don’t take equity or operational roles in production projects.
Providing Reliable and Competitive Supplies
Only a handful of organizations are ready to commit to future supplies today. The reasons are evident. Final hydrogen prices (and production costs) will remain uncertain until critical elements of the value chain mature, as well as public policy. Analogies to solar energy and how fast their prices dropped in the past decade make many CEOs cautious about current forecasts while few plan on a 10-year time horizon. Our job is to find those organizations, reduce their risks of moving forward while increasing their upside. We do this by developing due diligence processes that identify the most reliable and competitive projects within the most competitive regions worldwide. We still won’t have final prices for a while, but we know the position we want to be in when the value chain is ready.
For leading organizations, NewBalance absorbs the risk of building the supply in alignment with the HPQS and delivers at pre-agreed conditions from a diversified pool of competitive projects. This model turns our off-take partners’ commitments into de-risked milestone-driven events, adding predictability and transparency to their involvement.
The Upside for Early Movers
Securing early and de-risked access to hydrogen supplies provides organizations with flexibility and optionality as they face increasing pressure from stakeholders and public policy. As those pressures grow, having agreements into the first giga-projects at predefined conditions could also represent protection in a world with potential green hydrogen supply constraints and therefore increasing prices until new production catches up.
Green Ammonia Market Makers
During NewBalance’s first years, our focus will be on green hydrogen production projects using ammonia as a carrier and developing a green ammonia market. The main reason for this is straightforward: transporting liquid or gaseous hydrogen is still years away in terms of technology, capacity, and costs, and an established global supply chain for green ammonia solves many of the friction points we currently face, plus a current annual market of ~200M tonnes of grey ammonia to decarbonize (mainly fertilizers) growing at a ~5% CAGR. This number could grow if green ammonia emerges as a clean alternative for steal-making, coal-burning, and maritime fuel. The opportunity is clear and imminent.
Our long-term optionality lies within the emergence of hydrogen societies from the most advanced nations. The market could grow exponentially when liquid or gaseous hydrogen vessels become available at scale to decarbonize sectors that are hard to abate otherwise, such as heavy-duty transportation and heat & power. For those sectors, clean alternatives like battery-powered systems are either less efficient or a pass-thru of hard to replace carbon-heavy electricity.
We believe that making a green ammonia market and supporting competitive giga-scale green hydrogen projects today will contribute a cardinal piece to achieving the sustainable societies of tomorrow.