Technology upstart Modern Electron Inc. has cracked the code for turning natural gas into clean hydrogen cheaply, with negative production and delivery costs expected for some parts of the US, according to the company's CEO.
Modern Electron produces hydrogen by methane pyrolysis, or converting gas into hydrogen and solid carbon, as opposed to planet-warming carbon dioxide. The result is "turquoise" hydrogen, so named for its similar production method to blue hydrogen but with a greener emissions profile.
Turquoise hydrogen still lacks the name recognition of blue hydrogen, which is produced with natural gas using carbon capture technology, or green hydrogen, produced using renewable-powered electricity. Despite this, Modern Electron is betting on methane pyrolysis to reach the US Energy Department's goal to reduce the price of clean hydrogen to $1 per kilogram.
"I frankly think turquoise hydrogen hasn't taken off because the technology is a lot newer," Tony Pan, Modern Electron co-founder and CEO, told S&P Global Commodity Insights.
When factoring in federal tax credits for hydrogen producers, "in several years' time, there will be places in the US where we will be making hydrogen for free, delivered," Pan said. "Which is crazy."
Cleaning up the gas grid
Though still a nascent technology, the use of methane pyrolysis for carbon-free hydrogen production has been endorsed by the DOE's Loan Programs Office. In December 2021, the office guaranteed a $1.04 billion loan that Monolith Materials Inc. will use to expand its turquoise hydrogen facility in Hallam, Neb.
Modern Electron, based in the Seattle area, produces equipment that can be installed at the end of the natural gas distribution network, separating out the carbon and delivering hydrogen to the customer. The company has raised nearly $100 million in three disclosed funding rounds since 2020, with the results of a fourth funding round to be announced in about a month, Pan said.
The early-stage company's target market is small to midsize offtakers, such as industrial facilities or hydrogen trucking refueling stations. Instead of receiving hydrogen deliveries by tanker truck, which can be expensive without a nearby production facility, the customer would only need to install Modern Electron's technology at the end of the nearest natural gas distribution pipe.
Modern Electron's plans for its first pilot demonstrations in 2023 come as the Biden administration pushes private industry to substitute fossil fuels for hydrogen, despite its current price premium.
"To be very clear, hydrogen is a decarbonization play. There's no other reason to do it," Pan said. "But if you're interested in hydrogen, this could not only be an extremely cheap way of getting hydrogen — because natural gas is cheap as a feedstock, and there's no transportation and distribution costs — but a very quick way of getting hydrogen because you're not waiting for the hydrogen pipeline to be permitted and built."
By producing solid rather than gaseous carbon, Modern Electron also avoids the trouble of transporting and storing CO2 emissions underground, Pan said. The solid byproduct, called carbon black, is ineligible for federal tax credits for carbon capture. However, the commodity, found in tires and printer ink, fetches about $1 per kilogram, compared to the Inflation Reduction Act's tax credits of less than 9 cents per kilogram for carbon sequestration.
Modern Electron's process is also more likely than most blue hydrogen facilities to be eligible for the full $3-per-kilogram tax credit for hydrogen production, awarded to suppliers that limit their corresponding lifecycle greenhouse gas emissions to 0.45 kilogram. Such a carbon footprint is equivalent to about a 95% emissions reduction from "gray" hydrogen, or hydrogen produced without carbon capture technology.
While some blue hydrogen developers say they can achieve upward of a 95% carbon capture rate using a process called autothermal reforming, the figure does not account for upstream methane emissions from the facilities' natural gas feedstocks. "I think it's close but no cigar," Jeff Brown, managing director with clean energy nonprofit EFI Foundation, told Commodity Insights in February.
Pan said turquoise production has a higher carbon capture rate than blue, putting the process within the range of eligibility for the $3-per-kilogram subsidy. However, Modern Electron might lose that eligibility in regions with high rates of methane leakage.
"We clean up one end of the pipe, but we can do nothing about the other end," Pan said.
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