Hydrogen Hype

Last week a new hydrogen project underway in Lancaster, California made headlines in the energy press.  The project is the brain child of the engineers at SGH2, a private company that claims to have developed a waste-to-hydrogen conversion technology that is the cleanest method to produce hydrogen yet conceived.  SGH2 proposes to use municipal trash as feedstock for a plant that can produce up to 11,000 kilgrams of hydrogen per day.

Hydrogen has been made with one of two methods:  1) gasification of coal or natural gas or 2) electrolysis of water. Gasification of fossil fuels saddles the hydrogen output with an unwanted carbon heritage.  Carbon capture and sequestration helps green it up  a bit, but increases the cost of the otherwise economical gasification process.  Electrolysis begins with clean water, but is an energy-intensive production method.  Depending upon where the electricity comes from, it can also mean a very large carbon footprint.  Electrolysis can be greened up by using solar or wind power, but the added cost remains an obstacle to widespread adoption.

SGH2 claims high-temperature plasma process the best alternative.  It can be used with a variety of wastes from tires to textiles to plastics.  Applying a torch at temperatures as high as 4,000 degrees centigrade with oxygen catalyzes the feedstock into a synthetic gas composed of carbon monoxide, carbon dioxide and hydrogen.  The super-heated gas is put through a cooling chamber where water vapor helps convert the carbon gases to more hydrogen.

Plasma is actually the fourth state of matter.  It does occur naturally.  The closest most of us get to plasma is the sight of lightening in the distant sky or through special equipment to observe gas on the sun’s surface.  Scientists have known how to achieve man-made plasma for several decades by passing electrical discharge through a gas such as oxygen.  The interaction of the gas with the electric arc dissociates the gas into the bits and pieces of matter  -  electrons and ions.  The Westinghouse Plasma Corporation started working on plasma torch technology in the 1980s, selling its technology to Alter NRG Corp. in 2015.  Eventually the technology fell into control of Sunshine Kaidi New Energy Group Co. Ltd., a privately-held biomass power generating company in China.  In 2016, Sunshine Kaidi announced plans to build a production plant in Finland that would combine the Fischer-Tropsch process and plasma gasification to turned wood wastes into synthetic diesel.  A heavy debt load seems to have sidelined Sunshine Kaidi in the years since.

True enough ground breaking projects of the sort proposed by Sunshine Kaidi and SGH2 involve high costs that are not compatible with a debt-laden balance sheet.  This due in part to the fact that high-temperature processes typically mean high-cost for the energy requirement.  However, SGH2 claims its method actually generates 1.8 kilowatt hours of electricity as it produces one kilogram of hydrogen.  This compares 60 kilowatt hours of electricity to produce one kilogram of hydrogen through the electrolysis method.

An energy-positive method for generating hydrogen!  This seems like a dream come true.  The City of Lancaster in California has agreed to be a host for the plant at an industrial zone.  Ground breaking is scheduled for the first quarter of 2021 with a goal of full operation by 2023.  SGH2 says its team has already started talking to hydrogen distributors for off-take agreements.

This is not exactly the first time a plasma process has been proposed for energy production.  Indeed, the parent of SGH2, the Solena Group, made a run at a similar objective with a predecessor company, Solena Fuels Corporation.  Solena Fuels went bankrupt in 2015, after a plan failed to produce aviation fuel from municipal solid waste using the very same high-temperature plasma gasification.  British Airway had even signed on to build a plant in Thurrock, Essex.   Solena Fuel’s pilot plant in Pennsylvania was shut down having produced no fuel for BAs jets.

Now the Solena Group headed by its tenacious chief executive officer Dr. Robert Do proposes to produce hydrogen through SGH2.  Here is wishing the best of fortune to Dr. Do and his team.  However, it seems like investors with capital burning a hole in their pockets should wait for results from a pilot plant that confirms the SGH2 technology actually produces hydrogen.

 

 

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.