French oil major TotalEnergies and synthetic Tree Energy Solutions (TES) have announced plans to develop an e-methane — or so-called “e-NG” — project in the US, in hot pursuit of green hydrogen production tax credits introduced in the 2022 Inflation Reduction Act.

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The pair plan to take final investment decision (FID) on the proposed 100,000-200,000 tonnes-per-year plant in 2024, with first production expected in 2026.

The project will include a 1GW electrolyser powered by 2GW of wind and solar, which will produce renewable hydrogen for combination with so-called “biogenic” carbon dioxide — that is, carbon sourced from organic material — to create methane (CH4).

TES tells Hydrogen Insight that while the project’s details are still being worked out, this biogenic CO2 could come from landfills, biogas facilities, or ethanol production plants. The company plans to purchase this gas from third parties that already have carbon capture and transportation infrastructure in place — possibly in an effort to circumvent tax credit rules that aim to prevent double benefits to a single project.

The 45V clean hydrogen production tax credit stipulates that a facility cannot also claim the 45Q carbon capture tax credit. Consultancy Wood Mackenzie has told Hydrogen Insight that developers cannot claim both tax credits on the same process or facility even if different equipment—such as the electrolyser and carbon capture unit—is owned by different partners.

However, TES tells Hydrogen Insight that it will “most likely” try to claim the clean hydrogen production tax credit for hydrogen used to produce the synthetic methane and purchase the carbon dioxide—although it anticipates discounted prices from sellers claiming the 45Q, worth $85/t of CO2.

On paper, the resulting e-methane would be carbon-neutral depending on how emissions are accounted throughout the value chain. Although synthetic fuels such as e-methane have been criticised as hugely energy inefficient, expensive and ultimately making it harder to phase out fossil fuel transport, TotalEnergies argues that the product’s ease of transportation as gas or liquid and status as a drop-in fuel will make it easier for its customers to reduce emissions.

“This synthetic fuel will contribute to the energy transition by helping our customers to decarbonise their activities, notably the ones that are difficult to electrify,” says TotalEnergies’ president of gas, renewables and power Stéphane Michel.

“This product presents two significant advantages,” he adds. “First, it does not require new logistical infrastructure since [e-methane] and [fossil] gas have the same properties and can therefore be mixed in existing infrastructures. Second, our customers will not have to change their current industrial processes.”

A spokesperson for TES notes that the product “will likely be a bit more expensive than LNG”, but “in the next ten years, it will be less expensive” based on expected decreases in the cost of electrolysers and renewable electricity.

TES plans to export its e-methane to Europe via its planned Green Energy Hub in Wilhemshaven, Germany. The company claims that the fuel will meet EU emissions intensity criteria for renewable fuels of non-biological origin (RFNBOs) — 70% fewer emissions compared to fossil fuels on a cradle-to-grave basis — but says the synthetic methane has not yet been certified or “pre-certified” yet.

The process is aiming to use CO2 that would otherwise be emitted, but it is not yet clear how the process reduces emissions by 70% compared to fossil gas production.

And, as it is still promoting the use of a carbon-based fuel in place of zero-emissions fuels, or indeed carbon capture and permanent storage, there are questions over how aligned it is with the EU’s net zero goals.

There is also the risk that methane — a more potent greenhouse gas than carbon dioxide — leaks throughout production, liquefaction, transportation and storage.

TES has floated the idea that the Wilhemshaven site will import e-methane to reform it back to hydrogen and recycle the CO2 in a closed loop, but the company has told Hydrogen Insight that the synthetic gas produced in the US will most likely be used as methane in the near term — leaving it open to accusations of greenwash.

But “in the long term”, as hydrogen pipelines are built and more companies switch to using H2, it will move toward this process, TES insists.

The US will be TES’ first production plant, but the company is also looking to develop further capacity in the UAE and Australia. This will depend on establishing partnerships with major companies due to the high capital cost of setting up these projects. Australia’s FFI has already taken a €30m stake in TES, as well as putting down €100m toward the Wilhemshaven hub.