German start-up Turn2X in March cut the ribbon on its first commercial project, producing synthetic methane in Spain from green hydrogen and CO2 — which CEO Philip Kessler tells Hydrogen Insight has been sold at a similar price to biogas, without any subsidies to cover costs.
Turn2X started life as a research project at the Karlsruhe Institute of Technology, which developed a new reactor for the production of methane from H2 and CO2, and partnered with Uniper for a pilot plant in Germany, opened in 2018.
While nearly €18m of the German pilot’s €28m ($29.9m) cost was covered by a Horizon 2020 grant from the EU, Turn2X’s project in Extremadura, Spain, has been built in less than six months with no government support, using a combination of equity and pre-payments from offtakers.
“We have reached more or less prices of biomethane, certainly on the higher side, with that first commercial plant, and we will hit lower prices — more average biomethane prices — with the second plant,” Kessler says.
The German and Spanish plants are the same size, with the commercial project using a 2MW electrolyser, although Turn2X declined to provide figures for how much methane either system produced.
However, Kessler noted that renewable electricity prices are “four to five times” lower in Spain.
However, this still means that the synthetic methane comes with a green premium on its price tag, although Kessler predicts that with stricter carbon taxes, higher costs of extracting fossil gas and falling renewable electricity costs, Turn2X’s product could reach cost parity in Europe at €60-70/MWh in the near future.
“That’s definitely reachable in the next five to 10 years.”
Who is buying?
Turn2X has not named which companies have pre-purchased volumes from its plant in Spain, although Kessler notes that some industries are more willing to buy now than others.
“It’s mainly customers who are able to pass on the additional green premium to end users,” he says, noting that three sectors in particular — energy-intensive industry, shipping, and utilities — have shown particular interest.
Part of the appeal is that the volumes from the pilot plant are relatively small compared to the hundreds of millions of cubic metres that Turn2X’s clients use annually.
“As our volume increases and we deliver more volume to them, obviously the price will matter more,” Kessler says.
But amid calls for a phase-out of fossil fuels, with more and more companies switching to electric processes to reduce emissions, is there even a future for any kind of gas?
“Don’t get me wrong — I hope every customer who can do so will switch to a heat pump or to an electric car or electric barges in small harbours. I’m happy with that, because where it’s possible to electrify, we should electrify,” Kessler says.
However, he adds: “We cannot electrify everything — and there are also certain use cases where a pure hydrogen approach doesn’t work.”
He cites the glass industry as a sector where most trials for pure hydrogen-fired glassmaking have ended in failure due to drastic differences in product quality. However, at least one company — Pilkington in the UK — claims to have produced thick, architectural glass using 100% H2 in the furnace with no impact on quality.
Meanwhile, for shipping, while many analysts see e-fuels derived from green hydrogen as a two-horse race between ammonia and methanol, Kessler points out that LNG-fuelled [liquefied natural gas] ships are already in the water — and synthetic methane is as far along as other green hydrogen-derived fuels when it comes to large-scale production.
“Ammonia, e-methanol and e-LNG are, from a maturity perspective, probably all at the same size,” he says.
“E-LNG has the advantage that the engines are already there and the ship base is already there too, so you save a lot of costs by not switching your engines and not maintaining three or more fuel types,” Kessler adds. “From an upstream production perspective, they are all more or less at the same stage.”
However, another reason for Turn2X’s optimism is the sheer scale of the gas market today. Even assuming a 90% reduction in the use of gas, as recommended by the IEA in its 2050 net-zero scenario, “10% of a $420trn market is still a $42trn market” while still offering opportunities to decarbonise, Kessler says.
“We’re not going after the easy-to-electrify cases. We’re mainly talking to customers that have no, or very marginal other opportunities.”
The next project
Turn2X’s next project, after the 2MW Spanish facility, will be “the largest renewable natural gas plant in the world,” Kessler says, noting that it will also be built in Spain, along with a dedicated array of solar PV and using biogenic CO2 from a co-located biogas facility — although he did not provide a firm timeline for when it would be built.
However, while Turn2X has planned the next synthetic methane plant on the assumption of no subsidies, the company is still applying for support from the European Hydrogen Bank in order to accelerate the roll-out of extra facilities.
“More capital for the green transition always helps. If we get subsidies — and I think this is what subsidies are made for — we can deploy a profitable business model in a shorter space of time, saving emissions quicker,” he explains.
“Subsidies generally are not a bad thing. Of course, extreme cases of ‘subsidy surfing across continents’ rightly draw criticism. But I think in general, subsidies are fine if they help to accelerate deployment of potentially profitable or close-to-profitable projects.”
However, while Turn2X is still waiting on the EU to confirm which bodies will certify renewable fuels of non-biological origin (RFNBOs), Kessler is confident: “We’re most likely going to be one of the first certified RFNBO plants, because you can only certify plants that are already operating.”
Since the Spanish project came on line before 2028, it benefits from a grandfathering clause in the EU Delegated Acts defining RFNBOs, which allows projects to draw from renewable energy assets built more than three years before the electrolyser was installed until 2038.
However, Kessler notes that additionality requirements are not the reason the second Spanish plant will be directly connected to newly built solar. “It’s reducing the price, because if we buy a PPA [power purchase agreement] from the grid, it’s more expensive than if we build our own solar park.”
“We’re cutting out the margin of the solar project developer. We have a direct line, so we’re saving on the transmission cost.”
Scaling up
Kessler argues that compared to pure-play development, a vertically integrated approach — where Turn2X engineers the methanation reactor, integrates electrolysis stacks into the reactor rather than paying for extra balance of plant, and builds its own solar park — is fundamental for cost reduction.
“Otherwise, we have a lot of profit centres and margin pools, and if you stack all these margins, you get a product that needs a lot of subsidies but has no strong business case.”
Similarly, the Turn2X CEO suggests that being first out of the gate, even with smaller projects is better than planning for the next decade.
“It’s not that we indulge in hopes for ten years, and then suddenly have a business case, which happens I think with some other technologies,” Kessler says. “I think the good part is that we already have a business case today, without subsidies, and we’ll just be able to unlock more customers and more customer segments as we decrease the price.”
Kessler also notes that smaller projects have an advantage of faster development timelines. “If I build a project where I have five years of building and permitting, I have the first learnings only after five years.”
Investment
Turn2X is already attracting interest from infrastructure investors.
“We are not talking about projects in the 2030s, but about projects that can be realised within a brief space of time, namely within the next 24 to 36 months,” says Kessler. “Basically, we have a big project pipeline where we can already deploy capital with the prospect of seeing early returns, versus [other companies’] projects in the 2030s.”
Similarly, Kessler notes that Turn2X’s modular plants represent a more accessible investment opportunity.
“It’s not writing a check of €2bn on a technology they’ve never seen,” he explains.
Unlike a single, massive outlay of hundreds of millions or a few billion dollars, these projects are divided into numerous profitable assets in the double-digit millions.
“They can get in with a smaller ticket, and then, as they see it that it runs fine and is working for them, they can deploy more and more capital.”
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