NET Power LLC may hold the key to taking one of the natural gas industry’s biggest challenges – eliminating carbon emissions – and instead making them part of the solution.
Incoming CEO Danny Rice recently sat down with NGI to share how the emerging technology, already proven at a power plant southeast of Houston, is set to revolutionize the future of natural gas.
The “irony” is that many view carbon dioxide (CO2) emissions as a “massive, massive problem,” Rice said. “Yes, CO2 going into the atmosphere is a massive problem. But if you can actually harness CO2, it's actually a very effective gas to use as the working fluid in the turbine.”
NET Power is kicking off front-end engineering and design for its first commercial power plant. The West Texas project in the Permian Basin followed NET Power’s successful supercritical CO2 demonstration plant in La Porte, southeast of Houston. The La Porte pilot was synchronized to the Texas electric grid in late 2021.
Envisioning 500-Plus Plants
In December, one month after NET Power laid plans for the West Texas plant in Odessa, TX, Rice Acquisition Corp. II agreed to buy the company for $1.46 billion.
“We affectionately call it Serial No. 1,” Rice said of the first utility-scale natural gas plant. As designed, each facility would have the same specifications, with 300 MW electric (MWe) capacity.
“Why that one is so important is that it will be the first of the 500 utility-scale plants that we’ll end up deploying over the next whoever-knows-how-many years,” Rice said of the Permian project. “But it will be that standardized design and spec…It’s a smaller footprint than traditional combined-cycle plants, even without carbon capture. It’s a much more efficient way to generate power.”
NET Power has “figured out how to make the problem part of the solution,” Rice said. He said in a presentation that his team had “evaluated dozens of very promising businesses…with many counterparties wishing to engage with us on a bi-lateral basis, but NET Power is clearly the best opportunity we’ve seen.”
The world, he said, “wants to electrify all areas of the economy and they want that electricity to be reliable, low-cost and clean, which we call the energy trifecta. The world is beginning to see you can’t achieve the trifecta with just wind and solar: you need low-cost, firm power.”
NET Power’s technology works by combusting natural gas with pure oxygen to produce CO2 and water. The recirculated CO2 then is used to spin a turboexpander, which produces power. When the turboexpander exhaust cools, the water and byproducts are removed. Nearly all of the CO2 ultimately is captured through the process, but the remaining amount is sequestered or sold to industry.
“Each utility scale plant combines 50 MMcf/d of natural gas with pure oxygen to produce 300 MWe, along with water and 820,000 tons/year of pure CO2 that is ready for transportation and permanent storage,” Rice said.
In The DNA
Now a partner of Rice Investment Group, Rice served in various roles at family-controlled Rice Energy Inc. He served as CEO from October 2013 through its takeover by EQT Corp. in November 2017. Brother Toby now is CEO of EQT, the nation’s largest natural gas producer, and Danny serves on the board.
NET Power shareholders representing 70% of pro forma ownership initially were led by Occidental Petroleum Corp. (Oxy). Oxy, which plans to incorporate NET Power plants into planned direct air capture hubs, would provide CO2 transportation, sequestration and power offtake for Serial No. 1.
Investor Baker Hughes Co. is using its integrated process equipment and technologies for Serial No. 1, including providing the turboexpander, CO2 compression and pumps. Constellation Energy Generation LLC is lending its expertise in plant operations and power offtake. And 8 Rivers Capital, which holds the patents for the technology, is involved in project development support.
The Rice family also is committing $100 million to the transaction, separately from EQT’s involvement.
If all goes to plan, a limited notice to proceed with Serial No. 1 is set for early 2024. Sanctioning could happen in the second half of next year, with commissioning before the end of 2026.
‘Simple, But Elegant’ Solution
“The thing that's different is we're capturing CO2 in pure form,” Rice said. “Like with emissions from any other type of power plant, the CO2 is a small percentage of that flue gas. The exhaust is the other 95% of it.” As in a combined-cycle natural gas plant, most of the exhaust is nitrogen, he explained.
“The reason why carbon capture has so much CO2 is, you’re trying to remove that 95% nitrogen to capture that small percentage of CO2. That's why it's so expensive,” Rice said.
The NET Power solution is “so simple, but elegant…The real problem, if you take a look at it, it's really the nitrogen. There's so much nitrogen in that flue gas. Remove the nitrogen from the combustion chamber and put an air separation in there. The only thing going into the combustion chamber is oxygen.
“So if no nitrogen goes into the combustion chamber, you end up with just a pure stream of CO2 in the backend. If you're trying to capture CO2, this is a much more efficient way to do it because it is a total redesign of the way power is produced.”
Asked how much the NET Power technology could add to the cost of building out capacity, Rice said capturing CO2 during the combustion process “is the lowest cost form of carbon capture from a power plant…
“If you tried to do this…post combustion, carbon capture will cost you $220/ton to capture the CO2. When we do it at our power plant, there are no operating costs associated with the capture because that CO2 isn't pure form.”
Making Money To Sequester CO2?
Capital expenditure (capex) may be higher upfront, but “it comes down to $20/ton is the implied capital cost of the incremental capex to have our power plant versus our traditional combined-cycle gas-fired power plant,” Rice said.
Other advantages also come with the extra upfront capex. There’s a special focus on grant and loan opportunities from the Biden administration’s Bipartisan Infrastructure Law. Opportunity for NET Power projects also improved with the Inflation Reduction Act and enhancements to the 45Q carbon capture tax credit.
To qualify for tax credits, electric generation units must be designed to capture at least 75% of CO2 emissions, an amount that NET Power facilities would “easily exceed.”
Rice explained that the federal government “will pay you $85/ton to sequester the CO2. And so you can say, ‘Okay, well, it only cost me $20 and I'm getting paid $80…I'm actually making money on sequestering CO2.
“It’s so wild. If you're looking at the cash flows of a NET Power plant, between the power and CO2, you can make like almost twice as much money from this CO2 sequestration as you can from selling power.”
NET Power uses an “asset-light, licensing-based revenue model,” according to Rice. These licenses are expected to generate a fee stream of around $65 million of present value over 10 years for each utility-scale plant.
Miles And Miles Of Opportunities
The marketplace is much wider than only in the United States too, he explained.
“In terms of market impact, one of our primary use cases is replacing existing baseload capacity that is expected to be retired over the coming decades,” Rice said. “This equates to over 1,000 NET Power plants in the U.S. alone, and over 15,000 NET Power plants when including global baseload retirements and expected electrification demand growth.”
In many parts of the United States, he said, “there’s adequate pore space to safely and securely and permanently bury the CO2, in a lot of the great power markets like the Midwest and the Gulf Coast.”
The United States is “the top market, because we have access to low-cost natural gas. We have massive power demand. And we have massive pore space capacity for the CO2.”
Canada is “probably close behind” as far as market potential.
The Middle East and North Africa also could be good markets. While they may not have a carbon pricing regime that would pay companies to sequester the CO2, “they do have a lot of pore space for oil used for enhanced oil recovery,” Rice said.
“That's the primary use of CO2 today in the world…About 90% of the CO2 that the United States utilizes every year is for enhanced oil recovery.”
While EQT is “100% separate” from NET Power, “we share the same belief that if you can just harness the power of natural gas without emissions. It is the best thing for the environment and for the world…What natural gas producer wouldn't love to see that happen?”
Rice estimated that 90% of the emissions that come from natural gas are not from leaks during drilling or producing wells. “It’s all from the combustion” used in power generation. “And those producers are going to want to see their gas go into a power plant where there are no emissions from the combustion.”
Just The Facts
There are other types of carbon-free power, including hydrogen, which is seeing record investments globally. Rice was asked how he can make the case to continue using NET Power’s system to produce carbon-free natural gas hydrogen?
Versus hydrogen, NET Power “is a much more cost effective way to produce zero emission power. I think the way we've always evaluated this technique, any technology, is like there’s three criteria.
“What is it cost to develop? What's the actual cost of the power? What's the carbon intensity of it? Being totally intellectually honest, show me the carbon intensity of the entire thing. I don't care about colors,” Rice said of the different forms of hydrogen.
“I just care about the carbon intensity of the whole thing. And show me the reliability of it. It needs to be…truly apples -to-apples on both cost and carbon intensity. And you need to sell me something that's a 24-hour solution, not just part of the day when it's most convenient…
“I think people are now starting to awaken to this reality that we need reliability 24 hours a day. Otherwise, when the sun isn't shining, or the wind isn't blowing, we're having to use coal and that's actually causing major, major issues on just reliability and achieving our environmental goals.”
It’s “important to get everybody to talk about the actual metrics,” Rice said. “Stop talking about labels” and focus on what it may do for the environment.
Once he takes the helm, Rice said to expect more commercial announcements by NET Power.
In the United States and overseas, several 300 MWe plants already are in the works.
Project Coyote would be on the Southern Ute Indian Reservation in Colorado. It is being developed by 8 Rivers in partnership with the Southern Ute Growth Fund. Project Broadwing in Decatur, IL, also is being developed by 8 Rivers ,with ADM and Warwick Capital Partners.
And in Louisiana, the G2 Net Zero plant remains in the queue. It was to be the first net-zero liquefied natural gas export terminal in the country. However, in a filing in late March with the U.S. Department of Energy, G2 stated it had “shifted away” from developing liquefaction facilities to focus on “net-zero greenhouse gas emission energy products.”
Among its planned overseas facilities, Project Whitehall in the UK would be sited at the Teesside Zero Carbon cluster. 8 Rivers is developing Whitehall in partnership with Sembcorp UK. In addition, the Wilhelmshaven Green Energy Hub in Germany would have two 300 MWe class plants, developed by TES in partnership with Engie.
Oxy also has secured a lease on the King Ranch in South Texas.
CO2 sequestration is “still is a fairly nascent industry,” he noted. “I think you're going to see a lot of people say, ‘All right, I now have pore space capacity to hold 1 billion tons of CO2, or 2 billion tons of CO2,’ and that's great.
“But then they need to figure out the hard part, which is, ‘all right, where am I going get CO2 to fill this pore space? And I think that's where NET Power can really play a really excellent role, which is, we can locate these plants close to the sinks and fully decarbonize grid systems that wouldn't otherwise even think of being the first ones to be fully decarbonized…
“This is going to be pretty game changing for a lot of areas of the country.”
