TransAlta Finalizes Acquisition of Heartland Generation in $542 Million Deal

Key Points:
– TransAlta acquires Heartland Generation for $542 million, adjusting for asset divestitures.
– Acquisition to add 1,747 MW of capacity, enhancing TransAlta’s Alberta portfolio.
– Deal expected to yield $85-$90 million in annual EBITDA and $20 million in annual synergies.

TransAlta Corporation announced an amended acquisition agreement to purchase Heartland Generation from Energy Capital Partners (ECP) at a revised price of $542 million. This agreement, which includes the assumption of $232 million of debt, strengthens TransAlta’s presence in Alberta’s energy market, adding diverse power generation assets critical for the province’s growing needs. The transaction is expected to close by December 4, 2024, and includes the divestiture of Heartland’s Poplar Hill and Rainbow Lake assets, which account for 97 MW of power. These divestitures, required to meet federal Competition Bureau guidelines, prompted an $80 million reduction in the purchase price and will allow TransAlta to focus on core, high-value assets in its portfolio.

Heartland Generation’s assets are strategically valuable to TransAlta. By adding 1,747 MW of capacity, including gas-fired and peaking generation, as well as cogeneration facilities, TransAlta will significantly enhance its energy capabilities. This expanded portfolio is expected to be highly accretive to the company’s cash flow, contributing an estimated $85 to $90 million in annual EBITDA post-synergies and divestitures. Approximately 60% of Heartland’s revenues are under long-term contracts with an average remaining life of 15 years, ensuring steady, reliable income from high-credit, stable clients. According to TransAlta, the acquisition will yield substantial free cash flow and achieve a cash yield backed by low-cost, high-efficiency energy generation, supporting Alberta’s dynamic power needs.

CEO John Kousinioris emphasized the alignment of this acquisition with TransAlta’s growth strategy in Alberta. “The pending acquisition of Heartland will allow TransAlta to incorporate high-demand generation capabilities, enhancing our role in supporting grid reliability. Consistent with our original investment thesis, the Alberta market will increasingly require low-cost, flexible, and fast-responding generation to support grid reliability over the coming years. This transaction supports our competitive position by ensuring we maintain a robust and diversified portfolio,” he noted. The deal allows TransAlta to better meet Alberta’s evolving energy demands and gain an edge in the market by offering reliable power that complements and balances renewable energy sources, particularly as renewables are scaled up across Alberta.

TransAlta will also leverage significant operational and financial synergies by integrating Heartland’s assets. The company expects $20 million in annual synergies through shared corporate and operational costs. With TransAlta’s existing assets, the expanded scale will enable supply chain efficiencies, operational optimizations, and additional synergies that will enhance margins and support long-term growth. Heartland’s portfolio, with critical infrastructure for future hydrogen development, is also well-suited to support sustainable initiatives, aligning with TransAlta’s commitment to advancing clean energy solutions.

The transaction metrics are favorable to TransAlta’s growth outlook, with an estimated $270 per kilowatt valuation for the Heartland assets. The acquisition’s 5.4 times EBITDA multiple positions TransAlta for long-term value creation through low-cost power generation assets that are increasingly valuable in Alberta’s shifting energy landscape. With the strategic advantages of this acquisition, TransAlta’s enhanced portfolio and market reach will play a vital role in securing Alberta’s energy future.

Biden Administration Unveils $7 Billion Investment in Regional Hydrogen Hubs

The Biden administration is making a major push to develop a domestic hydrogen economy by funding 7 regional hydrogen hubs across the United States. The hubs will share up to $7 billion in federal funding aimed at spurring hydrogen production and use.

President Joe Biden and Energy Secretary Jennifer Granholm announced Friday the selection of hubs in Appalachia, California, the Gulf Coast, the Heartland, Mid-Atlantic, Midwest, and Pacific Northwest regions. The funds come from last year’s Bipartisan Infrastructure Law.

Accelerating the Hydrogen Economy

The goal is to accelerate the growth of a clean hydrogen industry in the U.S. Hydrogen is a versatile fuel seen as a critical tool for decarbonizing major sectors like heavy industry, transportation, and power generation.

When produced using low-carbon methods, hydrogen can provide emissions-free energy for hard-to-abate sectors. Expanding hydrogen is a key plank of the Biden administration’s strategy to cut greenhouse gas emissions and combat climate change.

The 16-state regional hubs model fosters clusters of hydrogen supply and demand, minimizing transportation needs. The administration expects the $7 billion federal injection to mobilize over $43 billion in private capital.

Leveraging Regional Strengths

Each hydrogen hub leverages unique geographic strengths ideal for clean hydrogen production. For example:

  • The Appalachia Hub will use the region’s abundant natural gas supply, applying carbon capture to lower emissions.
  • California and the Pacific Northwest have access to seaports critical for shipping hydrogen.
  • The Heartland can utilize wind resources to produce hydrogen via electrolysis.
  • The Midwest Hub will tap into nuclear power to make hydrogen.

In addition to production, the regional hubs focus on cultivating local hydrogen markets. Some will provide hydrogen for industrial uses while others may focus on fertilizer or fuel cell vehicle growth.

Building on Bipartisan Policy

The hydrogen hub funding originated from the bipartisan infrastructure package passed in 2021. The law included $8 billion for at least four regional hubs.

The Biden administration expanded the program to seven hubs to extend geographic impact. The policy builds on bipartisan support for advancing hydrogen in the U.S.

Last year’s Infrastructure Investment and Jobs Act also created a hydrogen production tax credit. The recently passed Inflation Reduction Act further boosted hydrogen incentives with an additional $3 per kg production credit.

The Energy Department will provide guidance on utilizing the tax credits later this year. The credits will aid long-term viability of the regional hubs.

Spurring Private Investment

The federal money is intended to galvanize substantial private capital investment in building out hydrogen infrastructure. Siting hydrogen hubs near key anchor facilities can spur economic growth.

For example, California’s hub grants will likely stimulate billions in private funding around port facilities. Financial incentives like the hydrogen tax credits create ideal conditions for private sector buy-in.

Over time, decreasing costs through scale and technology improvements could make hydrogen competitive with conventional fuels. The regional hubs represent a starting point designed to nurture both supply and demand.

Next Steps for Growth

The hydrogen hubs mark an important early phase of U.S. efforts to scale up the hydrogen economy. Biden administration officials noted work remains to develop connective infrastructure and further applications.

Ongoing policy support via research funding, incentives, and enabling regulation will help drive growth. Continued bipartisan cooperation around hydrogen could lead to additional catalytic investments.

With the right policy environment, hydrogen could become a major pillar of America’s clean energy economy. The regional hubs represent a down payment on the infrastructure needed to realize hydrogen’s vast decarbonization potential across the economy.

Is Hydrogen the Real Alternative Energy Solution

What is Hydrogen, and Can it Really Become a Climate Change Solution?

As the United States and other countries react to achieve a goal of zero-carbon electricity generation by 2035, energy providers are swiftly ramping up renewable resources such as solar and wind. But because these technologies churn out electrons only when the sun shines and the wind blows, a backup from more reliable energy sources would prevent blackouts and brownouts. Currently, plants burning fossil fuels, primarily natural gas, fill in the gaps. Can we stop using fossil fuels now? Paul Hoffman, Managing Editor, Channelchek

Hydrogen, or H₂, is getting a lot of attention lately as governments in the U.S., Canada and Europe push to cut their greenhouse gas emissions.

But what exactly is H₂, and is it really a clean power source?

I specialize in researching and developing H₂ production techniques. Here are some key facts about this versatile chemical that could play a much larger role in our lives in the future.

This article was republished with permission from The Conversation, a news site dedicated to sharing ideas from academic experts. It represents the research-based findings and thoughts of Hannes van der Watt, Research Assistant Professor, University of North Dakota.

So, What is Hydrogen?

Hydrogen is the most abundant element in the universe, but because it’s so reactive, it isn’t found on its own in nature. Instead, it is typically bound to other atoms and molecules in water, natural gas, coal and even biological matter like plants and human bodies.

Hydrogen can be isolated, however. And on its own, the H₂ molecule packs a heavy punch as a highly effective energy carrier.

It is already used in industry to manufacture ammonia, methanol and steel and in refining crude oil. As a fuel, it can store energy and reduce emissions from vehicles, including buses and cargo ships.

Hydrogen can also be used to generate electricity with lower greenhouse gas emissions than coal or natural gas power plants. That potential is getting more attention as the U.S. government proposes new rules that would require existing power plants to cut their carbon dioxide emissions.

Because it can be stored, H₂ could help overcome intermittency issues associated with renewable power sources like wind and solar. It can also be blended with natural gas in existing power plants to reduce the plant’s emissions.

Using hydrogen in power plants can reduce carbon dioxide emissions when either blended or alone in specialized turbines, or in fuel cells, which consume H₂ and oxygen, or O₂, to produce electricity, heat and water. But it’s typically not entirely CO₂-free. That’s in part because isolating H₂ from water or natural gas takes a lot of energy.

How is Hydrogen Produced?

There are a few common ways to produce H₂:

Electrolysis can isolate hydrogen by splitting water – H₂O – into H₂ and O₂ using an electric current.

Methane reforming uses steam to split methane, or CH₄, into H₂ and CO₂. Oxygen and steam or CO₂ can also be used for this splitting process.

Gasification transforms hydrocarbon-based materials – including biomass, coal or even municipal waste – into synthesis gas, an H₂-rich gas that can be used as a fuel either on its own or as a precursor for producing chemicals and liquid fuels.

Each has benefits and drawbacks.

Green, Blue, Gray – What Do the Colors Mean?

Hydrogen is often described by colors to indicate how clean, or CO₂-free, it is. The cleanest is green hydrogen.

Green H₂ is produced using electrolysis powered by renewable energy sources, such as wind, solar or hydropower. While green hydrogen is completely CO₂-free, it is costly, at around US$4-$9 per kilogram ($2-$4 per pound) because of the high energy required to split water.

The largest share of hydrogen today is made from natural gas, meaning methane, which is a potent greenhouse gas. IRENA (2020), Green Hydrogen: A guide to policymaking

Other less energy-intensive techniques can produce H₂ at a lower cost, but they still emit greenhouse gases.

Gray H₂ is the most common type of hydrogen. It is made from natural gas through methane reforming. This process releases carbon dioxide into the atmosphere and costs around $1-$2.50 per kilogram (50 cents-$1 per pound).

If gray hydrogen’s CO₂ emissions are captured and locked away so they aren’t released into the atmosphere, it can become blue hydrogen. The costs are higher, at around $1.50-$3 per kilogram (70 cents-$1.50 per pound) to produce, and greenhouse gas emissions can still escape when the natural gas is produced and transported.

Another alternative is turquoise hydrogen, produced using both renewable and nonrenewable resources. Renewable resources provide clean energy to convert methane – CH₄ – into H₂ and solid carbon, rather than that carbon dioxide that must be captured and stored. This type of pyrolysis technology is still new, and is estimated to cost between $1.60 and $2.80 per kilogram (70 cents-$1.30 per pound).

Can We Switch Off the Lights on Fossil Fuels Now?

Over 95% of the H₂ produced in the U.S. today is gray hydrogen made with natural gas, which still emits greenhouse gases.

Whether H₂ can ramp up as a natural gas alternative for the power industry and other uses, such as for transportation, heating and industrial processes, will depend on the availability of low-cost renewable energy for electrolysis to generate green H₂.

It will also depend on the development and expansion of pipelines and other infrastructure to efficiently store, transport and dispense H₂.

Without the infrastructure, H₂ use won’t grow quickly. It’s a modern-day version of “Which came first, the chicken or the egg?” Continued use of fossil fuels for H₂ production could spur investment in H₂ infrastructure, but using fossil fuels releases greenhouse gases.

What Does the Future Hold for Hydrogen?

Although green and blue hydrogen projects are emerging, they are small so far.

Policies like Europe’s greenhouse gas emissions limits and the 2022 U.S. Inflation Reduction Act, which offers tax credits up to $3 per kilogram ($1.36 per pound) of H₂, could help make cleaner hydrogen more competitive.

Hydrogen demand is projected to increase up to two to four times its current level by 2050. For that to be green H₂ would require significant amounts of renewable energy at the same time that new solar, wind and other renewable energy power plants are being built to provide electricity directly to the power sector.

While green hydrogen is a promising trend, it is not the only solution to meeting the world’s energy needs and carbon-free energy goals. A combination of renewable energy sources and clean H₂, including blue, green or turquoise, will likely be necessary to meet the world’s energy needs in a sustainable way.

The Case for Hydrogen Fuel Cell Vehicles

Image Credit: TruckPR (Flickr)

Is Hydrogen, Not Lithium-ion, the Automotive World’s Real Future?

Lithium-ion (Li-ion) batteries provide incredibly functional and versatile storage of electric power for cell phones, laptops, leaf blowers, Bluetooth speakers, and a myriad of other portable electric tools and appliances. But is it the best way to store power to drive the big motors found in a car or tractor-trailer? Hydrogen could provide a lighter, more potent, less environmentally harmful way to store power. And with greater range. Are car companies being steered down an inferior or potentially impossible path?

China plans to have a million hydrogen-powered vehicles on roads by 2035, and Japan, which has a much smaller population, is shooting for 800,000 units by 2030. Perhaps the world’s most abundant element is worth a deeper look before billions are spent on infrastructure to support the Li-ion model.

What’s a Fuel Cell

According to ThoughtCo.com, the most abundant element in the universe is hydrogen, making up about three-quarters of all things. Helium, then oxygen, makes up most of the rest of all matter. By comparison, all of the other elements are rare.

There are combustion engines that run on hydrogen, but it’s fuel cell electric vehicles (FCEVs) that are driven by motors, similar to those now going into Fords, Teslas and Volvos. The FCEV uses a hydrogen fuel cell.

These electric power storing fuel cells consist of a positive (cathode) and a negative electrode (anode), separated by an electrolyte membrane to chemically release electricity. This happens when oxygen from the surrounding air is exposed to the cathode. As liquid hydrogen, which fills the fuel cell in similar quantities that may be required of gas or diesel in a fossil fuel-powered vehicle, accumulates on the anode, they break apart into protons and electrons from the reaction with the electrolyte.

As protons travel through the membrane to the cathode, electrons are forced through a circuit. The circuit includes the electric motor, which releases the power to drive the vehicle down the road,  powering an electric motor in the process. The electrons complete the path and reach the protons on the cathode; here, they react with oxygen to create H20 vapor.

Benefits to Cars and Trucks

The emissions of an FCEV, if you can call it that, is pure water. This is the very definition of clean and sustainable for the planet. In fact, the water vapor released is completely recyclable. But with it being composed of two of the most abundant elements, the need to recycle it as a way to store energy doesn’t exist.

Cars and large trucks have a far longer range than battery electric vehicles (BEVs). The fuel cells can convert far more stored hydrogen into electricity than current EV batteries, making their range more in line with what drivers of cars and trucks expect from their vehicles.

The speed of powering up the fuel cell is also similar to refueling a vehicle with petrol. Refilling the fuel cell takes minutes. The combination of longer range and speed to get back on the road makes it a functionally attractive option for drivers.

Downside

Similar to recharging a lithium-ion battery, a power source is needed. Currently, this power source isn’t often wind, solar, or tidal, it’s fossil fuels. Hydrogen produced by coal or oil is seen as having dirty electrons; hydrogen produced by natural gas is called blue hydrogen. Using wind or sun to turn water into its atomic components is possible and does not need to be done in a large refinery in some remote place, but the outlets for this still need to be built.

The main reason is the lack of infrastructure. In order for hydrogen cars to become a viable option, there needs to be a network of refueling stations in place. This is a chicken-and-egg situation as car manufacturers are reluctant to mass-produce FCEVs without the existing infrastructure, and investors are unwilling to build hydrogen refueling stations without strong demand for them. Sales of fuel cell-powered vehicles in the U.S. in 2021 totaled 3,341. There aren’t entrepreneurs or even energy companies racing out to build a hydrogen refilling station when they’re not likely to experience any business.

Take Away

Although hydrogen still isn’t becoming a mainstream option, it is an alternative fuel source that is certainly worth keeping an eye on. With the right infrastructure in place, hydrogen cars could become a viable option for those looking for a clean and sustainable way to power their vehicles — if not now, definitely in the future.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://insideevs.com/news/565185/us-hydrogen-car-sales-2021/

https://www.thoughtco.com/most-abundant-element-in-the-universe-602186

https://www.marketwatch.com/story/battery-electric-cars-are-the-future-not-so-fast-hydrogen-powered-cars