Webber Research: Renewables Weekly

Webber Research: Renewables Weekly 11/05/2020

• Baker Hughes (BKR) Buys Carbon Capture Platform
• Dominion (D )Proposes 9 New Solar Facilities For ~500MW
• AMRC – 2 New Contracts In Oregon
• Neste Acquires Neighboring Refinery Plant
• ITRI Deploys AMI In Canada
• AGR Investor Day & PNM Merger
• Vestas Buys Out MHI Stake In MHI Vestas JV
• AEP PPAs In Ohio
• Diamond Green Diesel Receives Air Permit From TCEQ
• US Net Electricity Generation
• Solar PV Pricing
• LCOE Benchmarks & Timeseries
• Global Wind Turbine Market Share
• Global Solar PV Inverter Market Share
• US Wind & Solar Projects Announced Or In Early Development

BKR Buys Carbon Capture Platform: On 11/3 BKR announced it acquired Compact Carbon Capture (3C) for an undisclosed amount. BKR plans to accelerate development and commercialization of 3C’s carbon capture solution, which adds to its existing portfolio of carbon capture technology including turbomachinery, solvent-based capture processes, well construction, CO2 storage management, and digital monitoring solutions…

Dominion Proposes 9 New Solar Facilities For ~500MW: On 11/2, Dominion Energy (D) proposed a slate of 9 new solar projects with output of 498MW. Six of the facilities (416MW) are through PPAs, helping to fulfill the Virginia Clean Economy Act (VCEA) requirement of having 1/3 of new solar and onshore wind be procured through PPAs through 2035….

AMRC 2 New Contracts In Oregon: On 10/26 and 10/27 AMRC…..

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W|EPC: Southern Company (SO) – Q420 Vogtle Project Monitor – Key Decisions That Could Haunt Cost Prudency

Key Takeaways: Vogtle Q420 Monitor – Key Decisions That Could Haunt Cost Prudency

Who Will Be Getting Stuck With +$2.1B In Cost Overruns? Once Vogtle Unit 4 reaches “fuel load”, Georgia Power/Southern Company (GP/SO) can request a cost prudency determination to push their portion of cost overruns (~$2.1B) into recoverable utility rates. (Page 4)

Regulators will determine cost prudency based on project data, testimony, and a simple question: What should a reasonable manager have done at the time of the decision? (Page 5)

We expect that process to be heavily scrutinized considering the scale of the overruns, and, in our opinion, some questionable GP/SO decisions. (Pages 4-5)

Decisions That Could Haunt GP/SO’s Prudency. We believe there’s a case to be made that multiple GP/SO management decisions ran contrary to industry standards, potentially contributing to ($) billions in cost overruns, including

• A failure to either include or implement multiple EPC contract……(Page 7)
• For the first 4-years of the project, GP/SO used only…..(Page 23)
• In 2017, it appears GP/SO did not validate critical underlying EPC…..(Pages 9- 10)

Analyzing 12-Years Of GP & SO Testimony… (Pages 20 & 23)

Please join us for our next Client Call at 12pm EST on Monday 10/26, to review our Vogtle Project Monitor. Please reach out to us for access details.

Table Of Contents:

• Key Takeaways – Page 2

• Who Owns $2.1B In Cost Overruns? – Page 3
• Georgia Public Service Commission 2018 Order – Page 4
• Cost Prudency Definition & Process – Page 5
• Decisions That Could Haunt GP/SO

• LSTK Contract Mismanagement  – Page 7
• Bankruptcy – Parent Company Guarantee Settlement – Page 8
• Estimate to Complete  – Page 9
• Transition from EPC LSTK to T&M – Page 10
• QRA – Cost – Page 11
• QRA – Schedule – Page 12

• GP Testimony & W|EPC Analysis (2009 to 2017

• EPC Contract Overview – Page 14
• October 2009 – Page 15
• October 2010 – Page 16
• April 2011 – Page 17
• November 2012 – Page 18
• June 2013 – Page 19
• October 2014 – Page 20
• October 2015 – Page 21
• December 2015 – Settlement of LD’s – Page 22
• December 2015 – Revised EPC Contract – Page 23
• October 2016 – Page 25
• April 2017 – Page 26

W|EPC: Southern Company (SO) – Q420 Vogtle Project Monitor – Key Decisions That Could Haunt Cost Prudency

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W|EPC: LNG Canada – Updated Satellite Image Analysis & Construction Progress – Q420 Project Monitor

 Shell ∙ Fluor ∙ Mitsubishi ∙ PetroChina ∙ PETRONAS ∙ KOGAS

Table Of Contents:

• LNG Canada Q4 Monitor: Key Takeaways…………………………..….…Page 2
• LNG Canada Cost & Schedule Updates
  • Updated Estimates…………………………..……………….….……..Page 4
  • Project Milestones………………………………………………………Page 5
  • Progress Analysis…………………………………………….….….….Page 6
  • Analyzing Fluor’s 27.5% Reported Progress…….…………….……Page 7
  • Project Staffing……………………………………………..……….….Page 8
• Satellite/Aerial Image Analysis
  • July 2020 Overview………………….…………………….….………Page 10
  • Sep 2020 Site Analysis……………………………………….………Page 11
  • Jul vs. Sep 2020 – LNG Storage Tank…………………………..….Page 12
  • Module Yard Analysis………………………………………………….Page 13

Key Takeaways:

• Delays At LNG Canada Continue to Build   (Pages 4 – 7, 10 – 13)
  • Fluor reported ~27.5% Engineering, Procurement, Fabrication, & Construction (EPFC) progress in September, vs our current estimate of…
  • We believe Fluor’s 27.5% guidance implies module fabrication progress of ~45%, which is ~9x…
  • Fluor also referenced COVID-related project delays (without getting specific)
  • Our Current Delay Estimate:…..
  • Estimated Probability Of Maintaining Schedule:…..
  • Mind The Gap: There are several potential explanations for such a degree of progress variance…
• Examining Fluor’s Goal of 2,500 On-Site Workers By Dec-20 (Pages 4, 8, 10 – 13)
  • Aerial images suggest meaningful concrete, structural steel, and significant construction activities have yet to start (beyond piling)…
  • Pre-COVID, Fluor’s reported onsite labor was higher than the project’s publicly reported staffing levels, leading to cost overruns (Pages, 4, 8)
  • Limited construction work fronts could constrain Flour’s ability to…
• Kicking The Can Down The Road… LNG Canada Starting to Resemble Another Fluor/JGC Project… (Pages 4, 8)
  • In 3Q13, CPChem awarded Fluor & JGC a ~$6B EPC contract for an Ethylene Cracker in Texas. ~39-months later, Fluor/JGC announced the project would be over budget. The project was finished in mid-2018 (a year behind its baseline plan).
  • ~23-months after FID, we believe the LNG Canada (JFJV) schedule is slipping and costs are…

W|EPC: LNG Canada – Updated Satellite Image Analysis & Construction Progress – Q420 Project Monitor

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Hydrogen (H2) – The Production Process Roadmap – Upstream, Midstream, & Downstream – Q420

 Hydrogen  ∙  Ammonia  ∙  Methanol

Table Of Contents:

• Key Takeaways And Flow Of H2 & CO2………………………………………Page 2
• Hydrogen’s Upstream
  • Electrolysis Technologies & Market Leaders…………………….…..…Page 6
  • Blue Hydrogen CO2 Issue………………………………………….…….Page 7
  • Hydrogen Is Getting Cheaper………………………………………….…Page 8
  • Carbon Capture Systems & CO2’s Critical Role…………..………..…Page 9
• Hydrogen’s Midstream – Transportation
  • Ammonia Transportation – Green Hydrogen………………..….…….Page 12
  • Methanol Transportation – Blue & Green Hydrogen……………..….Page 14
  • Cryogenic Hydrogen Energy Loss Concern…………………….……Page 16
• Closer Look – Ammonia vs Methanol
  • Hydrogen Comparison…………………………………………………Page 18
  • Example Product Comparison…………………………………………Page 19
  • Converting Back To H2…………………………………………………Page 20
  • Ammonia & Methanol Co-Production Facilities………..….………..Page 21
• Marine and Fuel Cell Comps
  • Industry Impact – H2 Transportation…………………………………Page 23
  • IMO Driving LNG, Ammonia Or Methanol Fuel For Ships….……..Page 24
  • Carbon Neutral Marine Fuels – IMO 2050………………………….Page 25
  • Ammonia & Methanol Co-Production Facilities…………………….Page 26
• Technology Leaders and Applications
  • H2 – Industry Technology Leaders………………………………….Page 28
  • Applying Technology In The EPC Process…………….………..…Page 29
  • Technology Packaging & Trends…………………………….….….Page 30

Key Takeaways:

Upstream Sources Of Hydrogen – Blue & Green (Pages 4 – 9)
          >95% of Hydrogen (H2) is produced using Steam Methane Reformer (SMR) technology that produces 7 units of CO2/unit of H2 (on average)
SMR w/ a carbon capture system (Blue H2) is the preferred option to environmentally manage excess CO2. (page 7)
Green H2 provides minimal CO2 but current technology limits Green H2’s cost competitiveness. (Page 6)
H2’s Sprint To Market Share… Current Leaders (Pages 17 – 21, 27 – 30)
      We analyzed 13 Technology Companies spanning 12 Process industries, including ThyssenKrupp, Air Products, Air Liquide, & KBR/Johnson Matthey…the clear technology leaders include…
Frozen Industries – Marine, Automotive, & H2 Transport (Pages 22 – 26)
       Outside factors (i.e. carbon neutral fuels, fuel cells, regulations, safety, & other downstream applications) will play a large role in selecting the midstream transportation choice for H2.
International Maritime Organization’s (IMO) mandates for reduced emissions has many ship builders looking at LNG, Ammonia, and/or Methanol; without a clear long-term winner (yet), many shipbuilders are frozen.
Fuel pumps (gas stations) must receive H2 from high-pressure storage vehicles, pipelines, or by converting Methanol or Ammonia to H2 at the fuel pump, with a number of implications.…(page 20)
Midstream For Hydrogen – H2 Transportation Options (Pages 10 – 16)
     Ammonia, Methanol, and Cryogenic H2 are used to transport H2 long-distances.
Ammonia is the clear favorite to…
Methanol is the best option for…
Cryogenic H2 technology/costs…

W|EPC: The Production Hydrogen (H2) Production Roadmap – The Upstream, Midstream, & Downstream Process – Hydrogen ∙ Ammonia ∙ Methanol

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W|EPC: Renewable Methanol & Hydrogen – Analyzing Methanex’s (MEOH) Geismar Facilities

Renewable Methanol & Hydrogen – Analyzing Methanex’s (MEOH) Geismar Facilities – September 2020

• Methanex & Renewable Methanol – Key Takeaways (page 2)
• Renewable Methanol (page 3)
  • Methanol Feedstock & Applications (page 4)
  • Hydrogen is Getting Cheaper (page 5)
  • Renewable Methanol Facilities (page 6)
• Geismar Methanol Facilities (page 7)
  • Methanex Overview (page 8)
  • History – Geismar Units 1 & 2 (page 9)
  • Geismar Unit 3 Comps (page 10)
  • GU3 Cost Overview (page 11)
  • Schedule – Key Milestones & Impact (page 12)
  • Monthly Progress Curves (page 13)
• EPC Dynamics – So Long KBR, Next Up?(page 14)
• Disclosures (page 15)

Lower-Cost Hydrogen Will Produce Cost Competitive Renewable Methanol: Pipe Dream or Reality? Global methanol demand sits near ~75 MTPA; with demand expected to ramp amid new EU and U.S. environmental mandates. Renewable Methanol (RM) is produced using Hydrogen (H2) from solar/wind and carbon dioxide (CO2) as compared to traditional methanol produced from fossil fuels (i.e. coal & natural gas). (Page 4)
Cost-competitive RM would open the door to green plastics and support various marine, fuel, & vehicle clean energy mandates but, costs are not competitive based on current technology. (Pages 4 – 5)                                                                      Limited project economics hasn’t stopped ~10 commercial scale renewable methanol facilities in various stages of development around the world. As these projects develop, lower costs and improved technology would be a game changer for the methanol industry while providing H2 more downstream applications. (Page 6)                                                                                                                                                                                                                                                                           

Tracking the 800 lbs. Methanol Gorilla…Methanex (MEOH). (Pages 8 – 9)

Geismar Unit 3 – Positioning vs. Competition. (Pages 10 – 13)

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