Making hydrogen and carbon black out of renewable natural gas

TRANSCRIPT

James Lawler: [00:00:00] Welcome to Climate Now, the podcast that explores and explains the ideas, technologies, and the solutions that we’ll need to address the climate crisis and achieve a net-zero future. I’m James Lawler, and if you like this episode, please leave us a review, share it with your friends, or tell us what you think at contact@climatenow.com. We love to hear from folks. 

Today we’re gonna be talking to Rob Hanson, who is co-founder and CEO of clean hydrogen company Monolith. From its Nebraska-based plant, Monolith converts methane gas into hydrogen and another product called carbon black, which is an essential component of car tires (among other things).

In this episode, Rob and I discuss Monolith’s innovative carbon-zero logistics and manufacturing techniques, which include using renewable biogas from Nebraska’s farms and the world’s largest plasma torch. We also talk about how companies like Monolith are leveraging new government subsidies to supercharge the hydrogen industry.

But first, our news segment.

[00:01:00] Emma Crow-Willard: For This Week in Climate News, I’m Emma Crow-Willard, and I’m in for James Lawler today. I’m joined by Julio Friedmann. Julio, you wanna start us off on the first piece of news about the EU-UK carbon border adjustment mechanism discussions? 

Julio Friedmann: Absolutely, and always a pleasure to be here. There was a set of stories that looked at the EU border carbon adjustment or carbon border adjustment mechanism, sometimes called a “CBAM”.

And the carbon border adjustment is basically a tariff on imported goods as a function of their carbon footprint. And the EU has decided that they’re gonna go after this big and, because the UK is no longer part of the EU, they have to actually negotiate with the UK around it.

But it looks like they’re getting closer to a deal, they’re talking and they’re working together. This is relevant for many reasons, not the least of which is that the US is working on a CBAM as well, and it’s being pushed forward by a number of people. It is a [00:02:00] mechanism that could, if designed correctly, really lead to better trade that is cleaner. It could create strength among nations that are able to trade through that carbon border adjustment.

It should incent companies who want to sell into the European market or, if we have a US one, into the US market to really clean up their production. Um, if it’s designed poorly, it can become a real problem. If it’s designed poorly, it can become something that is challenged under the World Trade Organization and the International Monetary Fund. If it’s designed poorly, you end up counting the wrong things. 

Emma Crow-Willard: Yeah, and this could really impact how the US thinks about their CBAM. Now we had a podcast episode, before the Inflation Reduction Act came out, with several economists and a lawyer and folks working in the US about, like, the CBAM proposed in the US last year, uh, 2022.

And it just came down to like, it really doesn’t make sense in the US if there’s not a [00:03:00] carbon price, but I don’t know if things are different with the IRA.

Julio Friedmann: Right. It is the case that it is like a carbon price. It’s an indirect carbon price, and if you don’t have an internal carbon price to your nation, then that becomes a basis on which the WTO or the IMF may challenge it. It is a way to bring a price on carbon and push that into markets in places where it normally wouldn’t stick. 

Emma Crow-Willard: Yeah, makes sense. In other news, the US Treasury and the IRS have to write the rules for how to tax credits that are in the IRA will be administered, right? And we’re coming up to that point where they’re releasing notices of proposed rulemaking.

And on the 31st of March, the US Treasury released a notice of proposed rulemaking to clarify requirements for clean vehicle credits. To meet the $7,500 credit, a vehicle must undergo final assembly in North America. It must not exceed $55,000 in cost (that’s for the sedan-type vehicle) as opposed to the, [00:04:00] the bigger vehicles must not exceed $80,000.

And so these new proposed rules kind of explain how manufacturers must meet sourcing requirements for minerals and battery components. What are you seeing there? 

Julio Friedmann: Right, so first of all, great to see the guidance out. It will help people a lot. There is a challenge in the guidance around the Made in America provisions.

The IRS has tried to put a ladder in so that you can start with 40% and then increase those numbers up over time. Senator Manchin, uh, is nervous about this ‘cause he wants to see lithium made in the United States. Uh, and we do have lithium reserves, but we don’t have lithium production and we don’t have lithium refining.

So, he wants to try to cut China out of these supply chains. That is a reasonable thing to ask for, but if we get too bound up in those things, then we’re not gonna deploy, and the whole point is we wanna deploy EVs. 

Emma Crow-Willard: In addition, in April, it’s quite [00:05:00] possible that the treasury will be releasing a notice of proposed rulemaking around the hydrogen tax credits in the Inflation Reduction Act.

That’s 45 V and the tax credit offers up to $3 a kilogram for the cleanest method of producing hydrogen, cleanest methods, I should say. And, and so just into context today, it costs around five to $6 per kilogram to produce green hydrogen via electrolysis, depending on who you ask. And about $1 to a dollar 50 per kilogram for gray hydrogen, which is made using methane or natural gas and that can release CO2 emissions. 

And so this tax credit, obviously, is supporting, uh, green hydrogen production, but there’s a lot of complications and disagreements about how it should be administered. So Julio, I’ll pass it over to you to kind of explain what’s going on there.[00:06:00] 

Julio Friedmann: Sure. 

So 45V, which is this new tax credit for hydrogen, is determined as a function of how clean production is and you must include upstream emissions, including the emissions from electricity or the fugitive emissions from natural gas. All of that goes into the calculation.

The IRS is trying to figure out how exactly they should execute that calculation and what guidance they should give to people. And there’s a sticking point around a couple of things. One of them is called additionality. The other is called hourly matching. Additionality means all the energy that comes in has to be new green electricity, whether that’s nuclear, or solar, or wind, or geothermal to be determined. 

But if you have zero carbon electricity going in, one of the questions is, is that additional or are you stealing other clean electrons out of the grid? Um, in Europe they were gonna do that, and then they backtracked. The IRS is trying to figure [00:07:00] out whether or not to include additionality in this.

There’s the other issue though, which is about do you do the electricity generation on an annual average or a monthly average, or an hourly average? And for an hourly average, that means that you gotta generate an hour of electricity and match it to an hour of hydrogen production. If you wanna do that, most green hydrogen facilities need high capacity factors.

They need to run a lot in order to get their money back for the capital stack. So, that means that you would need to firm up solar with a lot of batteries and with a lot of wind, and that starts to look more expensive, even with the investment tax credits and production tax credits in the IRA. 

And it looks like that could increase the price by 50 to a hundred percent. It’s also the case that would get you a better climate outcome. If you did hourly matching and additional generation, you would definitely get a better outcome and it would be easier to hit that low target. So it’s [00:08:00] this push back and forth; it’s the trade off between actually getting things deployed and moved out into the field versus the additional costs versus the climate benefits.

If you just do it poorly and start pulling electricity off the grid, the actual footprint of hydrogen production could be very large. 

Emma Crow-Willard: Yeah, and that’s related to our upcoming interview with Rob Hanson, of Monolith that’s producing hydrogen from methane or renewable natural gas. 

Julio Friedmann: Yeah, but it’s not blue hydrogen as the way most people think about, it’s something different. I look forward to hearing him describe it. 

Emma Crow-Willard: I don’t know what you would call it. Is it blue? Is it green? 

Julio Friedmann: Yeah, I do actually, this is, this is part of the hydrogen rainbow nonsense that I try to avoid constantly. I would-

Emma Crow-Willard: Oh.

Julio Friedmann: He’s gonna call it turquoise hydrogen, which is just dumb, you know?

Emma Crow-Willard: [00:09:00] Blue and green mixed together, that makes sense to me. 

Julio Friedmann: But now there’s like pink hydrogen, there’s yellow hydrogen, there’s magenta hydrogen. 

Emma Crow-Willard: Oh my goodness.

Julio Friedmann: These people are trying to pitch gold hydrogen. It’s like, it’s utter nonsense.

Question is correctly, within the IRA, what’s the footprint? That’s the only thing that matters.

James Lawler: Now to our interview segment, Rob Hanson and co-founder Peter Johnson launched Monolith Materials in 2012. Their mission was to use sustainable electricity to turn natural gas into industrial products, namely hydrogen fuel and carbon black, which is an ingredient in paint, pigment, car tires, and hundreds or maybe thousands of other products.

Monolith would eventually open a manufacturing facility in Nebraska whose farms provide a ready source of what’s called renewable methane. To turn this gas into marketable products, Monolith uses a process which is called methane pyrolysis, which involves the largest plasma torch ever [00:10:00] constructed. If you have no idea what that is, you’re not alone.We will get to it eventually.

Monolith aims to use its hydrogen to manufacture carbon-neutral ammonia. In our conversation, Rob explained how all of this works and how the Inflation Reduction Act and other government action is paving the way for carbon-neutral industry.

So, what is Monolith? Could you tell us sort of how you got started and what the company is and does?

Rob Hanson: Yeah, so we’re a clean hydrogen and materials company, and we have invented a new process. It’s got a big fancy name called methane pyrolysis, but what it really is, is it’s taking methane and that can be either pipeline gas or renewable natural gas, and we use a lot of electricity and a very high temperature process to split the methane into its two key components, which are hydrogen and solid carbon.

And the big advantage there is, uh, because the carbon comes out as the solid, it never ends up in the atmosphere as CO2. And so you get clean hydrogen. And then we’ve gone a step further and we’ve really figured out how to tailor that solid carbon so that it’s got a [00:11:00] bunch of utility, uh, both economically and environmentally.

And it’s this product called carbon black.

James Lawler: So who are your customers of this carbon black material? Where do you sell this and what do you sell it for? 

Rob Hanson: Yep. So carbon black is another kind of interesting hundred year-old, uh, material. It’s pure carbon and it’s in solid form, it looks like, like black flour.

But if you zoom in on it with an electron microscope, it’s actually this really interesting nanostructure. So it looks like a bunch of grapes where the individual grape is like 10 to 50 nanometers and they’re connected together and you actually control the size of the grape and how many are connected together, and that makes different grades.

So it’s this highly customized carbon nanoparticle. So 70% of carbon black goes into making the tires of the world. And a third of every tire on the planet, car, truck, whether it’s EV or gas or diesel or hydrogen powered, a third of every tire is carbon black. Um-

James Lawler: hmm. 

Rob Hanson: And that’s really unchanged for just decade upon decade.

[00:12:00] Um, it also finds its way into other rubber products, the belts and hoses and things like that. And then the final thing, it’s, it’s used to make things black. It’s like the original black pigment. And so really anything that’s black, uh, or even anything that is tinted with something that is black, so basically every paint in the world has some carbon black in it.

Um, the black plastic keys on your keyboard. Um, and you just see it everywhere. You touch it or something with it, essentially every day. And it’s just this ubiquitous, uh, petrochem that’s all over the place. 

James Lawler: Interesting. Now, what’s the difference between carbon black and graphite? 

Rob Hanson: Yeah, good question. So, so graphite, um, if you kind of zoomed in on it with the electron microscope, it’s in a sheet structure.

So graphene is an individual sheet of carbon connected together, and graphite is a whole layer, you know, stack of those sheets. But if you put graphite, these, you know, think of like a stack of paper as opposed to carbon black [00:13:00] being a bunch of grapes, if you put the stack of paper and mix it into rubber, it wouldn’t really create a reinforcing network like the bunch of grapes that are highly branched and connect together and strengthen that rubber.

James Lawler: What else is- is carbon black in- in any other, uh, you men- you’ve mentioned rubber, you’ve mentioned, um, you know, pigment. I- is it used in other building materials? 

Rob Hanson: So, um, not really as a structural agent. Um, it’s primarily when you find it in rubber, in some plastics where it will be kind of at that nano-seal structurally.

Um, where there’s a lot of research going on is, um, I’d say on the, on the really big side of methane pyrolysis, where eventually, you know, companies are so successful that they fully displaced the 20 million tons of carbon black, and now they’re looking for more permanent sinks for the carbon.

And you could always just kind of bury it in the ground and sequester it, but you’d much rather, especially if you can tailor it to create utility, have it go into [00:14:00] something. And so the big areas that research are going into are building materials like concrete roads, right? When you think of like either concrete or asphalt roads, they usually have a whole bunch of different things going into them.

And imagining roads is quite interesting if you think of the volume of tires that are out there versus the volume of roads. 

James Lawler: Mm-hmm. 

Rob Hanson: And you know, a tire’s 30% solid carbon and a much harder application, right? It’s the thing that’s moving and the thing that has the humans inside. You could certainly imagine getting a material sink of this solid carbon into the roads of the world.

James Lawler: Yeah. 

Rob Hanson: Um, and there’s been some really interesting research on particularly carbon black where you, you put it into, into roads, uh, particularly asphalt, and you can improve the heat resistance. Right? That’s a big issue in countries like India where, as the world gets hotter, the asphalt gets soft and it starts to wear more. 

And so there’s some interesting, I’d say longer-term research and development that’s being done by us and by many, many [00:15:00] others around, let’s say gen. two utilization of highly tailored uh, solid carbon and the key things are you wanna create some value and you want it to be sequestered long-term. 

James Lawler: Awesome. So what I’d love to do is just drill into sort of all the- the inputs, the mechanism, and then the outputs. Just to sort of unpack it a little bit, if you could describe what actually happens within methane pyrolysis.

So, so you have natural gas, it enters into some kind of chamber, and if you could just sort of paint a picture of how the technology actually works. 

Rob Hanson: Yep. Great question. So all of the heat comes from a giant, uh, electric plasma torch. 

James Lawler: Okay. And what is that? 

Rob Hanson: Yeah, so it’s a way to convert electricity into high temperature, very, very high temperature heat in a working fluid at very high efficiency.

So we have a, a little larger than 16 megawatt plasma torch. It’s the [00:16:00] largest plasma torch that’s ever been built. The previous world record holder was NASA. They had an eight megawatt torch. And so we more than doubled that and it can convert electricity from the grid into very high temperature heat at uh, north of 95% efficiency.

And that’s really important because it’s really an electrification of these processes of making hydrogen and making solid carbon products that you need really high temperature heat, which comes from electricity to be able to do that efficiently. And it’s very complicated and probably one of the highest temperature reactors in the world.

Um, and then we introduce the feedstock, and you have to control that very precisely because we don’t just wanna split it. We wanna split it and have the carbon come out as this highly tailored carbon black nanoparticle that can then go into a life safety product like, like a tire, right? 

James Lawler: Right. 

Tires are demanding application.

Rob Hanson: I mean, when you ask people what’s the most important safety feature on your car, most people say their seatbelt. But like, of course it’s your tires. It’s the only [00:17:00] thing that connects you-

James Lawler: Of course. 

Rob Hanson: And so, so that’s, that’s kind of some of the magic or secret sauce of Monolith and, you know, there’s been maybe 10 new methane pyrolysis startups in the past couple of years, and that’s super exciting for us because it’s gonna take a whole ecosystem.

But the really hard part is not splitting methane, the really hard part is splitting it and getting this high value product out that can be tailored. 

James Lawler: Fascinating. Got it. 

So in the production of heat, I suppose you had a couple of different options there. You could use this plasma torch, um, which actually I’ve never heard of that before.

So you learn something new every day. Fascinating. Um, so you could use that or you could burn something presumably, right?

And maybe you could burn hydrogen or you could burn some of the natural gas and car- capture the CO2. Like you, you probably had a variety of options and you probably ran some analysis to figure out that your plasma torch was the best of those options.

Can you talk through what that sort of thinking was by which you arrived at the [00:18:00] solution you arrived at? 

Rob Hanson: Yeah, so if you look at these two products, hydrogen and carbon black, both are made in huge quantities today. Literally in the case of hydrogen, like a hundred million tons per year and in carbon black kind of 20 million tons per year, and they’re all made by burning something.

So in the case of hydrogen, it’s a process called steam methane reforming, where you’re burning a bunch of natural gas. In the case of carbon black, it’s called the furnace process, where you’re burning a bunch of oil. And so that’s how you generate the heat and the ability to split and, and, and get your end products.

But when you burn something, you make CO2, right? 

James Lawler: Mm-hmm. 

Rob Hanson: And so if you wanna make a clean process, you can either burn something that doesn’t emit CO2, which is hydrogen, but burning hydrogen is not the best end use of hydrogen, right? It’s this really powerful reductive. You can build all types of chemistry with it, like ammonia, and so it would be very expensive.

Or you can use electricity. The cool thing with electricity is now you give yourself a whole range of different ways that you can be [00:19:00] decarbonized, right? So your electricity can come from renewables, it can come from nuclear, it can come from hydro, where you’ve now decoupled the production and emission of CO2 into the atmosphere with the source of your primary energy that’s driving the process.

So really early on, I mean, this is electrification, right? This is electrification of these currently combustion processes, and so it was a, a pretty easy answer for us. Now, the last part of this is some of the nitty gritty of the chemistry, particularly of making this carbon black product, which is this nano form of carbon that’s just super bespoke and there’s lots of different grades and it’s really complicated.

Um, you can only do that at really high temperatures and so not just any old electrification works, right? You couldn’t use the element from your electric stove or, uh, equivalent to generate the heat. We had to use a plasma if you wanted the efficiency and the temperature range that can effectively drive this process.

James Lawler: Yeah, so, so you’ve got this plasma torch [00:20:00] and you have the natural gas as inputs. Now are you currently operational? You’re selling hydrogen and you’re selling carbon black, today?

Rob Hanson: Yeah, so we’re operational. Uh, we’ve taken a number of steps. We had a pilot plant, uh, in France, a demonstration plant in California, and now this is our first full scale commercial unit.

James Lawler: Mm-hmm. 

Rob Hanson: And so it’s, it’s one unit. Eventually we’ll expand this plant to have an additional 12 units. Um, but we have the first unit online and it’s producing carbon black and hydrogen. The carbon black, it looks like black flour. You then pelletize it into small BB size pellets and it’s, it’s really quite easy to ship.

It’s shelf-stable, it’s non-toxic, it’s non-combustible. And so you can put it into rail cars. We’re on the Union Pacific rail line. You can put it into hopper trucks or you can put it into what are called super sacks, which are like one-ton bags that would sit on a pallet. And then you ship those all around the country.

James Lawler: Amazing. 

Rob Hanson: And on the other side, you’ve got hydrogen, which is, perhaps, the hardest thing in the world to [00:21:00] transport, right? It’s number one on the periodic table. If you want it to be a liquid, you gotta go down to 20 kelvin, and then it’s 73 kilograms per cubic meter, so like 7% the density of water. Um, and so our plan there is, uh, you wanna convert it into something as quickly as possible that either has value or is more transportable.

And so the region of the country we’re in is, is the Corn Belt. And so we’re converting it into ammonia, which is NH3 at site. We’re not doing that today. We’re gonna do that with our expansion project because the amount of hydrogen we produce from one unit doesn’t really make sense. It would be the smallest ammonia plant in the world, probably.

James Lawler: Okay. 

Rob Hanson: And so we, we have an expansion to this plant.

James Lawler: Yay. 

Rob Hanson: Yeah. Yeah. Not the most capitally efficient thing to do. So, so unfortunately for, for the next few years, we’re actually just flaring the hydrogen, which doesn’t have a pollution footprint, but, it’s sad because, you know, it is a lot of hydrogen still to just be flaring.

Uh, but the reason is that we’re gonna be building these 12 additional units at this site in a [00:22:00] phase two, and then we’re gonna take all the hydrogen from the expansion and the existing one, and we’re building an on-site ammonia synthesis plant. And now it’ll be a very standard-sized ammonia plant that will, you know, be able to supply regionally, uh, for fertilizer primarily.

James Lawler: And where do you get the nitrogen for that?

Rob Hanson: Yeah, so nitrogen’s just from the air. Um, and, and that’s, you know, it’ll be an air set plant. We’re working with one of the industrial gas companies. They’ll, they’ll do that and just over-the-fence us nitrogen. 

James Lawler: Okay. 

Rob Hanson: And the hard, the hard part of making ammonia, both from a cost perspective and from an emissions perspective, is the hydrogen.

That’s the vast majority of the cost of making ammonia is making the hydrogen and essentially all the emissions when you have ammonia comes from the production of hydrogen to make that ammonia. 

James Lawler: Okay. Interesting. I guess that’s, so that, that’s probably the most lucrative thing you could do with the hydrogen.

Um, it wouldn’t be- would it be useful to just use it as another source of your heat? You could, you could burn it to supplement your, what you’re [00:23:00] taking off the grid or is that not efficient? 

Rob Hanson: Um, yeah, I think it’s- I think making a chemical out of hydrogen, especially one like ammonia where there’s a big market demand and the conventional way to make ammonia has a big footprint.

James Lawler: Mm-hmm. 

Rob Hanson: So the production of ammonia globally accounts for 1% of global CO2 emissions. 

James Lawler: What do you see the role of hydrogen being, you know, beyond ammonia production? What, what is hydrogen’s role in the energy transition? Do you think? 

Rob Hanson: Yeah, so two things. One, you know, the hundred million tons of hydrogen we make today, uh, emits over a gigaton of CO2.

So that’s like 2% of global co2. So number one, we just gotta clean that up, right? That’s, that’s worth doing. And that’s a big piece of- a big piece of the pie on that. 

James Lawler: Do you happen to have off the top of your head, kind of a, a pie chart of the current uses of hydrogen globally? And how does that break down today?

Rob Hanson: So it’s, it’s probably 40- hydrogen’s, currently [00:24:00] 45% utilized to make ammonia.

James Lawler: Mm-hmm. 

Rob Hanson: Kind of mother of all fertilizers. Number two, it’s used to refine, uh, liquid transportation fuels. Mostly that’s fossil fuel, hydro treating crude to make gasoline and low-sulfur diesel and other liquid fuels. 

But if you make renewable fuels like renewable diesel or sustainable aviation fuel, that requires even more hydrogen per unit because you’re not just taking things like sulfur, you’re also taking a lot of oxygen out of the, out of the chains. So that’s probably 35% today. 

James Lawler: Oh.

Rob Hanson: And then there’s a long tail. So 80% is ammonia and refining, and then 20% is all types of different things from hydrogenating foods to glass, to, you know, hydrogen cooling of generators and, and all of those.

James Lawler: Interesting. So one other question I had related to the business is why you’ve located in Nebraska. So you mentioned that it’s advantageous to be near rail so that you [00:25:00] can ship this carbon black, but could you, could you just tell us why have you picked that area to site the facility? 

Rob Hanson: Yeah, so number one input for us is electricity and uh, Nebraska’s actually the only state in the country that has 100% public power.

So it’s a really interesting model where, because of that, uh, you don’t have a profit motive in the electricity sector, and so over many, many decades of kind of good management, uh, they have very good rates and some of the best electricity rates in the country. Now, the second part is we want our electricity to be clean.

And so, you know, Nebraska’s mix is pretty good right now. Uh, they’ve got, uh, still a large nuclear plant and they have some wind and hydro assets, but, uh, there’s a ton of wind resource. And so when you look forward of who’s gonna be able to, you know, truly, deeply decarbonize their grid, we really liked the Nebraska potential.

James Lawler: Crazy. 

Rob Hanson: And so, yeah, so there’s [00:26:00] this, you know, put the production where the demand is. And then also clean it up. 

James Lawler: Another reason Monolith picked Nebraska for the first of its plants is because of the availability of what’s called renewable methane. Nebraska has a lot of agriculture and the plants and animals on its farms produce a lot of methane.

Methane from these sources is called biogas, and it can be refined into renewable natural gas, also known as RNG. RNG could be carbon negative, depending on where it comes from and how it’s made. Thus, by setting up shop in Nebraska, Monolith has a ready source of potentially carbon-negative methane to make its hydrogen and carbon black.

Rob Hanson: So when you think of, you know, fossil gas, right? That’s carbon that’s been pulled out of the atmosphere, you know, a hundred million years ago. And you pull that from the ground, you burn it, you put the CO2 into the atmosphere. That’s kind of this massive transfer of carbon into the ancient at- from the ancient atmosphere into today’s.

If you do RNG or, you know, biogas, the carbon dioxide gets taken out of the atmosphere by a [00:27:00] growing plant through photosynthesis, and it’s in its biomass. That biomass, you know, falls on the ground and aerobically digest back into CO2, and that’s the carbon cycle. Or you capture it, you anaerobically digest it into methane and then you burn the methane, the CO2 goes back into the atmosphere, and that’s kinda the simple view of, of RNG and why it’s perhaps somewhat sustainable.

Now that’s if you burn it, if instead of burning the RNG at the end, you pyrolize it, then that solid carbon, which used to be carbon dioxide in the atmosphere very recently, is now a solid carbon that ends up getting sequestered. 

James Lawler: Mm-hmm. 

Rob Hanson: And so you’re actually drawing CO2 out of the atmosphere through the only thing that touches the atmosphere at scale that humans have ever had any control over, which is agriculture.

And you’re pulling that out in potentially very large quantities into a solid sequestered product. And so we can actually measure, or anyone can measure the carbon 14 isotope. Which is, you know, uh, can tell you if it was recently [00:28:00] biogenic of our solid carbon. And you can kind of prove that, not just from a mathematics but from an actual physical perspective, CO2 has been drawn out of the atmosphere in this process.

And of course, you’re also making hydrogen alongside. So when you do the big lifecycle analysis, depending on what percentage of fossil versus renewable, you can be slightly positive in the case of all fossil, because you have to count the upstream emissions from the natural gas sector, of course, or strongly negative if you were using, you know, high percentages of RNG. 

James Lawler: Right. Um, and so to what degree has sort of participate- has participating in the voluntary carbon offset market then factored into your, your calculations about your business model given that, you know, it sounds like you guys have a- you guys have sort of this wonderful quality in your process, which, which is like we can actually prove, right? 

How much we are taking out, which. You know, we’ve, we’ve covered on this podcast in a number of different cases, how that’s really kind of the holy grail in terms of selling carbon offsets. As, as very [00:29:00] few sellers can actually show on a scale, if you will, how much carbon their particular operation has pulled out of the atmosphere.

And it sounds like you guys- there’s a path to doing that with your operation.

Rob Hanson: Yeah, so I mean, our fundamental philosophy from the beginning of starting this company is what we really need to do, right? What we need to do as a country, as a global community is we need to continue to make the high value energy and energy products that drive our society forward, but we need to do it in a way that doesn’t emit CO2, like full stop.

It’s not about continuing to emit CO2, but playing a shell game on some other area. So that’s kind of how we think about it is, is number one, like the world needs hydrogen and hydrogen-drive products like ammonia. It needs carbon black because it’s critical to mobility. And if you’re gonna bet on something persisting, it’s probably the wheel.

James Lawler: Mm-hmm. 

Rob Hanson: Um, that’s a pretty safe bet. But we gotta do it without emitting CO2, right? And so we kind of started from there and we [00:30:00] said like, we’re not worried about doing offsets. We want to get to true zero, including the electricity side on the upstream and the natural gas side on the upstream. And that’s where you wanna get that system tight. If it’s fossil, then you wanna start blending in RNG over time.

Now, if we find ourself in a position where, you know, we’re strongly negative and we have, you know, a potential to monetize the carbon negative nature of that, I think our customers are gonna want it first. 

James Lawler: Yeah. 

Rob Hanson: And so if you think of, you know, the big tire producers, they’ll have, uh, big commitments to getting both carbon neutral and a hundred percent sustainable products.

And there’s gonna be parts that are really hard. And so if we could bring not just neutral but negative, that probably is gonna be quite valuable to them. In which case I would first and foremost wanna sell to them and help them solve their problems, right?

And that rolls up into the auto OEMs. And if you think about EVs making, you know, more penetration, they’re really gonna care about the embodied carbon and, and tires are part of that and, and they really matter.

James Lawler: [00:31:00] Totally. That’s really, really interesting. So, pivoting a little bit in a- in the conversation, I’d love to talk to you about the Inflation Reduction Act and kind of your, I- as I understand it, your kind of behind-the-scenes conversations with senators about sort of the IRA and getting that across the finish line.

Rob Hanson: Yeah, so, you know, when we started the company, it was really important that we kind of had standalone economics. And we do, right? It’s, it’s, uh, we make these two products, carbon, black and hydrogen. And, uh, we don’t need a premium to be economically viable. And so for the first like nine years of the company life-

James Lawler: Mm-hmm.

Rob Hanson: Company’s life. I mean, we spent next to no time doing anything on the policy side. We just were like, heads down, technology, market, build the company. Well then last year, you know, all of a sudden some momentum started building for this big climate bill- first Build Back Better and then the IRA. And so it wasn’t one that we were pushing [00:32:00] for, but when it came up and you know, hydrogen had really become an important part of the energy transition.

And one of the tools that we have, particularly in this country, um, we engaged from the perspective of if there’s gonna be a hydrogen tax credit, we wanna make sure that it gets done, you know, to what we think is the right way. And so that’s, that’s the context that we started engaging.

I mean, I think our lobbying budget is probably one, 1000th or one 10000th of big existing companies in this space. So, you know, it, it was, you know, we were a few people, um, but it was really cool to get to engage in that process. Just getting to participate in how an actual law got, you know, passed was really cool of- even little old Monolith got to have a seat at many of the tables and it was, it was really fascinating and fun. 

James Lawler: Interesting. So tell us what the, um, just, you know, for those who aren’t tracking as keenly, you know, what exactly is the [00:33:00] hydrogen subsidy and how is Monolith positioned to take advantage of that?

Rob Hanson: Yep, so it, it all started- there was a kind of standalone bill for a clean hydrogen production tax credit, so a PTC, much like the wind PTC, and, and that kind of became the, the blueprint for what ultimately ended up being included in- passed in the IRA

And so, you know, it took various shapes over time, but where- kind of where we had our influence or what, what we really cared about was a couple things. We said we want this to be technology agnostic, right? The law shouldn’t be specifically picking types of technologies, so that was number one. Number two, it’s a clean hydrogen tax credit, and so we said, “define clean based on the full life cycle carbon intensity of the hydrogen production”.

James Lawler: Mm-hmm. 

Rob Hanson: And yes, that’s hard math. And there’s gonna- we’re in it right now. There’s gonna be all types of rules that need to be made. It’s gonna have to be [00:34:00] fought about, but like that’s kind of the challenge. 

James Lawler: And in your case, and, and just to, just to kind of bring that home, like the full life cycle, carbon intensity of the process in your case, and correct me if I’m wrong about this, but would include the grid, the carbon intensity of the grid, ‘cause that’s producing your electricity for your plasma torch. It includes the upstream emissions associated with natural gas production and delivery. It includes, I guess, any leaks in the, I hope there are none, but maybe there are some leaks in the process. Um, Anything else that would be relevant there?

Rob Hanson: No, those are the big ones. And, and-

James Lawler: Okay.

Rob Hanson: And the law did make it clear. They, they said, well-to-gate, so it’s all the way back to the well, but then it ends once you’re at the gate. So you- you’re not tracking, necessarily, the full lifecycle downstream because it’s, it’s about cleaning up hydrogen, right? 

 And so it’s saying, look, we need hydrogen in the end products, but we’re not gonna go all the way. You know, through the end of life. So it’s well to gate-

James Lawler: And gate means the point at which you are passing the hydrogen to your customer at your gate, [00:35:00] like you’ve produced the hydrogen and now here you go, up to that point. 

Rob Hanson: That’s right. 

James Lawler: Okay. 

Rob Hanson: And then, and then, you know, you hit all the big ones, you know, electricity upstream, um, natural gas upstream, any onsite emissions.

And the ones that are, you know, not perfectly clear, and it’s going through the rulemaking process right now; is okay, how much, if any of you know, the steel you use to build your plant, do you need to go upstream on the steel? 

James Lawler: Right. 

Rob Hanson: What about your corporate overhead? Do you need to do the travel of your executives?

James Lawler: Right. 

Rob Hanson:And, and that kind of stuff. I, I think the answer’s probably gonna be no on those because eventually you run into, um, just the actual practicality of it. And you’re starting to talk about the last few percent that, uh- but the big ones are, like you said, upstream electricity, upstream natural gas. 

James Lawler: And to recap, it’s not a carbon negative process, but the idea is that over time as the grid, you know, greens and as you start to use more, [00:36:00] um, renewable natural gas, it, it could be or will, or should be. 

Rob Hanson: Yep, that’s right. That’s right. 

James Lawler: Yeah. 

Rob Hanson: And, and so, so, so that’s kinda what we cared about was, um, technology agnostic and base the credit, and it’s a sliding credit, on what the carbon intensity of the hydrogen production is based on this lifecycle analysis. 

And so it ended up being quite a steep curve. So I’ll give an example. Uh, the current way of making hydrogen is 10 kilograms of CO2 per kilogram of hydrogen. To get the top credit, you’ve gotta get below 0.45, so that would be greater than a 95% reduction.

And then you get, 

James Lawler: Mm-hmm.

Rob Hanson: Then you get $3 a kilogram of tax credit. 

James Lawler: Okay. And what are you guys? 

Rob Hanson: And so we’re below. We’re below 0.45

James Lawler: .45, wow. Okay. 

Rob Hanson: Yeah. Now, in that tax credit, if you are at say, one, so you’re still 90% reduction, you’re one kilogram of CO2 per kilogram of hydrogen.

James Lawler: Mm-hmm. 

Rob Hanson: Then it’s a $1 credit, so it really [00:37:00] incentivizes you to go all the way the last mile.

James Lawler: Yep. 

Rob Hanson: And, and I mean, I think conceptually it’s kind of like zero, but then they said, “look, practically zero. You know, let’s incentivize 95% plus reduction with the top tier”. 

James Lawler: Yeah.

Rob Hanson: And, and that’s where, that’s where we get to. And then like I said, we can get to a hundred or more with the percentage of RNG that we use.

James Lawler: Right. That makes sense. Really neat. So it sounds like the inflation reduction act really kind of supercharged your business model, right? Providing $3 per kilogram of clean hydrogen produced and you’re producing how much clean hydrogen?

Rob Hanson: So our, our, you know, big plant that we’re working on is gonna be roughly 50 to 60 million kilograms per year.

James Lawler: Wow. 

So, hundreds of millions of dollars of additional kind of charge in favor of the, the business, which is amazing and on top of what should already kind of work from a financial standpoint. So that’s unbelievable. One, one question I have related to some of the other [00:38:00] incentives that we’ve, we’ve looked at- we’ve talked about on this podcast is the low carbon fuel standard, LCFS.

And I wondered, just thinking about, you know, end markets, given that 35% of hydrogen’s used to produce fuels, there might be good reason for refiners to purchase your hydrogen so that they could claim that. Is that something that you’re doing currently or thinking about? 

Rob Hanson: Yeah, so I, I think, like I was saying, you know, Nebraska’s our first project and that’s, you know, hydrogen to ammonia, um, in that whole story.

James Lawler: Yeah.

Rob Hanson: But we have a whole bunch of additional projects that we’re working on and, you know, some that are very interesting. You know, there’s, there’s some renewable diesel projects that I find fascinating. I mean, even in, in- where we are, um, ethanol, right? 30% of Nebraska’s corn goes to ethanol. I think like 90 plus percent of that ethanol goes to California.

James Lawler: Yeah. 

Rob Hanson: Because of the LCFS. 

James Lawler: Yeah.

Rob Hanson: And a decent number, it’s not as high as eight or nine points, but [00:39:00] it’s, you know, several points of the CI of ethanol is associated with the emissions that were used to produce the fertilizer that was used to grow the corn. And so that’s a more circuitous path.

James Lawler: Right.

Rob Hanson: But you know, the point is like, yeah, it’s there and it’s, it’s there in a real way.

James Lawler: Yeah. That’s very cool. Well, Rob, thank you so much for your time. I think we’ve covered it and this is such an exciting business, Monolith Materials, and really pleased to have you. Thank you for making time for us today. 

Rob Hanson: Yeah, my pleasure. Thanks for having me. 

James Lawler: That’s it for this episode of the podcast. To learn more about green hydrogen and sustainable industry, you can check out our other podcast conversations at climatenow.com.

And if you’d like to get in touch, email us at contact@climatenow.com or tweet us at @weareclimatenow. We hope you’ll join us for our next conversation.

Climate Now is made possible in part by our science partners, like the Livermore Lab Foundation. The Livermore Lab Foundation supports climate research [00:40:00] and carbon cleanup initiatives at the Lawrence Livermore National Lab, which is a Department of Energy applied science and research facility. More information on the foundation’s climate work can be found at livermorelabfoundation.org.