Green Hydrogen Dvt & New Incentives in the U.S. In Conversation w/ Matt McMonagle & Manka Khanna

By Fiona Wilson | October 27, 2023

In Conversation w/ Matt McMonagle and Manka Khanna 

In this episode of In Conversation, Fiona Wilson interviews Matt McMonagle (CEO) and Manka Khanna (CCO) from NovoHydrogen, a green hydrogen developer based in the US. NovoHydrogen develops and leads zero-emissions green hydrogen projects, serving industrial clients in the United States.

NovoHydrogen shares details  about their target clients, project portfolio, and insights into the green hydrogen market in the US. We also hear some notable updates from NovoHydrogen including a $20m equity commitment from Modern Energy and selection by the US Department of Energy to Develop the Pacific Northwest Hydrogen Hub. Read more about these updates:

If you’d like to get in touch with NovoHydrogen, you can reach their team at  

We’d love to hear your feedback on the interview, so please comment with questions or reflections on our LinkedIn post or the YouTube video itself.


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More resources on Green Hydrogen from Pivotal180:

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Interview Transcript 

Fiona: Okay, thank you for joining today, everyone. I’m Fiona Wilson. This is “In Conversation” which is Pivotal 180’s interview series where we get to talk with leaders from the energy finance world, renewable energy, sustainable infrastructure. We have what I think is gonna be a great episode today. Two guests actually, both from NovoHydrogen which is a green hydrogen company here in the US. So we’re gonna be talking a little bit about the technology, the current state of the market, at least in the United States, and also about the company itself, what new developments have been happening in the past few months and two years since the company was founded. But first, love to introduce our guests. We have Matt McMonagle and Manka Khanna, both from NovoHydrogen, so welcome to both of you.

Manka: Thank you.

Fiona: Thanks for joining today.

Matt: Happy to be here. Thanks, Fiona.

Fiona: Awesome. Okay, so before we really get into the meat of this conversation, let’s talk a little bit about the technology of green hydrogen or clean hydrogen, some might call it. We can go very deep on the different classifications and sort of the rainbow of colors of hydrogen. But this technology has been getting a lot of attention in recent years, especially here in the US, both because of the potential of the technology itself, but then also due to current events and policy changes that have provided new incentives for developing this technology. I think even given all the attention that’s been on green hydrogen, a lot of folks are still figuring out exactly what the technology is, why it has so much potential, and yeah, why we’re all talking about it. We’re not gonna spend this whole episode going deep on the technology. You know, we’ll link to other resources. Pivotal 180 authored a blog series last year, so we can link to that. We had a little update last week that Pivotal 180 wrote about regarding the Hydrogen Hubs announcement from the DOE. So we’ll give you more resources, but I still think it’s worthwhile. Manka and Matt, can you give us a little bit of a rundown on what green hydrogen is, how it’s used, and why is it gaining more of a foothold in the US market these days?

Manka: Yeah, sure. And Matt, feel free to pitch in here, but I can start. So green hydrogen is a hydrogen molecule. It’s just produced by the process of electrolysis where you input water and electricity in the electrolyzer and then the electricity splits the water into hydrogen and oxygen molecule. The oxygen is typically vented out. It could also be captured and provided to certain off-takers. And the hydrogen that you derive from the process is green if the electricity used for the input is clean. Now, again, clean being subjective right now, depending on which state you’re working in or even the IRS guidelines that we’re all waiting for, but what makes this hydrogen special is that it’s very, very clean because it’s coming from green electricity into the electrolyzer. The federal government is on a mission to clean the hydrogen ecosystem in the country. And there are different tiers to it, depending on how your hydrogen is being produced. And that is why green is gaining a lot of prominence today because it is there to serve an industry that exists already. It’s a 10 million metric tons per annum industry in the US already and has the potential to grow exponentially into the future. So we are not just talking about folks and customers who are using hydrogen today, but those who are heavily reliant on natural gas or other fossil fuels and hydrogen or green hydrogen provides an avenue for them to decarbonize. So a lot of pool that we are seeing from different sectors are outside the conventional hydrogen users as well where hydrogen could be a space a part of their fossil fuel usage and help them decarbonize. So I think the underlying theme that’s making this molecule shine is decarbonization primarily.

Fiona: Okay, great. Thank you, Manka. I think that’s a very helpful orientation for our audience. Let’s talk about NovoHydrogen. Can you share a little bit more about the company, who you are, what the company’s niche is? I think that can include a lot of different things, you know, what types of hydrogen projects are you focusing on, but also, who are the the client segments of the market that you’re focused and targeting currently?

Matt: Yeah, happy to take that one. And we just celebrated our two-year anniversary, so very happy about that. And as you indicated in the beginning, Fiona, we only do green hydrogen. We are a project developer, so we get the customer to use the hydrogen under what we call an HPA which your audience will probably be familiar with from the perspective of a PPA. We model our contracts off of that renewable energy structure. We develop projects and then we structure the financing and then we’ll own and operate for the long term, for that term of the HPA. So we only do green hydrogen which Manka just explained what that is. Right now, we’re primarily focused on the US, but broadly we have looked at other projects in North America. My personal background is in the solar and battery storage space. And hydrogen made a lot of sense to me for a couple different reasons. One was that hydrogen’s the smallest molecule out there and because of that, it’s hard to move. It’s not equivalent to say, a crude oil or even a natural gas. It’s very small, very hard to move, therefore, expensive to move. My background was primarily behind the meter or distributed, batteries, solar, solar plus batteries. So the way that we look at it is how do we get our customers the cheapest, cleanest, most resilient supply of hydrogen? Oftentimes, that is on-site or right at the customer facility, so we can avoid the midstream or the distribution component. That doesn’t always work because electrolysis does require a lot of power, and we need clean power and cost-effective power. Therefore, we also do what we call off-site or near-site projects where the production facility of the hydrogen is separate from the end use, but we make it as close as possible. And in that way our projects are distributed. Now, it doesn’t mean the projects are small. We do have very large projects, but they’re always customer-focused as close as possible to that customer. And building on Manka’s answer earlier, the simplest customer segment are folks that already use hydrogen for its chemical properties. They have to use it, therefore, there’s no change to their process. So that would be refining ammonia, some metals, glass, semiconductors, some food applications. And then, there’s the new applications which is where a lot of the controversy is because clean hydrogen is one way for them to decarbonize, but not the only way. And we really try to focus on the applications where green hydrogen is the best pathway for this particular customer to decarbonize. And that could change based on the geographic or regional considerations based on where they’re located. So we try to focus on the best applications, and we’re huge fans of other decarbonization technologies because we need all of them to get there. But green hydrogen’s is complex, therefore that’s all we do, and we try to find the right applications for it.

Fiona: That makes a lot of sense. And you know, still focusing on Novo, are there any kind of developments in the company, you said just passed the two-year mark since it was founded, so happy birthday to NovoHydrogen, but yeah, are there any other updates that you want to share from the company? Not to partially spoil your answer, but I know that the US government released the selections for the Hydrogen Hubs, I guess just over a week now on the 13th of October, we’re recording this in October. So would love to hear more about that, but any updates that you wanna share? Would love to hear more.

Matt: Yeah, and Friday 13th was actually our anniversary as well, so that was certainly a good day. And Manka, I’ll let you talk about that. We were part of one of the Hubs which we can announce, so I’ll let Manka go into that in more detail. But we also announced last week, the 18th, I believe, that we just closed our Series A Fundraise for 20 million. So we’re also super excited about that. Our investor is Modern Energy who only invests in clean, distributed, energy transition technologies. So we’re looking forward to working with them and really growing our portfolio, and getting it to FID or construction-ready the portfolio of projects that we’ve been developing for the last several years since the start of Novo.

Manka: Yeah, and I’m happy to talk about the Hubs. I think it’s such a special and unique initiative by the Department of Energy to kind of, it’s a huge catalyst in building out the clean hydrogen ecosystem in the country. And the way they’ve approached is they want feedstock diversity. They want end-use diversity. They wanna see projects of different sizes. They wanna see scale. So it’s not a focus on pilots, it’s a focus on actually building out this huge hydrogen economy, and give different kind of players, different kind of industries an opportunity to participate and actually help develop it. So yeah, it’s unique. I think it’s one of the biggest grants ever. So that’s super exciting. And yeah, we are part of the Pacific Northwest Hub, and we’re shortlisted to enter negotiations with the DOE, so there’s still a lot of work to do, but we’re very happy we made it this far. And yeah, looking forward to continuing the engagement with them.

Fiona: Awesome. Well, congratulations both, both on the funding from Modern Energy and the Hydrogen Hubs selection. That’s really exciting, so looking forward to seeing how all of that develops. I think the Hydrogen Hubs are really kind of interesting initiative, given the kind of holistic approach of again, wanting to develop the economy and not just a specific project that it’s about generation, but also distribution of it. And making sure the end users are ready to use the product. So yeah, really looking forward to tracking that closely and seeing how that develops. I guess thinking more broadly about some of the policy changes and incentives in the United States market, at least, you know, the Inflation Reduction Act or IRA, as a lot of us call it, also, I guess, a few months ago now celebrated its first birthday in August, 2023. But IRA, you know, has had a big focus on promoting building new infrastructure and specifically, sustainable infrastructure, low-carbon infrastructure, and low-carbon energy generation. And it included a lot of incentives for various technologies across renewable energy or sustainable energy spectrum. And in the past year plus, we’ve gotten more guidance from the IRS about exactly how those incentives will work, how different projects of various technologies will qualify for the different incentives. We’re still waiting on more clarification from the US government about the criteria for accessing the tax credits for green hydrogen projects. Is there anything in particular that NovoHydrogen or you would say the market overall is kind of listening closely when that, listening closely for when that guidance does come out? Anything that your mind is on is really gonna significantly impact your projects?

Matt: Yeah, absolutely. And I think at one level, we have structured our projects to be flexible based on whatever the guidance comes out to be from more lax to more strict. And I founded a company before the Infrastructure Bill was passed and well before the IRA was passed. And we certainly, I was certainly hoping and at that point, it was filled back better, was hoping that would pass. And looking at the policy tea leaves, clean hydrogen is more bipartisan than some other renewable technologies out there. We can go into that further, but fundamentally, we felt the conviction that the US market was fundamentally strong. And then these policies have really just accelerated and have really catalyzed the market and shone a light on it. But like you introed here, Fiona, the guidance is pending specifically on what counts as the clean electricity in order to produce the hydrogen from the electrolysis perspective. And there of course, are other pathways to make clean hydrogen. At a high level, we really applaud how this bill was constructed and that the credit is tied to the carbon intensity of how the hydrogen is made which is really how it should be. You mentioned the rainbow of colors in the beginning which have been created to provide a shorthand on the different pathways. But at the end of the day, what really matters is that carbon intensity. And as an example, the traditional hydrogen has come from a process called steam methane reforming. Methane is CH4, one carbon, four hydrogens, and it’s the primary ingredient in natural gas. So basically, you zap natural gas with steam. You get the hydrogen off, but then you have carbon, and it’s significant carbon emissions. So hydrogen from that perspective, traditional fossil hydrogen is a problem we need to solve. So then we say, okay, how do we make it clean and how do we test that? If we had electrolysis, but it’s connected to a grid that’s all coal generation, that would be worse from a climate perspective, from a carbon emissions perspective, than the steam methane reforming of natural gas. So going back to what Manka said earlier on, it’s really important that that electricity is clean, but how do you calculate that if you’re connected to the grid? And that’s really the crux of the issue. I don’t want to go into too much detail on it because you can go down a huge rabbit hole and ultimately, it really doesn’t matter what we think. It matters what the IRS said, and for our projects, we’re gonna structure them such that they’re not gonna die based on the strictness. It might change some of the cost profile, but fundamentally our projects are flexible to accommodate whatever the guidance is. And then at a high level, we fully support that these incentives should not go to projects that actually increase emissions. That’s certainly not the intent of the IRA. Manka, anything to add on that?

Manka: No, I think you covered it all pretty well. I think we’ll just say we are all really, really waiting for the guidance to come out as with many others.

Fiona: Yeah, yeah. It kind of determines maybe not overall how you proceed, but that’s the basis for a lot of a lot of the future outcomes, yeah. And I think.

Matt: It’s like certainty. So we certainly, want that clarification. One way or another.

Fiona: Yeah. Yeah, absolutely. Well, actually, now that you’ve mentioned project finance, I’m curious if you could share a little bit about how most of these projects are financed. You know, we touched a little bit on how we have some new incentives that relate to tax equity and which has been a big driver of clean energy finance in the US for quite a while now. But can you share a little bit about some of the project finance structures that you’re using and the incentives that are really key?

Matt: Yeah, and again, this also stems from the IRA and as you mentioned and coming from the the renewable space and myself and other colleagues have renewables backgrounds. Manka and others have oil and gas backgrounds. It’s really important for us to bring those different experiences to play in terms of getting the best solution, the best service to our customers. And post-IRA tax equity is now a part of the picture which is its own esoteric beast, so to speak, right? That’s kind of unique to the US, but it’s fundamental. I think a couple factors that were really impactful from the IRA were one, there’s a hydrogen PTC and the guidance we’re talking about is the hydrogen PTC. So what counts for that? And it’s 10 years, just like the wind PTC has been for many decades now. Under the IRA, the hydrogen PTC, it can be direct pay for the first five of 10 years, meaning you don’t have to have any tax liability to be able to monetize it In addition, the IRA also enabled all credits to be transferrable. Basically, you can sell the credits and that was not allowed previously which is why the industry had to structure the partnership flips, or sale leasebacks, or inverted leases in order to bring tax equity as equity means an owner of the project. The one unique aspect about transferability is that you can’t sell the depreciation benefits which are also there. So if you do go the transfer route, that doesn’t solve for depreciation, but it makes for an interesting puzzle to figure out what’s the optimum structure based on what technologies you have. I wouldn’t say we have the final answer, Fiona, but we spend a lot of time thinking about this. Fundamentally, our projects are based on long-term contracted revenues with our customers, which project finance, that’s project finance 101, right? The revenues are certain for our projects. And then the structuring and the optimization is really around how to best monetize and take advantage of these tax credits that now exist. But certainly, the fact that transferability is available and that guidance just came out, I believe, in this summer, July or August.

Fiona: Yeah.

Matt:  So that’s is also pretty fresh, and we’re just starting to see some transfer deals be announced in in the market, but that dramatically opened up the market, given that tax equity structuring is complicated, right? And it was typically limited to big banks and some very sophisticated tech and other players. The accounting is very complicated. So it just makes it a harder barrier to entry, whereas transferability is a lot easier and any corporate taxpayer is now a potential customer of transferred credits.

Fiona: Yeah, interesting. Yeah, I think that’s another area that’s gonna be really interesting to watch over the next, even six months to see what, I guess, how the financing of these projects maybe is a little bit diversified now that we have this extra option of tax credit transferability. Because as anyone who’s done Pivotal 180’s tax equity modeling courses know it actually is really complicated. And previously, there’s only been this handful of players who you could get involved in your projects. And again, while the tax credit transfers don’t encompass the full benefits necessarily of the incentives like it is another option and probably,

Matt: Yes.

Fiona:  is especially interesting to smaller outfits and firms who are just looking for another way to monetize these incentives. So, yeah, we had a really good conversation with Andy Moon from Reunion who’s built one of those, a platform essentially to transfer tax credits. So, I’m really looking forward to seeing how this all plays out, but that, yeah, that makes perfect sense.

Matt: Yeah, and we love that interview, and I think we’re starting to see those other players like Reunion to be able to make this as efficient as possible. And I think that’s the intent of the IRA was to really democratize. and certainly, added tax credits to lots of different places that didn’t exist before, right? Before it was really just solar wind, there were fuel cells, that was about it, storage, right? If you were attached to solar- now, it’s tech-neutral from a clean generation perspective which again, I think that’s how it should be, right? Who cares if it’s geothermal, or solar, or wind, or some other clean technology, as long as it’s clean. That’s what we should be using. And then we have hydrogen, and they expanded the carbon capture tax credits, so the availability credits certainly went up which I think it would’ve kind of shot themselves in the foot if there was not the transferability, just given those complications. So I think it really goes hand in hand in terms of what the bill was trying to accomplish.

Fiona: Yeah, definitely. Definitely. Okay, lots for us to be watching in the market over the next, oh, I was gonna say year, but it’s really also months. Things are changing so quickly and there’s so many more deals being announced as we go. You know, before we sign off here, is there anything else that you’re excited to see play out in the market, or you’re watching closely as things are shifting so rapidly in the US at least? Anything you have your eye on or any developments that are progressing that you’re keeping track of right now?

Manka: Yeah, I would just probably shout out to the states who are thinking very proactively about incorporating clean hydrogen in their energy mix from the utilities all the way down to the fleets and introducing incentives or grants, or anything that could basically ramp up this industry. So we are seeing a lot of that, and that’s truly been very interesting to keep tabs on, and we often caught ourselves trying to keep up which is a good problem to have. So yeah, watching those developments very closely and yeah, it’s just exciting to see the whole industry take off, also from a compliance standpoint beyond the consumers, and the production, and all of that.

Matt: Yeah, I’ll just add certainly, globally, and kind of for me, my intro to hydrogen was a little more three years ago, and there was a lot more going on in Europe and Asia, and kind of felt like the US is a little bit behind. And that has certainly changed and leapfrogged, given the policies and the initiatives that we’ve talked about already today. But there certainly is a lot going on in Europe as well and in the EU-created guidelines which treasury, I’m assuming they’re looking at for how they’re gonna create the 45V Guidance from the IRA and then the impacts of the war in Ukraine really upended energy markets and unfortunately, another war, right, has just started as well. And those effects I think have really yet to be felt or known throughout the energy industry. But obviously, the Middle East is a huge player from an oil and gas perspective which will impact energy. And then you have the European Carbon Border Adjustment Mechanism, or CBAM, going into effect and negotiations there. And we’ll see if what happens in the US from that perspective. So certainly, lots on the policy front to look at and follow as these markets mature, and develop here in a very rapid pace, given the urgency around climate change.

Fiona: Definitely. Lots of things to keep our eye on and yeah, we might have to consult you all for our next blog post or maybe it’s really is becoming a blog series now on green hydrogen, so that makes that’s some really good food for thought. Yeah, yeah. But yeah, I think we’ll have to end there. We could definitely go on for another 20, 30 minutes easily. But mostly, I just wanna say thank you so much for joining today. A lot of really exciting developments for NovoHydrogen, so I appreciate you sharing with us, you know, as well as your broader perspective on the market. But yeah, thanks for joining today, Matt. Thanks for joining, Manka. It’s really good to have you.

Manka: Yeah, glad to be here.

Matt: Thanks, Fiona. My pleasure.

Manka: Thanks so much, yeah.

Fiona: Okay, thanks everyone

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