Monarch Energy expects to tap capital markets in 1Q23 to scale green hydrogen development platform

Monarch Energy intends to explore a capital markets raise in 1Q23 as its builds up its green hydrogen project development platform.

The San Diego-based Monarch develops projects with a goal of getting to notice-to-proceed (NTP) with an offtake onboard, and selling the projects to long term owner/operators.

At this point in their lifecycle, Monarch has sited some 4,500 MW across 12 projects, of which 3,000 MW is presently in Texas. Overall, Monarch has roughly 2,000 acres under siting control.

The company is forecasting its first wave of projects will hit NTP in late 2024 and COD in 2025.

Monarch is currently exploring different strategies for its fundraise and has not engaged an investment banker as of yet, said Monarch’s CEO Ben Alingh in an interview with NPM, adding that the capital raise is aimed at doubling their headcount and expanding their pipeline.

“There are over 10 million tons of hydrogen produced in this country annually, so we are focused on a market that exists, getting green hydrogen to scale and eventually driving down costs,” said Alingh. Monarch is focused on replacing carbon emitting forms of hydrogen production, such as grey hydrogen and replacing it with green hydrogen.

But like any nascent industry, there have been growing pains along the way.

The first projects are not due to hit NTP until 2024 because there is a supply chain constraint, not because of an Asian market under pressure related to solar and battery markets, but because there is a lack of electrolyzer manufacturing capacity globally. Alingh said production historically was a few hundred MW per year, globally, but that number was expected to grow more than ten-fold in the comping years, due to outsized demand.

Until recently, the cost of electrolysis was considered uneconomical. Monarch was able to tap into a first round of fundraise from Lancium and others to build up its initial team and also start building up a pipeline of development projects in anticipation that a tax bill might pass. The team got their wish in August with the passage of the Inflation Reduction Act of 2022 (IRA2022), and two sets of tax breaks aimed at clean hydrogen production. Alingh said Monarch anticipates being able to use the production tax credit (PTC) or Section 45C, which created a USD 3/kg tax credit for zero carbon hydrogen as its more valuable for higher capacity factor projects.

Monarch Energy’s core business model is to secure real estate, permits and approvals, necessary entitlements such as sources of water and renewable power supply for the project, and long term-offtake, then look to the capital markets to find the best owners of these assets. Monarch typically partners with renewable developers to supply clean power to its electrolyzers behind-the-meter as most its sites are co-located with generation.

*This story was originally published exclusively for NPM subscribers.


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