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Gas Industry Vet Touts NET Power's Decarbonization Potential

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Rice Acquisition II, a blank-check firm formed last year by natural gas veteran Danny Rice and his family, said this week it would acquire and take public technology player NET Power. Rice has considerable experience in growing start-ups, including with his own company, the Marcellus-focused Rice Energy, which went public in 2014 and was acquired by EQT in 2017. He also led Rice Acquisition I’s purchase last year of renewable natural gas (RNG) player Archaea Energy, which was recently acquired by BP. Rice, who will serve as NET Power’s CEO, spoke with Energy Intelligence about the acquisition, decarbonizing the gas grid, and the market for low-carbon gas.

Q: Last year, when you were talking about potential targets for Rice Acquisition II, you said something along the lines of ‘there are great technologies out there that don’t involve EVs or batteries, but they do involve decarbonizing the grid.’ Which really describes what NET Power is doing. So was that a target for a while?

A: We’ve been following the NET Power story for almost the entirety of its existence. So we were up in Appalachia in the mid-2000s, late 2000s, doing Rice Energy, and we went public in 2014. And that was around the time that the 8 Rivers team spun NET Power off into its own standalone company. And so from afar, we were saying, ‘All right, we've been able to really unlock a massive amount of low-cost, reliable natural gas.’ And I think in the back of our heads, we were always thinking, wouldn't it be nice if somebody could figure out a way to, in a really cost-effective way, totally decarbonize it and really make natural gas the no brainer solution for the planet, for consumers, for everybody.
And so I think it was more of just the stars sort of aligned with us being in the market with Rice Acquisition Corp II.

With NET Power, we have this massive appreciation of how low-cost and reliable natural gas is as a feedstock to power generation. The big question mark with natural gas is, how do you make it clean? And the NET Power guys, to their credit, a long time ago said we need to figure out a way to make natural gas low-to no-emissions in the power generation cycle. And so the coming together of the two companies, from my perspective, has kind of been 10 years in the making, even though we only reached out to them to possibly inquire about taking them public within the last 12 months.

Q: In the US alone, you've targeted about 1,000 plants in the total addressable market. So are those going to be new plants? Are those coal replacements? Are they both?

A: It'll be both. In the United States, we'll definitely be looking to replace these aging coal and gas plants. A lot of those plants aren't baseload power anymore. They've been relegated to peaker status. So those become fantastic candidates to replace with NET Power and then get back to 90%-100% baseload. So they're running all the time, as they should be if there's zero carbon emission, and it's 24/7 reliable power, and it's low cost. But that's just kind of meeting current demand. I think if you look at electrification trends here in the United States, I think there's a 50% increase in electricity growth, just demand growth over the next 30 years. So there's the massive growth in new electricity demand coming. And so it's really important that we have a very reliable, low cost and clean grid to meet that new demand as it moves from petroleum to power.

Q: So how do you actually go about addressing that market? How do you expect to capture that?

A: I think it's a couple of ways because I think if you look at potential builders and owners of a NET Power plant, it varies. It could be a traditional utility that wants to build a NET Power plant into their rate base. It could be an independent power producer that sees attractive power prices in certain markets that are really, really close to sequestration sites, that say this is a no-brainer to put this plant here and just dispatch power into this power market. And then there's also going to be folks with behind-the-meter solutions that have really large industrial complexes that say, ‘I need baseload power, but I also have an obligation to reduce my carbon intensity in my base business.’ And so when those companies take a look around and say, ‘show me a clean, reliable, low-cost source of power for my business right now,’ there's no one single solution to be able to do that. And so we see a tremendous amount of opportunity there as well. And I think in those sorts of applications, Baker Hughes is going to be really helpful in being able to penetrate those markets. But I think a lot of it is going to be folks reaching out to us. And I think that's been like the most incredible thing is the company really hasn't spent any time on the commercialization, they've really just been head down focusing on proving the technology for the last decade. And us taking the company public is really this inflection point of going from proving the technology to now commercializing the technology.

Q: Looking at your background with Archaea Energy, can we expect at some point to see a renewable natural gas (RNG) NET Power plant?

A: Yeah, I mean, that’s the beauty of natural gas. We have this intricate pipeline network that we have here in the United States. You can deliver gas from the Marcellus to a power plant in California, and it can be a NET Power plant in California to use that gas. So you can take responsibly sourced gas and ship it by pipeline anywhere. The same goes with RNG. You put that gas into the pipeline, it's fungible. And so you're really taking it by displacement at the final location where it's going to be converted into power. And so I think, as you look at the carbon intensity of that power generation, yes, sticking RNG into a NET Power plant is probably the most environmentally beneficial source of power we have on this planet. So that's part of the appeal of NET Power; you can put these plants anywhere there's a grid and you really just need a sequestration site, and you just need access to natural gas. And fortunately, this country is blessed with both of those. We have lots of natural gas pipelines connected everywhere in the country. And we also have an abundance of downhole pore space capacity to permanently sequester the CO2. That's the other part that’s so exciting, the sequestration opportunity here.

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The New Power Cycle

Topics:
Gas-Fired Electricity, Corporate Strategy , M&A
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