project on pause

ExxonMobil pauses plans for $7B hydrogen plant in Baytown

ExxonMobil Chairman and CEO Darren Woods said the company was weighing whether it would move forward with a proposed $7 billion low-hydrogen plant in Baytown this summer. Photo via exxonmobil.com

As anticipated, Spring-based oil and gas giant ExxonMobil has paused plans to build a low-hydrogen plant in Baytown, Chairman and CEO Darren Woods told Reuters.

“The suspension of the project, which had already experienced delays, reflects a wider slowdown in efforts by traditional oil and gas firms to transition to cleaner energy sources as many of the initiatives struggle to turn a profit,” Reuters reported.

Woods signaled during ExxonMobil’s second-quarter earnings call that the company was weighing whether it would move forward with the proposed $7 billion plant.

The Biden-era Inflation Reduction Act established a 10-year incentive, the 45V tax credit, for production of clean hydrogen. But under President Trump’s One Big Beautiful Bill Act, the period for beginning construction of low-carbon hydrogen projects that qualify for the tax credit has been compressed. The Inflation Reduction Act called for construction to begin by 2033. The Big Beautiful Bill changed the construction start time to early 2028.

“While our project can meet this timeline, we’re concerned about the development of a broader market, which is critical to transition from government incentives,” Woods said during the earnings call.

Woods had said ExxonMobil was figuring out whether a combination of the 45Q tax credit for carbon capture projects and the revised 45V tax credit would enable a broader market for low-carbon hydrogen.

“If we can’t see an eventual path to a market-driven business, we won’t move forward with the [Baytown] project,” Woods told Wall Street analysts.

“We knew that helping to establish a brand-new product and a brand-new market initially driven by government policy would not be easy or advance in a straight line,” he added.

ExxonMobil announced in 2022 that it would build the low-carbon hydrogen plant at its refining and petrochemical complex in Baytown. The company had indicated the plant would start initial production in 2027.

ExxonMobil had said the Baytown plant would produce up to 1 billion cubic feet of hydrogen per day made from natural gas, and capture and store more than 98 percent of the associated carbon dioxide. The plant would have been capable of storing as much as 10 million metric tons of CO2 per year.

Trending News

A View From HETI

The company says its proprietary Arc “grid in a box” contains everything needed to store and supply electricity. Photo via LinkedIn

Houston-based startup Branch Energy, which offers a self-contained “grid in a box,” has collected $33 million in a Series B round.

Piva Capital and Clean Energy Ventures led the round, according to a news release. Active Impact Investments, Whitecap Venture Partners, Prelude Ventures, Zero Infinity Partners and Inovia Capital also contributed to the round.

In 2024, Branch raised $10.8 million in an oversubscribed Series A round.

Branch’s business model

Branch, which launched in 2021, says its proprietary Arc “grid in a box” contains everything needed to store and supply electricity. A container about the size of a parking space holds an industrial-grade battery, grid connection equipment, cooling capabilities, autonomous controls and cloud-based management software.

The startup installs Arc systems at warehouses, hotels, factories, stores and other commercial properties. Each system arrives on a flatbed truck and can be online within two days, Branch says.

Under Branch’s business model, a property owner avoids upfront payment for an Arc system.

Aside from equipping a host business with an Arc system, Branch serves as the business’ power provider. The startup says it guarantees savings on the host’s energy bills and delivers backup power during outages.

Branch generates revenue by sending the battery’s stored power to the grid or to customers like hyperscale data centers. It also benefits by shifting energy from low-cost periods at night to high-cost periods during daily power peaks.

The startup handles permitting, installation, insurance and operations for each Arc system. The host provides a parking-lot-sized plot of land for the system.

Alex Ince-Cushman, co-founder and CEO of Branch, says the startup’s “grid in a box” can quickly meet the substantial power requirements of hyperscale data centers.

“We can do it on the timeline of a delivery, not a construction project. Our customers don’t lift a finger, don’t pay a dime and get guaranteed savings,” Ince-Cushman said in the release.

Entering the Illinois market

Branch already operates in Texas and is entering the Illinois market.

PJM, which operates Illinois’ power grid, recently paved the way for major energy users like data centers to connect to the grid sooner when they rely on their own electricity generation. PJM’s territory covers roughly 1.2 million commercial buildings and represents 20 percent of U.S. power demand, according to Branch.

“Grids around the country need the distributed capacity that [the Arc] system can supply, especially in states with fast-growing power demand like Texas and Illinois,” Lee Larson, principal at Piva Capital added in the release.

To keep up with that demand, Branch plans to build tens of thousands of Arc systems in the U.S.

A multibillion-dollar company in the making?

Daniel Goldman, co-founder and managing partner of Clean Energy Ventures, said Branch holds the potential to become a multibillion-dollar competitor in the emerging market for distributed power.

“With utility-scale generation and storage challenged by interconnect and siting constraints, behind-the-meter commercial, and industrial storage sites have become the ultimate market opportunity with ease of interconnect, ability to combine distributed AI data centers, and identifiable savings in rapidly growing markets,” Goldman said.

Trending News