New JV to push rDME into big league – SHV Energy and UGI to accelerate rDME with joint venture

SHV Energy and UGI International are launching a joint venture to advance the production and use of Renewable Dimethyl Ether, rDME, a low-carbon sustainable liquid gas, to accelerate renewable solutions for the LPG industry and is aiming to develop the full potential of rDME as a sustainable solution.

In today’s Digest, why this is a huge deal, how the JV will work, how many production plants by when, how these two big companies can really push rDME into large scale adoption, the reactions, and more.

The deal

rDME has an interesting story to tell, which you can check out in the backstory section below, but this JV is a huge story in terms of two big behemoths capable of pushing rDME into large scale adoption. This exciting new JV can advance the production and use of Renewable Dimethyl Ether to accelerate de-fossilization of the LPG industry in a major way. The potential here is huge.

Let’s dive into the deal details.

SHV Energy and UGI International are launching a joint venture to advance the production and use of rDME and they are both big companies who can leverage their expertise, innovation capabilities and distribution power of both companies, to really ramp up the adoption of rDME as a sustainable solution.

The parties anticipate the development of up to 6 production plants within the next 5 years, targeting a total production capacity of 300 kilotons of rDME per year by 2027. The aggregate investment is estimated to be up to $1 billion which is expected to involve third party investment.

The joint venture, in which both parties would have an equal stake, will bring scale and critical mass to the rDME market by developing opportunities for investment in production capacity. Moreover, it will promote the use of rDME by driving efforts geared at broad market acceptance, developing new rDME based technologies to gain traction among users, and supporting the development of infrastructure, regulations and standards for the safe use of rDME in the off-grid energy sector. The joint venture aspires to advance the further de-fossilization of the entire LPG industry by making available approximately 20% of the rDME production to peers in the LPG industry.

Where?

So where will the focus be for this joint venture? Rebecca Groen, Director Sustainable Fuels, SHV Energy told The Digest in an exclusive interview that the short-term focus would likely be Europe and North America as these regions have the most supportive policy for renewable fuels, and many of the companies with technologies for rDME production are located here. However, the scope of the JV will be global.

Will the JV license tech or develop its own?

When asked if the JV is planning to license technology (e.g. from Oberon, Enerkem, BASF/Lutianhus) or develop its own, Groen told The Digest that the JV will have two main areas of activity, which will support the development of rDME as a viable sustainable fuel for use in the off-grid energy sector:

1. “Support the development of rDME supply, including project development and research and development activities. We will do this through various collaborations and licensing with different technology providers so we are not proposing to develop our own technology.”
2. “Advocacy, communication and stakeholder engagement, particularly for standards and regulations to facilitate the development of rDME.”

Economically sustainable too

Groen also noted that the affordability of rDME when made from a wide variety of feedstock including wastes and residues is key. “Both Neil and I (on behalf of the two companies UGI and SHV Energy) see the need to pioneer affordable, reliable, sustainable and modern energy as part of the green recovery. We believe that innovations such as rDME are essential for our industry to deliver sustainable energy at the most affordable cost both here in Europe and in the US. So we welcome investment that not only drives value for all stakeholders but also aligns with our passion for reinforcing long term sustainable solutions.”

What is rDME again?

Renewable Dimethyl Ether or rDME is a low-carbon sustainable liquid gas chemically similar to propane and butane that is easy to liquefy and transport but with up to 85% less GHG emissions compared to diesel and heating oil since it is made using a variety of renewable feedstocks such as waste from pulp and paper mills, forest products, agricultural residues, manure and municipal waste. It can either be produced from methanol dehydration or directly from synthesis gas produced via thermal gasification. rDME can be used as an aerosol propellant, transportation, cooking, domestic and industrial heating and more. You can even blend rDME with LPG as a replacement of diesel and gasoline and as an efficient hydrogen carrier for the future energy mix.

Under ambient conditions, rDME is a gas but can be stored as a liquid under moderate pressure, which makes DME ideal for blending with propane. DME’s easy handling properties also make fueling and infrastructure relatively simple and inexpensive.

Reactions from the stakeholders

Rebecca Groen, Director Sustainable Fuels at SHV Energy told The Digest in an exclusive interview, “We envisage rDME to play an important role in the future fuel portfolio of SHVE and UGII, as well as in the wider LPG industry. Given the clear market demand for sustainable alternatives and the technology routes for rDME largely being proven, bringing scale and critical mass to the rDME market is crucial in order to bring this market to fruition. We are ready to take up this responsibility, which will be to the benefit of the whole industry and its customers.”

Neil Murphy, Vice President Business Development UGI International also told The Digest in an exclusive interview, “The JV is expected to promote the use of rDME by driving efforts geared at broad market acceptance, developing new rDME based technologies to gain traction among users, and supporting the development of infrastructure, regulations and standards for the safe use of rDME in the off-grid energy sector.”

“De-fossilization is pivotal for our industry,” said Bram Gräber, Chief Executive Officer at SHV Energy. “Liquid gas is an important, clean and efficient energy source used in over 1000 different applications by millions of people around the world.  Finding accessible, sustainable and affordable feedstock to produce alternative liquid renewable gas is a high priority for the LPG industry. We are convinced that rDME ticks all the boxes to be a gamechanger for our industry. We are excited to join forces with UGI to guide the LPG industry in this important transition. We are ready to take up the responsibility to bring rDME to fruition, which will be to the benefit of the whole industry and its customers.”

Roger Perreault, Executive Vice President Global LPG of UGI Corporation, who will become UGI’s CEO next month, said, “The proposed joint venture leverages our expertise in off-grid energy and renewable fuels. Innovation is at the heart of both our organizations, and by teaming up we will combine our strong innovative capabilities. As leading distributors of LPG, we jointly provide an even more extensive global distribution network through which to promote the use of rDME. Although US and EU regulations differ, we are convinced rDME will help LPG down the path of de-fossilization across jurisdictions. We are excited to announce this joint venture proposal and be able to contribute to a more sustainable future for our industry and customers.”

Bottom Line

Two big companies coming together to make rDME adoption on a large scale happen – this is huge news. We wouldn’t be surprised to see more rDME news coming in 2021 based on the innovative technologies now being used out there, the affordability piece as money is often a big driver for any renewable fuel uptake, and the sustainability, GHG emission savings and circular economy aspect. And it looks like these two companies JV is a big step forward in getting us there.