About

CPS Energy has partnered with clean energy startup Modern Hydrogen to pilot a project that converts natural gas into clean hydrogen for power generation.

“This is about doing something more valuable with natural gas,” Modern Hydrogen CEO Tony Pan told Power Engineering in an interview on Tuesday.

San Antonio’s municipal utility will deploy Modern Hydrogen’s methane pyrolysis technology, which uses heat to transform methane from natural gas into hydrogen and solid carbon.

Unlike traditional methods such as steam methane reforming (SMR), which generate CO₂ as a byproduct, Modern Hydrogen says its modular MH500 unit uses methane pyrolysis to extract solid carbon from natural gas at the point of use, preventing CO₂ from forming in the first place.

“We don’t need an external supply of electricity to run this process,” said Pan. “As we produce the clean hydrogen, we siphon a portion of it off and burn that to produce the clean heat needed to run pyrolysis.”

Each MH500 unit yields approximately 500 kg of hydrogen per day onsite, according to the company, enabling fueling for power generation, fuel cell-powered vehicles, or blending with natural gas systems.

CPS Energy has not made a final decision on where to use the hydrogen, but it is expected to be used at one of the utility’s natural gas-fired plants. Pan told us the plant would use less than a 20% hydrogen blend, but the exact ratio hasn’t been determined. The captured solid carbon would be reused in products like asphalt for infrastructure projects.

The biggest obstacles to hydrogen’s use at scale in power generation include building new infrastructure and ramping up supply. Building an extensive hydrogen pipeline network would take years and cost billions of dollars. There are only roughly 1,600 miles of hydrogen-dedicated pipelines in the U.S., virtually all concentrated in Texas and Louisiana, where there is petrochemical and other industry activity.

In Modern Hydrogen’s methane pyrolysis solution, the company claims it has found a workaround.

“[It] seems way more elegant to reuse existing infrastructure than to build a new hype infrastructure for the hydrogen grid,” said Pan.

In partnering with Modern Hydrogen, CPS Energy becomes one of a few utilities in the nation to pilot distributed natural gas pyrolysis technologies and carbon capture.

“By exploring this innovative opportunity to produce clean hydrogen using our existing natural gas system, we are moving forward on our commitment to deliver reliable, affordable, and cleaner energy for our community,” said CPS Energy CEO Rudy D. Garza.

Modern Hydrogen has two other existing pilot projects that are smaller in scale, per Pan. One pilot, focused on clean, distributed power generation, is located in Florida at an undisclosed manufacturing facility. In this project, hydrogen is produced onsite and fed directly into a generator to produce electricity. In a non-power generation use case, Modern Hydrogen is partnering with Oregon’s NW Natural to blend hydrogen into the natural gas distribution system.

Modern Hydrogen is based in Seattle, Washington. The company says its investors include the likes of Bill Gates, NextEra Energy and National Grid.

-On May 26, OCI Energy signed a three-party agreement with CPS Energy and LG Energy Solution’s subsidiary Vertech

- The partnership will begin with the Alamo City project, scheduled for completion by the end of 2026

- OCI Holdings to strengthen mid- to long-term cooperation for a pipeline of 13 ESS projects totaling 3.0GW.

 - Plans to build a 2GW solar cell plant in San Antonio, Texas by next year to hedge against tariff risks

OCI Holdings announced on the 27th that its U.S. subsidiary, OCI Energy, signed a three-party memorandum of understanding (MOU) with Texas-based energy company CPS Energy and Vertech, a subsidiary of LG Energy Solution, for the North American energy storage system (ESS) business. The signing ceremony was held on the morning of the 26th at OCI’s headquarters in Seoul.

Key attendees included Kim ChoungHo, President of U.S.-based solar holding company OCI Enterprises; Sabah Bayatli, President of OCI Energy; Rudy D. Garza, President and CEO of CPS Energy; Kim Dong-Myung, President and CEO of LG Energy Solution; Kim Hyung-sik, Head of ESS Battery Division; and Park Jae-hong, Head of Vertech.

Under the agreement, OCI Energy will secure ESS batteries through a supply contract with Vertech, store solar energy generated during the day, and sell the stored electricity to CPS Energy.

CPS Energy, the largest municipally owned electric and natural gas utility in the U.S., serves approximately 1.28 million customers in Texas. The three parties will kick off their collaboration with the “Alamo City ESS LLC” project, which is scheduled for completion at the end of 2026 and expand cooperation on OCI Energy’s pipeline of 13 ESS projects totaling around 3GW.

The “Alamo City ESS LLC” project is a solar power plant under development on a 35-acre site in southeastern Bexar County, Texas. It will integrate a 120MW solar photovoltaic system with a 480MWh energy storage system (ESS).

In December of last year, OCI Energy announced the development of the Alamo City ESS LLC project and signed a 20- year Storage Capacity Agreement(SCA) with CPS Energy to supply power to the San Antonio area. In addition, OCI Holdings recently announced a $265 million (approx. KRW 380 billion) strategic investment to build a solar cell manufacturing plant in North America. The new facility, located in San Antonio, Texas, will span 200,000 square feet and is expected to secure a production capacity of 2GW — 1GW in the first half of next year and another 1GW in the second half — in response to global tariff risks and surging electricity demand.

According to the Center for Strategic and International Studies (CSIS), electricity demand from AI data centers in the U.S. is expected to surge from 4GW in 2024 to 84GW by 2030 — a 2,100% increase. Texas, home to OCI Energy, is a key location for AI data centers, including those operated by OpenAI, Oracle, and Crusoe.

A spokesperson for OCI Holdings stated, “In light of external uncertainties, including reciprocal tariffs, we have selected LG Energy Solution — which has multiple production bases in North America, including Holland, Michigan — as our ESS battery strategic partner. Going forward, we will further strengthen our collaboration with LG Energy Solution and CPS Energy to ensure sustainable electricity supply through our North American ESS projects and address the intermittency of solar energy.”

CPS Energy has expanded its existing Power Purchase Agreement (PPA) with Avangrid by adding an additional 159.2 megawatts (MW) of wind energy from the Peñascal wind farm in Kenedy County, Texas. As a result of this expanded agreement, the utility’s power capacity from Avangrid will nearly double, rising from 160.8 MW to 320 MW. This increase is enough to power approximately 40,000 homes on a hot summer day.

“CPS Energy’s expanded relationship with Avangrid is a testament to our Vision 2027 plan, a comprehensive and diverse generation portfolio that enhances our capacity to serve a growing community,” said Rudy D. Garza, President & CEO of CPS Energy.  “This additional investment in wind power allows us to continue to provide reliable and sustainable energy at an affordable price for our customers.”

“Avangrid’s relationship with CPS Energy grows even stronger with this expanded power contract,” said Pedro Azagra, Avangrid CEO. “Demand for electricity is growing from coast to coast, and we are glad to see this project serving communities in and around San Antonio. Projects like Peñascal are helping ensure we meet the growing demand for energy in Texas and support the reliability of the local electrical grid while bolstering the state’s reputation as a leader in American power production.”

The Peñascal wind farm has a total capacity of 401 MW. With this expanded agreement, Avangrid will allocate 80% of the total wind energy produced at this facility to CPS Energy’s customers.  

CPS Energy currently has approximately 908 MW of wind capacity in its generation portfolio. With the addition of the 159.2 MW from Avangrid, the utility will have a total of 1,067 MW of this renewable resource—maintaining CPS Energy’s position as the second-largest buyer of wind energy in the state. This additional wind energy connected to CPS Energy’s power system on April 1, 2025, and is already online to support the energy demand during this summer season.

This latest PPA expansion supports CPS Energy’s Vision 2027 plan which contemplates the retirement of 2,541 MW of older generation capacity before 2030. As part of this future generation plan, in 2024 CPS Energy added 1,735 MW of natural gas, 113 MW of wind capacity, 480 MW of solar and 520 MW of energy storage under contract. CPS Energy also contracted an additional 52 MW of nuclear.

These efforts also align with CPS Energy’s commitment to the City of San Antonio’s Climate Action & Adaptation Plan (CAAP), which includes a Board of Trustees resolution to support the CAAP’s goal to become carbon neutral by 2050 with interim goals of reducing greenhouse gas 71% by 2040.