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Albuquerque startup BayoTech Inc. is blazing a path for hydrogen, ammonia and fertilizer producers to replace today’s mammoth, centralized facilities with modular, transportable production units.

The technology, originally developed at Sandia National Laboratories, could allow chemical companies to produce fuel and fertilizer right where it’s used – at the doorsteps of farms, or next to future filling stations for hydrogen-powered vehicles. That could mean far-lower costs for growing food, and for replacing carbon-emitting, gasoline-fueled cars with cleaner ones that run on fuel cells.

And it’s technology that will hit the market next year, said BayoTech CEO Justin Eisenach.

“We have a prototype now for the modular hydrogen plant,” Eisenach said. “We continue to refine it, but we’ve shown that it works. We’ll have our first sales sometime in 2019.”

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The technology’s promise has attracted $16 million in venture investment since 2016, including a substantial contribution from a global fertilizer producer that’s signed on as BayoTech’s strategic partner, although the company’s identity remains confidential.

“It’s one of the world’s largest fertilizer producers,” Eisenach said. “They provide technology support, marketing, and help with strategic planning for system deployment. We’re very fortunate to have them.”

That partner will be the first one to receive a hydrogen-production unit next year.

“We’ll begin building the first prototype system in November for delivery to our strategic partner in 2019,” Eisenach said. “The company will use it for fertilizer production, providing a much cheaper way for them to make the hydrogen they need for their manufacturing process … They’ll test it first, and then hopefully convert to commercial orders that we’ll fill under a supply agreement.”

It’s the first step in a three-part, modular strategy to build a full fertilizer plant by 2020. With the hydrogen unit now developed, BayoTech will build its first ammonia-production unit next year, and then add a final unit to produce nitrogen fertilizer.

The technology employs traditional “steam methane reforming,” or SMR, which is a pressurized heating and cooling process that most chemical plants use today to separate hydrogen from methane. The hydrogen is then processed further into other chemicals, including ammonia and nitrogen fertilizer.

But the plants that currently manufacture those chemicals require huge investments of $2 billion or more, and they’re usually centrally located far from target markets, driving up shipping costs for farmers or other end users.

In contrast, BayoTech’s modular, “nested flow” reactor contains the entire SMR process for all three units in a small space the size of a cargo container. The contained area makes better use of energy in the heating and cooling process, improving efficiency by about 25 percent compared with traditional plants, according to the company.

Because it’s modular, the mobile units can be located right next to farms, or alongside future hydrogen filling stations to reduce shipping costs. And the plants can be scaled up and down to raise or lower chemical production without losing processing efficiency, said David Blivin, managing partner at Cottonwood Technology Funds, one of BayoTech’s original investors.

“The goal is to produce locally and sell locally,” Blivin said. “That eliminates most transport costs, providing a major benefit on top of the lower-cost production process itself.”

The global fertilizer market offers huge opportunities. It reached $117 billion in 2014, and is projected to hit $152 billion by 2020, according to research and consulting firm IndustryARC.

And with fertilizers accounting for nearly one-quarter of production costs for some key agricultural crops like corn, a locally placed, cheaper manufacturing process could prove very attractive, Eisenach said.

For hydrogen, the fuel cell market is only just emerging, making BayoTech-backed hydrogen filling stations a longer-term goal. But the company’s strategic partner and other chemical firms can immediately deploy BayoTech’s hydrogen unit to lower production costs in fertilizer plants. And other industries could benefit as well.

“Steel mills use a lot of energy, and producers want to lower their carbon emissions,” Blivin said. “Low-cost hydrogen can offer carbon-free production.”

Ammonia as well can be used for fertilizer and in fuels, such as a substitute for diesel with a lower carbon footprint.

“The ammonia market is expected to double in five to 10 years because of its fuel applications,” Blivin said.

BayoTech’s technology is drawing broad interest.

“We’re getting attention from industries all over the world,” Eisenach said. “In late September, I’ll be in Switzerland and Germany discussing the technology and visiting some of the world’s largest hydrogen users.”

Sandia spent about $50 million to develop the original technology, which BayoTech licensed from the lab. Some of the same laboratory scientists that worked on the project are now leading the commercial development at BayoTech, which employs 16 people at a 15,000-square-foot facility near the Albuquerque Balloon Fiesta Park.

“We have five retired Sandians working with us,” Eisenach said. “That’s about one-third of our workforce.”

BayoTech is partnering with a family-run manufacturing firm in Farmington, Process Equipment & Service Co., to build its reactor units. That could significantly boost local employment opportunities, said PESCO co-owner and board chair Jim Rhodes.

“We employ about 400 people now, 75 percent of them Native Americans,” Rhodes said. “When we move into full production with BayoTech, we could add another 100 to 200 people.”

PESCO Business Development Manager John Byrom said it’s a win-win for New Mexico’s emerging innovation economy.

“This is technology originally developed at Sandia that an Albuquerque startup is refining into a commercial product,” Byrom said. “They’re drawing on our manufacturing expertise to build it, which helps us to diversify our operations.”