Speaker 1: Hi everyone. Today we're going to talk about hydrogen. In
Speaker 1: the run up to this interview, I asked a few
Speaker 1: people around the office, not being of analysts, what they
Speaker 1: thought of when I said hydrogen. A few answers came back. Okay.
Speaker 1: The first was the Hindenburg So will the hydrogen blow up?
Speaker 1: Do I really want it in my car? Next is
Speaker 1: how do you make it? I've heard about this word electrolysis,
Speaker 1: but really what is it? How do you make this stuff?
Speaker 1: And finally, isn't it gonna leak? I mean it's a
Speaker 1: really tiny molecule. Today we're going to kick off the
Speaker 1: discussion about hydrogen with some of the basics and some
Speaker 1: talk of the economics. We'll be joined by Kobad Bevnagrey,
Speaker 1: who heads up special projects for BENF, and Martin Tangler,
Speaker 1: who wrote the report will discuss today hydrogen the economics
Speaker 1: of storage. BENIOF users can get this report on benif
Speaker 1: dot com, the benof mobile app, or on terminal at BENFC.
Speaker 1: But before we get into the discussion with Cobad and Martin,
Speaker 1: I thought we'd have Albert Chung, global head of research
Speaker 1: for BEANIF, will ease us into the topic and just
Speaker 1: real quick. Please note that BENIF does not provide investment
Speaker 1: or strategy advice, and you can hear a full disclaimer
Speaker 1: at the end of the show. I'm Mark Taylor. He
Speaker 1: was Dana Perkins and you're listening to Switch Down Bean podcast.
Speaker 1: Albert Welcome, Thanks Mark. Can you give us a little
Speaker 1: bit of background on why BENF has started covering hydrogen now? Well,
Speaker 1: the history of BENF and hydrogen actually goes back a
Speaker 1: long way because when any F was founded back in
Speaker 1: two thousand and four, it was founded as a hydrogen
Speaker 1: fuel cells research and data gathering shop UM and since
Speaker 1: then we kind of dip in and out of it.
Speaker 1: Probably every every three or four years we've gone into it,
Speaker 1: done a deep dive and said, oh, it's probably three
Speaker 1: or four years away. I think what's different now is
Speaker 1: that the number of countries and companies that are getting
Speaker 1: quite serious about investing into the technology and deploy real
Speaker 1: projects and pilot projects and so on from the orine
Speaker 1: gas companies and beyond. And I think things are changing
Speaker 1: a bit in terms of the cost outlook as well.
Speaker 1: I remember, I think it was back in two twelve.
Speaker 1: In my team at the time, we actually did take
Speaker 1: a look at fuel cell vehicles and basically concluded way
Speaker 1: too expensive, going to take years supring costs down. But
Speaker 1: now when we look at you know, particularly the electrolysis
Speaker 1: and hydrogen production piece, it seems like costs have come
Speaker 1: down quite a lot. Um, So you know, we feel
Speaker 1: like it's definitely worth another look. So okay, so one
Speaker 1: part of it is a cast story. But why are
Speaker 1: our companies investing in it because of the cast story
Speaker 1: or are they seeing some other benefit to developing this
Speaker 1: technology further? Yeah, good question. Um. Again, if I if
Speaker 1: I rewind a few years, I think everyone was really
Speaker 1: focused on passenger vehicles and including us, you know, that's
Speaker 1: why we looked at it as well. Um. I think
Speaker 1: what we've realized now is with cheap renewables and cheap batteries,
Speaker 1: there are solutions now in place for you certain chunks
Speaker 1: of the emissions pie where the hydrogen's kind of been
Speaker 1: priced out of the competition. But now there's kind of
Speaker 1: more serious discussions about decarbonizing the rest of the economy,
Speaker 1: so things like long haul trucking, things like steel production,
Speaker 1: pemumonia production, really difficult sectors that where frankly, you know,
Speaker 1: renewables and batteries probably won't make the cut. And there
Speaker 1: you're really talking about alternative clean fuels molecules rather than electrons,
Speaker 1: and that's where hydrogen comes in. Now, hydroens not the
Speaker 1: only solution. Things like CCUS that we're going to look
Speaker 1: at as well. But I think in terms of why
Speaker 1: companies are starting to look at it more seriously, I
Speaker 1: think they see the momentum towards de carbonization of these
Speaker 1: trickier sectors. So besides the class coming down, they see
Speaker 1: as an growth opportunity. Yeah, I think so it's a
Speaker 1: growth opportunity, and especially if you think about the competencies
Speaker 1: of some of the companies that are investing, their competencies
Speaker 1: are around fuels and you know, fuels production, fuels management
Speaker 1: and storage and transportation and fuels provision um and hydrogen
Speaker 1: as well as you know, potentially other kind of renewable
Speaker 1: fuels are a pathway to an energy transition to low
Speaker 1: carbon that maintains a major role for fuels, and so, yeah,
Speaker 1: certainly an opportunity for those companies. Can you tell us
Speaker 1: a little bit of how it works? So I said
Speaker 1: in the intro, you know, I've heard of this term electrolysis.
Speaker 1: But what is that? Yeah. Sure, Electrolysis essentially is when
Speaker 1: you split water and produce hydrogen. So you it by
Speaker 1: putting power in and water in and you get hydrogen out.
Speaker 1: So it's pretty straightforward. It's a bit like a reverse
Speaker 1: fuel cell. So if you'll sleep hydrogen and you get
Speaker 1: powered out, electrolysis is the other way around. Now, the
Speaker 1: great thing about electrolysis is if you do it using
Speaker 1: renewable power as the input, then you have renewable hydrogen.
Speaker 1: You have carbon free hydrogen on the back end of it,
Speaker 1: which is different from the traditional ways of producing hydrogen.
Speaker 1: So basically all the hydrogen in the world today is
Speaker 1: produced by steam methane reformation, which is not zero carbon
Speaker 1: um So if you if you use hydrogen in the
Speaker 1: process today, chances are it's not clean hydrogen um So,
Speaker 1: so you need to either have electrolysis from renewables or
Speaker 1: steam methane reformation with carbon capture in future to to
Speaker 1: get to clean hydrogen. Okay, thanks for joining us, Albert,
Speaker 1: Thank you, Mark. I think now we're going to jump
Speaker 1: in with the discussion with Dana and Martin and cobad Hi. Martin,
Speaker 1: thank you, for joining us today, and Hi Cobad welcome, Hidanna,
Speaker 1: good to be here. When you think about the future
Speaker 1: of hydrogen, do you think about it in terms of
Speaker 1: fossil fuels with CCS, is being the dominant source of
Speaker 1: H two or is it renewables with an electrizer sub question,
Speaker 1: are the players that are the main players now in
Speaker 1: making H two are those going to be the main
Speaker 1: players going forward? Yeah, that's that's a great question. So,
Speaker 1: and that's one of the things we're trying to figure out.
Speaker 1: Is this going to be a fossil fuels plus CCS
Speaker 1: story or is this going to be a renewable power story?
Speaker 1: And um In some ways, actually it's a bit of
Speaker 1: a false question because the first part is is hydrogen
Speaker 1: going to become that fuel for a for a clean economy?
Speaker 1: Because if it is, it's going to play such a
Speaker 1: massive role, and you're going to need to have so
Speaker 1: much supply of hydrogen that it's almost unquestionable that you'll
Speaker 1: need both. You'll need it to come from fossil fuels,
Speaker 1: you'll need it to come from renewables. Different countries have
Speaker 1: different resources. Countries with a lot of gas are going
Speaker 1: to want to keep doing it from gas. Um Countries
Speaker 1: which are fossil fuel poor but have great wind or
Speaker 1: solar resources are obviously going to do it from renewable
Speaker 1: so there will be to some extent of horses for
Speaker 1: courses approach, But we are trying to get to the
Speaker 1: bottom of that. The companies. That's also an interesting thing
Speaker 1: that we'll have to see how it goes. But it's
Speaker 1: some of the main actors that are sort of pushing
Speaker 1: the hydrogen barrow, if you will, are the big producers
Speaker 1: the current the chemical giants who already have skin in
Speaker 1: the game and would love for that game to get bigger.
Speaker 1: Dating into the topic of this note specifically, which is
Speaker 1: storage and economics around storage. The storage of hydrogen has
Speaker 1: a lot to do with factors that are beyond anyone's
Speaker 1: control physically, what is the geology of that space? So Martin,
Speaker 1: can you actually explain a little bit what the ideal
Speaker 1: scenario is and what maybe some of the less preferable
Speaker 1: ones are and why you can think of storing hydrogen again,
Speaker 1: similar to storing natural gas. The easiest way today to
Speaker 1: store natural gas at scale is to put it in
Speaker 1: a deepleted natural gas field. That's the cheapest way to
Speaker 1: store a very large volume of natural gas for a
Speaker 1: long period of time. You cannot necessarily do that with
Speaker 1: hydrogen as easily because you might end up with that
Speaker 1: hydrogen being contaminated by that residual natural gas. So you're
Speaker 1: going to have to use something else. And the most
Speaker 1: the best choice when it comes to cost and the
Speaker 1: purity of hydrogen that comes out of that storage is
Speaker 1: salt caverns. And salt caverns are large cavities in the
Speaker 1: ground that we can make in the salt rock by
Speaker 1: leaching it, by pumping water in taking it out, and
Speaker 1: what's left is a cavity into which we can pump
Speaker 1: natural gas or hydrogen or many other different substances. And
Speaker 1: the benefit there is that it keeps the natural gas
Speaker 1: very pure and sorry keep keep the hydrogen very pure.
Speaker 1: And it's the cheapest way to store hydrogen at scale.
Speaker 1: The problem, and I think you are alluding to this,
Speaker 1: is that you need salt deposits, deep salt deposits in
Speaker 1: order to use salt caverns or to be able to
Speaker 1: mind them, and not every country is lucky to have those.
Speaker 1: So we are seeing lots of salt caverns and lots
Speaker 1: of salt deposits in North America, especially the Gulf Coast
Speaker 1: of the US, parts of Canada. We are seeing salt
Speaker 1: caverns or the opportunity to build them in many parts
Speaker 1: of Europe, but we are not seeing the opportunity for
Speaker 1: salt caverns in places like Japan or South Korea, which
Speaker 1: by the way, are one of the two countries are
Speaker 1: very very interested in having or pursuing a hydrogen economy.
Speaker 1: So that natural question is what are these countries going
Speaker 1: to do to store the hydrogen that they're going to
Speaker 1: need to power that hydrogen economy. Is this a case
Speaker 1: of I mean you hear US and Canada being just
Speaker 1: the lucky ones for the salt caverns again, right, it
Speaker 1: seems to be the case where you have fossil fuels,
Speaker 1: you know, you have the right geology for salt caverns
Speaker 1: as well, so they're going to be winners here as well. Yes,
Speaker 1: So it depends on the on the geology, and the
Speaker 1: geology of salt caverns is very much linked. The geology
Speaker 1: of salt deposits is very much linked to the geology
Speaker 1: of oil because the salt tends to trap oil. So
Speaker 1: any place with large oil deposits That includes, for example,
Speaker 1: the Middle East has good potential for building salt caverns.
Speaker 1: Any place that does not have good oil deposits is
Speaker 1: unlikely to be lucky when it comes to salt caverns.
Speaker 1: How big a piece of the pie from an economic
Speaker 1: standpoint is the storage cost in this game, storage costs
Speaker 1: are very very important or could be very very important,
Speaker 1: depending on your location and depending for how long and
Speaker 1: for what purpose you are storing that hydrogen. But we
Speaker 1: have seen that the cost of producing hydrogen today from
Speaker 1: fossil fuels are anywhere between a dollar or two two
Speaker 1: dollars per kilogram of hydrogen. If you're going to store
Speaker 1: that gas in a salt cavern, you might add another
Speaker 1: cents for storing that gas. If you are not lucky
Speaker 1: enough to have salt currents, you might be paying three
Speaker 1: times that much. And that means the one or two
Speaker 1: dollars is going to become one dollar seventy five to
Speaker 1: two dollars seventy five, So you're almost doubling your cost
Speaker 1: of hydrogen. So on an LCOE basis, it's pretty far
Speaker 1: behind pretty much anything else, right, So hydrogen will always
Speaker 1: cost more than fossil fuels, particularly always particularly at the
Speaker 1: chap end, and the reason for that is physics. Hydrogen
Speaker 1: has to be produced from something. Fossil fuels can be
Speaker 1: very cheap because they exist in the natural state, so
Speaker 1: if you can get it out easily, it can be
Speaker 1: produced cheaply. Hydrogen has to be made either from an
Speaker 1: existing hydrocarbon, hydrogen stripped out from the carbon, or from water,
Speaker 1: which case you need energy to split the oxygen and
Speaker 1: the hydrogen. So because you have to produce it from
Speaker 1: something else, it's always going to be more expensive than
Speaker 1: what that original source of the energy was. Let's pivot
Speaker 1: a little bit to the companies that are looking to
Speaker 1: bring this technology forward. Who are the players? Are they
Speaker 1: big or they little? So there is a whole host
Speaker 1: of really quite big companies. Many of them are the
Speaker 1: sorts of big companies that you don't hear about in
Speaker 1: your day to day life because they are behind the scenes.
Speaker 1: Chemical giants players like air Liquid who make a lot
Speaker 1: of industrial gases like um Martin can speak to some
Speaker 1: of the Japanese ones, players like Karalasaki Heavy and Iwatani,
Speaker 1: which are very interested in getting a liquid hydrogen supply
Speaker 1: chain and the liquid hydrogen market off the ground, You've
Speaker 1: got your your industrial conglomerates, the siemens is of the world,
Speaker 1: that the teas and croups who make a lot of
Speaker 1: heavy machinery and and things that plants that make other things.
Speaker 1: And then of course you've got your big oil and
Speaker 1: gas companies who are now very interested in the prospect.
Speaker 1: So the bps of the world, the shells, the totals,
Speaker 1: the woodsides, they're all there sort of existing well and
Speaker 1: gas giants that have started hydrogen business units. They're funding
Speaker 1: pilot projects and they're investigating the technology to prepare for
Speaker 1: a low carbon future. What is the general perception around
Speaker 1: the safety of hydrogen because it conjures up this view
Speaker 1: of that exploding zeppelin. Uh and I think about that
Speaker 1: sometimes when I see the occasional but not frequent hydrogen
Speaker 1: vehicle driving around. That's right. So a lot of focused
Speaker 1: groups discussing the issue of hydrogen safety. If you look
Speaker 1: at the word cloud, it includes things like bomb and
Speaker 1: and explosion. So safety is always identified in the national
Speaker 1: road maps that countries at the at the forefront of
Speaker 1: of this um push and the exploration of the potential
Speaker 1: of hydrogen safety is always one of the key things
Speaker 1: that they are looking at, imagine along with leakage and corrosion.
Speaker 1: Is that true or not so that that those play
Speaker 1: into the safety and the compatibility issues of hydrogen. But
Speaker 1: um certainly so that the safety issue actually spans a
Speaker 1: whole bunch of areas. So, for one, the usage of
Speaker 1: production of hydrogen is currently really tightly regulated. There's a
Speaker 1: lot of safety codes. There's a lot of prohibitions on
Speaker 1: where you can use hydrogen, on when you can use hydrogen,
Speaker 1: on how you store it, on how you handle it. So,
Speaker 1: for instance, in China, liquid hydrogen is um illegal to
Speaker 1: possess or to make because it is considered a rocket fuel,
Speaker 1: which it is. The space shuttle follow eleven they were
Speaker 1: all powered by liquid hydrogen. UM. Likewise, there's lots and
Speaker 1: lots of safety codes on and often prohibitions on putting
Speaker 1: hydrogen into pipelines because hydrogen can make pipelines weak and
Speaker 1: cause them to rupture. But you can do it in
Speaker 1: in smaller percentages um. The latest science is saying five
Speaker 1: you can blend and without a problem, but to be
Speaker 1: on the safe side, and in years gone by, these
Speaker 1: hydrogen has often been prohibited. There's there's a whole bunch
Speaker 1: of other safety concerns, concerns about UM and issues of
Speaker 1: social acceptability which will have to be worked through, which
Speaker 1: is all a key part of their consideration of whether
Speaker 1: hydrogen can play the role that some people hope it will.
Speaker 1: So how do you see hydrogen coming into let's see
Speaker 1: my daily life, right, Will it come into play practically
Speaker 1: by me buying a as fuel cell car or will
Speaker 1: it be more in industrial processes that I don't see?
Speaker 1: That's right, yes, So one of the beauties about hydrogen
Speaker 1: actually is that UM it can be used almost everywhere
Speaker 1: and in almost every major industry and sector. It could
Speaker 1: be the natural gas of the future, and that it's
Speaker 1: this you know, ubiquitous Lee used fuel that UM. You know,
Speaker 1: people who just need energy end up using it and
Speaker 1: buying it. So m Hydrogen could be the fuel that
Speaker 1: powers your vehicle or the battery electric vehicles are definitely
Speaker 1: winning that race for the moment um. It could be
Speaker 1: the fuel that is going into the manufacturing it what
Speaker 1: will is ending up somehow powering your airplane. It could
Speaker 1: be the fuel that is allowing steel to be made
Speaker 1: and for the chairs we sit on. UM. It can
Speaker 1: also be the fuel which ends up producing the fertilizers
Speaker 1: which make a tomato is nice and red um It
Speaker 1: can perme at all different parts of the economy, so
Speaker 1: it could being incredibly useful. It can also, as Cobad
Speaker 1: has already mentioned, be blended with natural gas into existing
Speaker 1: natural gas pipelines about five concentrations depending on the pipeline,
Speaker 1: depending on the regulations, and it could then end up
Speaker 1: heating your home or you could cook your dinner with
Speaker 1: a partly hydrogen gas mix. So the storage part has
Speaker 1: to be built from scratch, but the transportation through existing
Speaker 1: pipelines can mean we could use existing infrastructure, so that
Speaker 1: could actually help drive it towards economic viability sooner. That
Speaker 1: is one way in which we think that hydrogen could
Speaker 1: start taking off is if a government, for example, mandates
Speaker 1: that five percent of the volume in a natural gas
Speaker 1: pipeline any given time must be hydrogen. And if that happens,
Speaker 1: that creates large demand for hydrogen, which would then help
Speaker 1: reduce the costs of producing the hydrogen. So hydrogen can
Speaker 1: be used in our existing gas pipes to a point.
Speaker 1: Depending on what material those gas networks are made of,
Speaker 1: um they have you know, varying levels of compatibility or
Speaker 1: safety with hydrogen. So if you have a more modern
Speaker 1: network of polyurethane based pipes, which are common when um
Speaker 1: in in new cities and new population centers, and also
Speaker 1: where there's been a deep retrofital replacement, then hydrogen can
Speaker 1: can be piped through their up to a hudd percent
Speaker 1: concentration with with a little bit of work done on
Speaker 1: making sure it's sealed of because you'd also have to
Speaker 1: adjust the appliances or by new appliances to burn that hydrogen.
Speaker 1: That's right. So, just in the way that cities and
Speaker 1: towns and countries switched from town's gas back in the sixties,
Speaker 1: seventies and eighties to natural gas, a similar type of
Speaker 1: whichever will be required in order to start to use
Speaker 1: a large high blends of hydrogen. In effect, towns gas
Speaker 1: is a blend of hydrogen and carbon monoxide. So we
Speaker 1: used to have hydrogen running under the streets of London,
Speaker 1: under the streets of Sydney, of Tokyo, et cetera. So um,
Speaker 1: that comes back to the point that the idea of
Speaker 1: hydrogen as a fuel is actually not an old not
Speaker 1: a new one. It's an old one and it's ebbed
Speaker 1: and flowed over the years and had various backers and
Speaker 1: then it's fallen, fallen over, but this time may be different. Well,
Speaker 1: I am certainly interested in watching this space because you
Speaker 1: have sold me on the excitement of a potentially emissions
Speaker 1: free future. So thank you very much for joining us
Speaker 1: today about kind of this new and exciting area in
Speaker 1: the spaces that we cover. Cobad Martin, thank you for
Speaker 1: being here right pleasure. Thank you, Dana. Bloomberg. An e
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