WEBVTT - Things to Watch: Hydrogen 0:00:00.280 --> 0:00:03.400 This is Dana Perkins, and you're listening to Switched on 0:00:03.680 --> 0:00:07.280 the B and EF podcast. On today's bonus episode, which 0:00:07.280 --> 0:00:10.080 is actually our final one in our twenty twenty four 0:00:10.200 --> 0:00:13.320 Things to Watch series, we speak with Kathy Gao about 0:00:13.320 --> 0:00:15.840 what we should be watching in the hydrogen space in 0:00:15.880 --> 0:00:19.120 the year ahead. We start by discussing off take agreements 0:00:19.280 --> 0:00:22.640 and the potential for shipping and aviation to step up 0:00:22.760 --> 0:00:26.000 as customers and sources of demand. We also look at 0:00:26.040 --> 0:00:29.880 methods of hydrogen production across different regions and whether nuclear 0:00:30.000 --> 0:00:33.280 or pink hydrogen may become a more viable option in 0:00:33.320 --> 0:00:36.360 the air ahead, and we assess the global policies that 0:00:36.440 --> 0:00:40.000 could help drive hydrogen production in twenty twenty four, in 0:00:40.040 --> 0:00:43.680 particular in the US, where the long awaited guidance on 0:00:43.720 --> 0:00:47.879 the IRA has now been released. To access this research 0:00:47.960 --> 0:00:51.320 note titled Hydrogen ten Things to Watch for twenty twenty four, 0:00:51.520 --> 0:00:54.200 B and EF subscribers can find it at BNF dot 0:00:54.240 --> 0:00:56.920 com and at BNF go on the Bloomberg terminal. If 0:00:56.960 --> 0:00:59.440 you like this podcast, make sure to subscribe, and if 0:00:59.480 --> 0:01:01.640 you want to share with others, well, you can send 0:01:01.640 --> 0:01:03.640 it to them, or you can give us a review 0:01:03.680 --> 0:01:06.960 on Apple podcasts or Spotify. But right now, let's speak 0:01:06.959 --> 0:01:19.960 with Kathy about the year ahead for hydrogen. Kathy, thank 0:01:19.959 --> 0:01:22.280 you very much for joining today to talk to us 0:01:22.319 --> 0:01:24.120 about the year ahead for hydrogen. 0:01:24.360 --> 0:01:25.839 Thanks Dana, happy to be here. 0:01:26.080 --> 0:01:28.399 So as we think about the year ahead, you know, really, 0:01:28.400 --> 0:01:30.840 when I think about hydrogen, I think about it as 0:01:30.920 --> 0:01:33.760 this solution that's going to be used more in the 0:01:33.800 --> 0:01:36.880 longer term, both from the standpoint when we think about 0:01:36.959 --> 0:01:40.000 how the economics are likely to work out and get 0:01:40.319 --> 0:01:42.400 a bit cheaper over time, and when we look at 0:01:42.440 --> 0:01:45.400 some of the learning rates for the technology. So we're 0:01:45.400 --> 0:01:47.720 really talking about hydrogen in what I consider to be 0:01:47.800 --> 0:01:49.680 a really unique space for us to talk about it, 0:01:49.720 --> 0:01:51.720 which is very time delimited. Right, We're going to talk 0:01:51.720 --> 0:01:53.760 a little bit about the year behind us and then 0:01:53.840 --> 0:01:56.720 about the year ahead and resist the temptation to look 0:01:56.760 --> 0:01:59.760 too far into the future. So with that in mind, 0:02:00.160 --> 0:02:04.120 let's talk a little bit about this hydrogen predictions. We 0:02:04.160 --> 0:02:06.640 did them last year. We do tend to give ourselves 0:02:06.680 --> 0:02:08.919 a bit of a scorecard. How well did you do 0:02:09.280 --> 0:02:12.799 versus well what you thought would happen in twenty twenty three. 0:02:13.240 --> 0:02:16.320 Yeah, I think we did pretty well on overall the 0:02:16.440 --> 0:02:19.440 kind of judgment of the industry. What I'm actually really 0:02:19.680 --> 0:02:21.720 want to hide light is actually the one that we 0:02:21.880 --> 0:02:26.040 got wrong is around sort of the project financing kickstarting 0:02:26.080 --> 0:02:30.160 in the US, which obviously didn't happen last year because 0:02:30.200 --> 0:02:33.040 of the delays of the US I a guideline on 0:02:33.080 --> 0:02:35.720 the hydrogen text credit. So I think just by drawing 0:02:35.720 --> 0:02:40.080 this one examples, this actually highlights the policy and recutory 0:02:40.200 --> 0:02:43.680 complexity and uncertainty the whole industry's facing right now. So 0:02:43.760 --> 0:02:46.760 this is actually one thing that we're closely watching for 0:02:46.800 --> 0:02:49.160 twenty twenty four as well to see whether there could 0:02:49.200 --> 0:02:52.240 be any policies coming out to actually lift the sector 0:02:52.360 --> 0:02:55.440 and give positivity to the sectors into twenty twenty four. 0:02:56.080 --> 0:02:58.320 So that actually was one of your predictions for the 0:02:58.360 --> 0:03:01.600 year ahead, and the US had finally released this long 0:03:01.639 --> 0:03:04.080 awaited guidance on the what is it the forty five 0:03:04.200 --> 0:03:06.919 V tax credit from the IRA. Can you talk a 0:03:06.919 --> 0:03:09.440 little bit about what the prediction is for that for 0:03:09.520 --> 0:03:10.320 twenty twenty four. 0:03:10.760 --> 0:03:14.080 Yeah, So obviously the delays in the IRA guide like 0:03:14.120 --> 0:03:16.440 coming out has actually slowed down a lot of projects 0:03:16.520 --> 0:03:19.240 eating FID in twenty twenty three in the US. So 0:03:19.440 --> 0:03:21.840 just to give you an idea of the landscape of 0:03:21.880 --> 0:03:24.440 the project being proposed. In the US, there's a total 0:03:24.480 --> 0:03:27.520 of around one point six millimetric town of clean hydrogen 0:03:27.600 --> 0:03:30.840 projects proposed by twenty thirty and of that amount, only 0:03:30.919 --> 0:03:33.800 twenty percent has found an off ticker and even you know, 0:03:33.880 --> 0:03:36.520 less than one percent has reached FID by the end 0:03:36.520 --> 0:03:39.320 of last year. So it tells sort of the challenge 0:03:39.320 --> 0:03:41.520 the whole industry is facing right now. There's not much 0:03:41.560 --> 0:03:45.440 demand and much less keating the financial milestone. So the 0:03:45.520 --> 0:03:48.880 IRA guide like coming out actually right before Christmas last year, 0:03:48.920 --> 0:03:51.360 was actually very good news for the whole industries. So 0:03:51.560 --> 0:03:54.520 the US actually offers one of the most generous subsidy 0:03:54.560 --> 0:03:57.400 for clean hydrogen production, as high as three dollar packge 0:03:57.560 --> 0:04:01.640 of hydrogen. The highest subsidy actually lies for hydrogen with 0:04:02.160 --> 0:04:05.560 very low emission standard of less than point forty five 0:04:05.640 --> 0:04:08.320 kg of CO two, so those hydrogen could get the 0:04:08.400 --> 0:04:11.680 highest level of subsidies. So the IRA actually comes out 0:04:11.760 --> 0:04:15.400 much trigger than most have hoped. So it requires project 0:04:15.480 --> 0:04:18.400 to meet a few criterias to be able to qualify 0:04:18.440 --> 0:04:21.599 for the subsidies, one of them being the hydrogen having 0:04:21.640 --> 0:04:25.560 to couple with new build or additional renewable resources, so 0:04:25.600 --> 0:04:28.839 it cannot draw power from existing power such as nuclear. 0:04:29.080 --> 0:04:31.960 The second one is that there should be hourly matching 0:04:32.080 --> 0:04:36.039 between hydrogen production and the renewable generation. So this is 0:04:36.080 --> 0:04:38.599 also really hard to hit because a lot of the 0:04:38.880 --> 0:04:43.480 renewable generation are intermittent and electualizer are actually not ready 0:04:43.480 --> 0:04:46.760 to take those intermittent power. So in order to match 0:04:46.880 --> 0:04:50.000 the renewable generation and hydro production, you need the technology 0:04:50.120 --> 0:04:53.120 to be ready. We also probably need a portfolio of 0:04:53.200 --> 0:04:57.520 renewable to support electualizers. You probably need solar and wind 0:04:57.600 --> 0:05:01.479 and battery storage on signed to support electualizer production, which 0:05:01.480 --> 0:05:05.240 will obviously raise the cost of clean hydrogen production. So 0:05:05.440 --> 0:05:07.920 a lot of people are actually quite worried about a 0:05:07.960 --> 0:05:12.120 Republican presidency and whether that would revoke the IRA subsidy 0:05:12.320 --> 0:05:14.240 for US. We don't think that would be the case 0:05:14.320 --> 0:05:17.320 because the IRA subsidy on hydrogen actually has by parties 0:05:17.320 --> 0:05:21.360 and support, and then we think even with a Republicans presidency, 0:05:21.600 --> 0:05:23.160 the subsidy would actually survive. 0:05:23.680 --> 0:05:27.000 So there's a lot happening with IRA implementation, which is 0:05:27.040 --> 0:05:29.720 a federal policy. But now let's actually talk a little 0:05:29.720 --> 0:05:33.440 bit more about the US and states are individual states 0:05:33.440 --> 0:05:35.440 getting in this game and thinking about hydrogen. 0:05:35.640 --> 0:05:37.800 There's actually a lot of states that are interested in 0:05:37.960 --> 0:05:41.960 supporting hydrogen. So as we've seen some states actually when 0:05:41.960 --> 0:05:45.120 I had to launch their own demand site incentive in 0:05:45.400 --> 0:05:48.640 twenty twenty three, which could actually trigger more states to 0:05:48.720 --> 0:05:52.040 follow this suit. For example, Colorado has introduced a subsidy 0:05:52.080 --> 0:05:54.599 of up to one dollar perkg for the users of 0:05:54.640 --> 0:05:58.440 clean hydrogen in mid twenty twenty three. Illinois has introduced 0:05:58.480 --> 0:06:02.039 similar subsidies of one dollar package credit as well, but 0:06:02.120 --> 0:06:04.120 it's more strict so it's only limited to hard to 0:06:04.200 --> 0:06:08.120 abate sector users. Pennsylvania has also released a text credit 0:06:08.240 --> 0:06:11.480 of around point eight dollars package of clean hydrogen purchased 0:06:11.520 --> 0:06:14.520 from the regional Clean Hydrogen HOB which recently got the 0:06:14.560 --> 0:06:18.599 founding from the federal government. So we expect more stays 0:06:18.640 --> 0:06:22.080 actually to launch more subsidies because currently only on the 0:06:22.080 --> 0:06:25.200 federal level, although the government has announced a one point 0:06:25.240 --> 0:06:29.559 six billion incentive package for supporting the demand of clean 0:06:29.640 --> 0:06:32.760 hydrogen in twenty twenty three, there was very little detail 0:06:32.800 --> 0:06:35.200 of how the government is actually going to implement that, 0:06:35.520 --> 0:06:37.960 so we'll still need to wait and see, you know, 0:06:38.000 --> 0:06:40.600 how the federal government will do this, but with the 0:06:40.680 --> 0:06:43.840 lack of certainties on how the federal government will implement that, 0:06:43.920 --> 0:06:46.320 we think there will be more states actually going ahead 0:06:46.320 --> 0:06:49.800 and launching their own subsidies to incentivize more demand on 0:06:49.839 --> 0:06:53.440 the local level, especially the states which got the regional 0:06:53.600 --> 0:06:56.040 Hydrogen hob funding for the production side. 0:06:56.120 --> 0:06:59.480 So we'll come to some of the conversation around technologies 0:06:59.480 --> 0:07:01.680 and application, but I think it would be great for 0:07:01.760 --> 0:07:04.039 us to actually continue to talk about this in terms 0:07:04.040 --> 0:07:06.560 of what's happening in different parts of the world. So 0:07:06.880 --> 0:07:10.080 can we next go to Asia as a continent, And 0:07:10.160 --> 0:07:12.480 I know this is going to vary widely by country 0:07:12.480 --> 0:07:16.000 by country, we zero in on, say Japan and Korea. 0:07:16.320 --> 0:07:18.880 This was an area of the world that were early 0:07:19.040 --> 0:07:22.360 proponents of hydrogen and actually looked at applications when it 0:07:22.360 --> 0:07:25.040 came to cars and fuel cells since that was a 0:07:25.080 --> 0:07:27.600 part of their early strategy. Do you see a bit 0:07:27.600 --> 0:07:29.760 of a pivot to some of the other applications that 0:07:29.840 --> 0:07:32.120 parts of the world have looked at, And what is 0:07:32.200 --> 0:07:35.400 happening in Asia and how is their year head look 0:07:35.480 --> 0:07:36.600 for hydrogen. 0:07:36.400 --> 0:07:39.280 APEC is pretty interesting because, as you said, every country 0:07:39.320 --> 0:07:42.760 has slightly different approach and on the policy wise, is 0:07:42.800 --> 0:07:45.680 actually less sophisticated than the US and Europe in terms 0:07:45.680 --> 0:07:49.320 of hydrogen policies. It's interesting to see how these countries 0:07:49.320 --> 0:07:52.840 will actually push forward the hydrogen subsidies So far, if 0:07:52.880 --> 0:07:56.320 you compare the subsidy level from APAC to the US, 0:07:56.320 --> 0:07:59.480 and Europe is actually lagging behind for a lot. The 0:07:59.520 --> 0:08:03.560 only trees that have implemented subsidy for hydrogens are India 0:08:03.600 --> 0:08:06.800 and Australia, but they're tiny compared to the US are 0:08:06.920 --> 0:08:10.200 A subsidies. The upcoming one that we're actually pretty excited 0:08:10.280 --> 0:08:14.320 for is the potential subsidies in Japan. So Japan has 0:08:14.440 --> 0:08:18.120 introduced a contract for different mechanisms similar to the one 0:08:18.120 --> 0:08:22.160 that EU is implementing for clean molecule supply, including clean hydrogen, 0:08:22.240 --> 0:08:26.160 so that would benefit both domestic supplier and overseas suppliers. 0:08:26.400 --> 0:08:29.840 This will basically subsidize the cost difference between the cost 0:08:29.880 --> 0:08:33.240 of importing clean hydrogen and the cost of producing or 0:08:33.360 --> 0:08:37.000 using great HydroD domestically or fossil fuel. This is actually 0:08:37.080 --> 0:08:39.400 quite a lot of money that the Japanese government is 0:08:39.400 --> 0:08:42.400 putting into this mechanism, but it solely depends on whether 0:08:42.440 --> 0:08:44.640 the government could actually raise that much money because this 0:08:44.760 --> 0:08:46.600 pool of money is actually going to come from the 0:08:46.600 --> 0:08:49.720 transition bonds that the government will be issuing. So depending 0:08:49.720 --> 0:08:52.439 on whether there will be anybody buying transition bonds, it 0:08:52.480 --> 0:08:55.200 would actually determine how much money will be available for 0:08:55.280 --> 0:08:59.479 this pool of CFD subsidies. And then the other countries 0:08:59.520 --> 0:09:03.360 that we are pretty optimistic about on hydrogen import is 0:09:03.520 --> 0:09:06.800 South Korea. So similar to Japan, South Korea is actually 0:09:06.960 --> 0:09:10.960 also thinking to import clean hydrogen or clean ammonia, mostly 0:09:11.040 --> 0:09:14.480 for domestic power generation and a bit of transport. South 0:09:14.559 --> 0:09:16.840 Korea is interesting because it's actually one of the few 0:09:16.880 --> 0:09:20.920 countries in the world that implemented a usage manday, so 0:09:20.960 --> 0:09:24.120 it's basically a mandate for the power sector for the 0:09:24.200 --> 0:09:27.880 utilities to use a portion of clean hydrogen or clean 0:09:27.920 --> 0:09:31.520 ammonia derived power from now to twenty thirty. So by 0:09:31.520 --> 0:09:34.720 twenty thirty, the goal is for South Korea to consume 0:09:34.760 --> 0:09:37.760 at least eight hundred thousand towns of clean hydrogen or 0:09:37.800 --> 0:09:40.920 equivalent for power generations, so that it's quite a lot 0:09:40.920 --> 0:09:44.840 of demand that they actually mandated for domestic utilities. South 0:09:44.920 --> 0:09:47.240 Korea is a big steel manufacturing hub. They also have 0:09:47.320 --> 0:09:51.400 plans to use hydrogen in the industrial particularly steel manufacturings. 0:09:51.600 --> 0:09:54.600 So overall for Asia, we think South Korea and Japan 0:09:54.679 --> 0:09:57.280 are the two markets that we're most excited about for 0:09:57.400 --> 0:09:58.440 twenty twenty four. 0:09:58.520 --> 0:10:00.840 And you would reference that in your This has been 0:10:00.840 --> 0:10:03.520 a part of the world that has historically had favorable 0:10:03.600 --> 0:10:06.640 policies on the books for hydrogen. And without going into 0:10:06.800 --> 0:10:09.880 individual countries, let's talk a little bit about the European 0:10:10.000 --> 0:10:13.800 Union and the year ahead and whether or not you 0:10:13.960 --> 0:10:16.640 see more of those policies coming down the pipe. 0:10:16.840 --> 0:10:20.079 Europe is really interesting because it's actually something that all 0:10:20.120 --> 0:10:23.160 the other countries are looking after as kind of a 0:10:23.280 --> 0:10:26.280 model in terms of hydrogen policies. And in Europe there's 0:10:26.280 --> 0:10:30.200 actually quite a lot of policies, mandates, and subsidies that 0:10:30.240 --> 0:10:32.960 they implemented to support hydrogen. But one thing that we 0:10:33.080 --> 0:10:36.160 actually looking out for for twenty twenty four is the 0:10:36.200 --> 0:10:39.720 clean hydrogen definition because right now in Europe they actually 0:10:39.720 --> 0:10:43.080 hasn't really clarified any regulations around sort of the production 0:10:43.320 --> 0:10:46.839 of clean hydrogen and blue hydrogen in particularly as well 0:10:46.840 --> 0:10:48.679 as pink hydrogen. So a lot of people kind of 0:10:48.720 --> 0:10:51.480 planning those kind of projects in Europe are worried that 0:10:51.600 --> 0:10:54.120 those project might not get any support in you at 0:10:54.120 --> 0:10:56.880 the end, So in twenty twenty four, we actually would 0:10:56.880 --> 0:11:01.240 expect you to publish clear definition on how the emission 0:11:01.360 --> 0:11:05.079 from producing low carbon hydrogen should be measured. So, for example, 0:11:05.160 --> 0:11:09.120 right now EU has adopted a emission criteria of three 0:11:09.120 --> 0:11:12.160 point three akg of COE to equivalent per kg of 0:11:12.280 --> 0:11:16.560 hydrogen as the benchmark or criteria of low carbon hydrogen. 0:11:16.640 --> 0:11:20.199 But EU hasn't really clarified like how those emissions should 0:11:20.200 --> 0:11:23.800 be measured, whether leakage would be accounted. So those are 0:11:23.840 --> 0:11:25.880 the things that the industry is actually looking out for 0:11:25.960 --> 0:11:28.280 in twenty twenty four for the EU to actually clarify 0:11:28.600 --> 0:11:32.840 the emission accounting methodology for clean hydrogen. And then another 0:11:32.880 --> 0:11:35.680 thing on EU is that in addition to the EU level, 0:11:35.720 --> 0:11:38.840 which already have run the first round of hydrogen auction 0:11:39.120 --> 0:11:41.800 in late twenty twenty three and it is expected to 0:11:41.920 --> 0:11:44.400 run another round of auction in twenty twenty four, a 0:11:44.400 --> 0:11:46.360 lot of people are actually looking out for sort of 0:11:46.360 --> 0:11:50.439 the member country level subsidies. For example, like Germany is 0:11:50.679 --> 0:11:54.559 expected to launch its carbon contract with different schemes. Friends 0:11:54.679 --> 0:11:57.559 is also running its own hydrogen auctions. So in addition 0:11:57.640 --> 0:11:59.800 to the EU level a lot of people are looking 0:11:59.800 --> 0:12:02.920 at for the member country level subsidies and auctions in 0:12:02.960 --> 0:12:03.760 twenty twenty four. 0:12:04.200 --> 0:12:06.480 So the hydrogen color wheel is something that people talk 0:12:06.520 --> 0:12:08.480 about a lot. It's all of these different colors that 0:12:08.840 --> 0:12:12.040 stand for the different technologies that we use to make 0:12:12.240 --> 0:12:15.200 the non naturally occur during hydrogen. So be it blue 0:12:15.320 --> 0:12:18.080 or pink or green, it all stands for something. But 0:12:18.160 --> 0:12:20.000 really what I want to know about is in the 0:12:20.080 --> 0:12:22.880 year head, which technologies are really going to come out 0:12:22.880 --> 0:12:25.280 on top. So is it going to be the application 0:12:25.360 --> 0:12:28.640 of CCS, which is largely coupled with colon gas. Is 0:12:28.679 --> 0:12:32.120 it going to be green hydrogen produced from renewables, or 0:12:32.200 --> 0:12:34.679 are we going to see a resurgence in the use 0:12:34.720 --> 0:12:37.760 of nuclear which is referred to often as pink hydrogen. 0:12:38.040 --> 0:12:39.920 What does it look like and what does that mix 0:12:39.960 --> 0:12:42.720 look like from a technology standpoint in the year ahead. 0:12:43.160 --> 0:12:46.600 Yeah, So for CCS, it's interesting because EU right now, 0:12:46.760 --> 0:12:49.520 you know, it's actually have a preference on green hydrogen 0:12:49.559 --> 0:12:51.680 over blue because it wants to get rid of fossil 0:12:51.679 --> 0:12:56.120 few use, so blue hydrogen is not particularly popular in EU. 0:12:56.520 --> 0:12:59.440 The blue hydrogen actually only concentrated in a few countries 0:12:59.480 --> 0:13:02.600 that actually have support on carbon capture. For example, the 0:13:02.760 --> 0:13:06.200 US have the forty five Q subsidies on the carbon 0:13:06.240 --> 0:13:09.679 capture and utilization and storage as well, so a lot 0:13:09.720 --> 0:13:12.760 of those blue hydrogen projects are concentrated in the US 0:13:12.960 --> 0:13:16.400 the UK as well. UK. Actually blue hydrogen would we 0:13:16.440 --> 0:13:18.760 expect it would be the biggest source of clean hydrogen 0:13:18.880 --> 0:13:22.040 by twenty thirty in year really depends on, as I 0:13:22.080 --> 0:13:26.280 mentioned earlier, how the emission accounting methodology will comes down to. 0:13:27.200 --> 0:13:31.079 For example, the emission accounting for clean hydrogen will account 0:13:31.120 --> 0:13:33.839 for the upstream meat and leakage and all the other 0:13:33.920 --> 0:13:37.440 upstream emission associated with blue hydrogen that would make blue 0:13:37.520 --> 0:13:41.080 hydrogen really difficult to meet the emission criteria under the 0:13:41.080 --> 0:13:44.839 EU Centard. And then in terms of pink hydrogen, it's 0:13:44.880 --> 0:13:46.920 interesting because there's not a lot of countries in the 0:13:46.920 --> 0:13:50.520 world that have the nuclear required to produce pink hydrogen. 0:13:50.720 --> 0:13:53.520 So the few countries that have that could produce pink 0:13:53.600 --> 0:13:57.520 hydrogen include the US friends for example in Europe and 0:13:57.520 --> 0:14:00.840 in China, and South Korea is actually pretty cue with 0:14:00.920 --> 0:14:04.480 the new presidency to explore pink hydrogen as well in Asia. 0:14:04.600 --> 0:14:06.760 So those are only you know a few countries that 0:14:06.800 --> 0:14:10.240 could produce clean hydrogen using nuclear and then in the EU, 0:14:10.400 --> 0:14:13.480 it really depends whether again sort of the new emission 0:14:13.559 --> 0:14:17.320 accounting methodologies that is counted in the US with the 0:14:17.360 --> 0:14:21.920 IRA guideline, it actually required, as I mentioned earlier, additional 0:14:22.040 --> 0:14:24.680 new build renewal boat to be coupled with the clean 0:14:24.760 --> 0:14:27.680 hydrogen for it to qualify for the subsidies, which would 0:14:27.760 --> 0:14:31.040 make it really difficult for pink hydrogen, which would most 0:14:31.120 --> 0:14:34.160 likely use existing instead of no built nuclear as a 0:14:34.240 --> 0:14:36.280 power source, would make it really difficult for it to 0:14:36.920 --> 0:14:40.360 get them IRA subsidies. So you know, it really depends 0:14:40.360 --> 0:14:44.720 on the policy regulation and emission accounting methodology under those 0:14:44.840 --> 0:14:49.000 different countries whether this source of hydrogen will be qualified 0:14:49.080 --> 0:14:50.480 for any subsidies going forward. 0:14:50.960 --> 0:14:53.560 So next I want to talk about two of our 0:14:53.760 --> 0:14:57.600 favorite hard to evate areas, shipping and aviation. We've spent 0:14:57.640 --> 0:15:00.000 a lot of time thinking about the solutions for these 0:15:00.080 --> 0:15:02.680 in the future, and one of them is hydrogen. Are 0:15:02.720 --> 0:15:05.920 we seeing off take agreements that indicate that twenty twenty 0:15:06.000 --> 0:15:09.560 four could be a really big year for application for 0:15:09.640 --> 0:15:11.600 these two hard to abate sectors. 0:15:11.800 --> 0:15:15.160 Yeah, so we're actually pretty optimistic about this two sector 0:15:15.240 --> 0:15:18.320 lifting the demand for hydrogen in the year ahead. This 0:15:18.440 --> 0:15:22.160 two sector are under pretty tight regulation in the EU 0:15:22.560 --> 0:15:27.240 for de carbonization. For example, that Refuel EU Aviation initiative 0:15:27.400 --> 0:15:30.120 which mandated one point two percent of the fuel supply 0:15:30.320 --> 0:15:33.320 to aircraft at the EU airport must be synthetic by 0:15:33.360 --> 0:15:36.760 twenty thirty, so that would our estimate result in at 0:15:36.800 --> 0:15:39.680 list zero point thirty five million tounds of green hydrogen 0:15:39.720 --> 0:15:43.360 demand by twenty thirty. There's also the few EU maritime initiatives. 0:15:43.400 --> 0:15:46.640 Similar to the aviation one, it mandates a shipping sector 0:15:46.640 --> 0:15:50.840 to de carbonise following a fixed emission intensity target from 0:15:50.920 --> 0:15:54.720 now to twenty fifty. So this carbon intensity target will 0:15:54.760 --> 0:15:58.440 require the shipping companies to redeal fuel emission by two 0:15:58.480 --> 0:16:01.640 percent by twenty twenty five, which would rise dramatically to 0:16:01.800 --> 0:16:04.800 eighty percent by twenty fifty. And then in addition to 0:16:04.840 --> 0:16:08.320 the few EU maritime initiative, we also have the EUETS, 0:16:08.560 --> 0:16:13.600 which included the shipping sector into the ETS scheme last year, 0:16:13.680 --> 0:16:16.640 so the shipping sector would have to pay carbon price 0:16:16.680 --> 0:16:19.920 starting from this year and then full carbon price starting 0:16:19.920 --> 0:16:22.680 from twenty twenty six. A lot of shipping companies are 0:16:22.720 --> 0:16:25.880 actually under a lot of pressure to decarbonise, they are 0:16:26.080 --> 0:16:30.120 looking for green fields globally trying to be compliant, so 0:16:30.200 --> 0:16:32.720 that would actually drive a lot of demand as we 0:16:32.800 --> 0:16:36.000 are already seen from the shipping and aviation sector. Just 0:16:36.040 --> 0:16:38.320 to give you a couple of examples. For example, in 0:16:38.320 --> 0:16:42.040 the aviation sector, Airfrance and Kelm and Delta signed eight 0:16:42.080 --> 0:16:45.320 seven year sustainable aviation fuel off tack with a US 0:16:45.360 --> 0:16:48.560 based synthetic fueld producer d G Fuels to make aviation 0:16:48.680 --> 0:16:52.040 fuel using hydrogen. Merz, which is one of the biggest 0:16:52.120 --> 0:16:56.080 European shipping company, also signed a binding off taic contract 0:16:56.120 --> 0:16:59.480 with the Chinese developer Goldwin for a five hundred thousand 0:16:59.480 --> 0:17:03.560 towns of methinode off take which will be using around 0:17:03.560 --> 0:17:07.399 one hundred thousand towns of green hydrogen for those methino productions. 0:17:07.400 --> 0:17:10.200 So this is actually one of the largest green methinoe 0:17:10.240 --> 0:17:12.880 off take that we've seen so far, and this give 0:17:12.960 --> 0:17:15.520 a lot of hopes to the whole industry, especially to 0:17:15.640 --> 0:17:20.040 the countries with very cheap renewables and abundant biomass resources 0:17:20.040 --> 0:17:23.439 such as China and potentially South America as well as 0:17:23.520 --> 0:17:26.600 the Nordic country to actually step up to produce green 0:17:26.640 --> 0:17:29.320 fields for the shipping sectors. 0:17:28.880 --> 0:17:32.080 And on some of these ships are electrilyizers for other 0:17:32.160 --> 0:17:35.159 parts of the world to make hydrogen. As we ship 0:17:35.240 --> 0:17:38.040 the required equipment around the world, and we've got some 0:17:38.119 --> 0:17:42.600 predictions for volumes of elect shipments in the airhead, what 0:17:42.680 --> 0:17:43.440 are those. 0:17:43.680 --> 0:17:45.920 For the shipment of electrializer, which is, you know, a 0:17:46.000 --> 0:17:50.359 key component or equipment to produce green hydrogen. From twenty 0:17:50.359 --> 0:17:53.119 twenty three to twenty twenty two, we saw shipment of 0:17:53.119 --> 0:17:56.440 electrizer double going ahead in twenty twenty four. We expect 0:17:56.600 --> 0:17:59.080 the shipment to continue to grow in twenty twenty four. 0:17:59.280 --> 0:18:02.880 In our conservative scenario, the shipment in twenty twenty three 0:18:03.080 --> 0:18:05.720 would be around one point seven gigawatt, and then we'd 0:18:05.760 --> 0:18:08.399 expect that to double in twenty nwenty four to reach 0:18:08.440 --> 0:18:11.760 around three point six gigawatt. But in terms of like 0:18:11.800 --> 0:18:15.000 the exact amount whether in twenty twenty four would actually 0:18:15.000 --> 0:18:17.240 achieve that double, it really depends on a lot of 0:18:17.320 --> 0:18:19.760 different factors. We think there's a lot of certainties around 0:18:19.800 --> 0:18:22.760 the exact shipment in the year had because there are 0:18:22.760 --> 0:18:24.840 a couple of factors that could affect it, for example, 0:18:25.000 --> 0:18:29.600 policies and also macroeconomic environments. And also sort of the 0:18:29.640 --> 0:18:32.159 technical issue is a big one. The issue that the 0:18:32.240 --> 0:18:36.200 technology like electrialized has been around for over fifty years 0:18:36.240 --> 0:18:38.919 as a technology to be used in multiple sectors to 0:18:38.960 --> 0:18:43.400 produce hydrogen on site, but those are mostly small scales. 0:18:43.640 --> 0:18:47.520 In order to deploy those technology in a megawat scale, 0:18:47.560 --> 0:18:50.240 you need to have technology improvement. And then we're actually, 0:18:50.320 --> 0:18:54.200 we don't think the industry now is ready for this yet. 0:18:54.400 --> 0:18:57.879 We've heard a lot of manufacturer having technical issues, so 0:18:57.920 --> 0:19:00.520 we think this is something that industry have to fix 0:19:00.800 --> 0:19:03.720 for the technology to be deployed in a larger scale. 0:19:03.880 --> 0:19:07.400 So one of the key technical issues is the compatibility 0:19:07.400 --> 0:19:11.480 with renewable power because in the past, electualizer is used 0:19:11.480 --> 0:19:15.080 to getting stable power input from the greed, but now 0:19:15.119 --> 0:19:18.240 if we want to couple that with renewable electricity, the 0:19:18.280 --> 0:19:21.080 power input will be intermittent and that's something that the 0:19:21.280 --> 0:19:22.560 manufacturer has to figure out. 0:19:22.920 --> 0:19:26.080 And now let's talk about interest rates, which are raising 0:19:26.119 --> 0:19:28.600 costs for power projects all over the world, and when 0:19:28.600 --> 0:19:30.800 it comes to hydrogen, do we think we're going to 0:19:30.880 --> 0:19:33.080 end up seeing the impact of these higher interest rates 0:19:33.080 --> 0:19:35.399 in auctions? And the reason that I asked this is 0:19:35.440 --> 0:19:38.800 so often we're looking for cost declines in hydrogen projects, 0:19:38.920 --> 0:19:41.679 So will this be a year where essentially the costs 0:19:41.680 --> 0:19:43.680 go up and will we see that in the auctions. 0:19:44.119 --> 0:19:46.800 So it's actually something that we've observed in the past 0:19:46.880 --> 0:19:49.040 year in a couple of the auctions around the world 0:19:49.040 --> 0:19:51.639 that the production costs that produce a bit for is 0:19:51.640 --> 0:19:54.480 actually much higher than we expected. For example, in the 0:19:54.520 --> 0:19:57.960 first auction that UK run in twenty twenty three, the 0:19:58.040 --> 0:20:01.800 cost is actually much higher than we estimated, mostly because 0:20:01.880 --> 0:20:04.879 of a couple of factors. For example, the rising equipment costs, 0:20:04.960 --> 0:20:08.720 rising electricity costs, additional grid connection cost you know, alongside 0:20:08.760 --> 0:20:10.600 with a couple of other factors that push up the 0:20:10.680 --> 0:20:14.040 cost by at least six to seven dollars package So 0:20:14.119 --> 0:20:16.760 this is pretty significant. We think that the auction plan 0:20:16.840 --> 0:20:19.560 in twenty twenty four are likely to be affected by 0:20:19.680 --> 0:20:21.960 higher costs as well. There are a couple of auctions 0:20:21.960 --> 0:20:24.119 that we are closely watching al four, such as the 0:20:24.560 --> 0:20:28.879 second EU Hydrogen Bank auction that will supposedly happen in 0:20:29.000 --> 0:20:31.960 spring twenty twenty four. The UK and Idland would also 0:20:32.040 --> 0:20:35.359 have its second hydrogen auction. Friends in Germany, as I 0:20:35.400 --> 0:20:38.840 mentioned before, would also have its hydrogen tender Japan as well, 0:20:39.080 --> 0:20:42.600 as I mentioned earlier, would have its CFD schemed launched 0:20:42.640 --> 0:20:44.520 this summer as well. So there are a lot of 0:20:44.520 --> 0:20:47.000 auctions that we're watching alpha in twenty twenty four. I 0:20:47.000 --> 0:20:50.119 think it remains an outstanding question whether this kind of 0:20:50.240 --> 0:20:53.119 higher cost will be applied to all the markets in 0:20:53.160 --> 0:20:56.119 the world. It really depends on sort of the subsidy 0:20:56.200 --> 0:20:59.840 and auction mechanism design as well. For example, in the EU, 0:21:00.119 --> 0:21:03.360 you wear some sectors face quotas or mandates to buy 0:21:03.400 --> 0:21:07.280 clean hydrogen. This would create demand and also willingness to 0:21:07.320 --> 0:21:10.600 pay for the green premiums amount the buyers. In that case, 0:21:10.640 --> 0:21:13.720