1 00:00:00,520 --> 00:00:03,560 Speaker 1: This is Dana Perkins and you're listening to Switched on 2 00:00:03,840 --> 00:00:06,320 Speaker 1: the b and EF podcast, where we bring you some 3 00:00:06,480 --> 00:00:10,479 Speaker 1: of our latest analysis on the future of the energy transition. Now, 4 00:00:10,560 --> 00:00:13,680 Speaker 1: today we're going to discuss hydrogen with Aditya Basham from 5 00:00:13,720 --> 00:00:16,599 Speaker 1: bnaf's hydrogen team. It's a buzzy topic, which would be 6 00:00:16,600 --> 00:00:20,080 Speaker 1: why we have revisited it several times on this show. 7 00:00:20,320 --> 00:00:23,360 Speaker 1: Clean hydrogen supply has the potential to increase by a 8 00:00:23,400 --> 00:00:26,720 Speaker 1: factor of thirty by twenty thirty. So if you're focused 9 00:00:26,760 --> 00:00:30,840 Speaker 1: on decarbonizing industry, you're probably looking at hydrogen and also 10 00:00:30,920 --> 00:00:33,199 Speaker 1: thinking about how to transport it, how to store it, 11 00:00:33,280 --> 00:00:36,239 Speaker 1: and also what it's going to cost. And those who 12 00:00:36,280 --> 00:00:39,840 Speaker 1: are looking most intensely at the decarbonizing side of things 13 00:00:39,920 --> 00:00:42,800 Speaker 1: are also looking at green hydrogen. That's the hydrogen that 14 00:00:42,920 --> 00:00:45,960 Speaker 1: is made from renewable energy. It can be used to 15 00:00:46,000 --> 00:00:49,760 Speaker 1: decarbonize industries with high temperature heating demand, but it is 16 00:00:49,880 --> 00:00:53,720 Speaker 1: not a silver bullet. As the hydrogen industry matures, we 17 00:00:53,880 --> 00:00:58,120 Speaker 1: are increasingly separating the real potential from the hype. Today 18 00:00:58,240 --> 00:01:00,640 Speaker 1: we talk about some of the regional force is at play. 19 00:01:00,800 --> 00:01:03,920 Speaker 1: We get into things like Europe's carbon border adjustment, mechanism, 20 00:01:04,160 --> 00:01:08,360 Speaker 1: or the US's Inflation Reduction Act or China's shear Green 21 00:01:08,440 --> 00:01:11,760 Speaker 1: hydrogen production capacity. We also talk about the gap that 22 00:01:11,760 --> 00:01:14,840 Speaker 1: we're seeing between supply and demand as we pull from 23 00:01:14,920 --> 00:01:19,679 Speaker 1: bn EF's recent supply side focused research notes, including Hydrogen 24 00:01:19,680 --> 00:01:23,520 Speaker 1: Supply out Look twenty twenty four a reality check, alongside 25 00:01:23,520 --> 00:01:25,760 Speaker 1: some of the regional deep dives that we've done. B 26 00:01:25,840 --> 00:01:28,119 Speaker 1: andF subscribers are going to be able to find these 27 00:01:28,200 --> 00:01:32,240 Speaker 1: at BNAF dot com or at BNAF on the Bloomberg terminal. Now, 28 00:01:32,240 --> 00:01:34,720 Speaker 1: if you like today's show, subscribe or give us a 29 00:01:34,760 --> 00:01:37,480 Speaker 1: review and that'll help other people find us. But right now, 30 00:01:37,560 --> 00:01:40,600 Speaker 1: let's hear from Addie with an update on what's happening 31 00:01:40,760 --> 00:01:51,920 Speaker 1: in hydrogen. Addie, thank you for coming on the show. 32 00:01:51,680 --> 00:01:52,960 Speaker 2: Today, Thank you for having me. 33 00:01:53,080 --> 00:01:55,320 Speaker 1: We're here to do a status update on what's happening 34 00:01:55,560 --> 00:01:58,800 Speaker 1: in hydrogen and there, as always is a lot of 35 00:01:58,840 --> 00:02:02,640 Speaker 1: attention and excitement about the potential of the role that 36 00:02:02,720 --> 00:02:05,960 Speaker 1: hydrogen could play in the energy transition, in particular for 37 00:02:06,000 --> 00:02:08,280 Speaker 1: some of the really heavy emitting spaces where this could 38 00:02:08,280 --> 00:02:10,960 Speaker 1: be a real source of a near term pivot. But 39 00:02:11,240 --> 00:02:14,880 Speaker 1: of course there are challenges. Nothing is perfect and hydrogen 40 00:02:15,120 --> 00:02:18,800 Speaker 1: has historically been plagued with some pretty high prices, So 41 00:02:18,880 --> 00:02:22,600 Speaker 1: can we actually start with where we are from a 42 00:02:22,680 --> 00:02:26,320 Speaker 1: pricing standpoint with hydrogen. I realize that that then brings 43 00:02:26,320 --> 00:02:29,360 Speaker 1: into question the fuel source. And we're going to focus 44 00:02:29,400 --> 00:02:33,040 Speaker 1: today on kind of three colors, so gray, blue, and green. 45 00:02:33,240 --> 00:02:35,880 Speaker 1: So if you can actually also explain what those colors 46 00:02:35,919 --> 00:02:38,600 Speaker 1: are so that everyone listening today knows what we're talking 47 00:02:38,600 --> 00:02:41,240 Speaker 1: about as we go through the hydrogen color wheel, just 48 00:02:41,280 --> 00:02:43,239 Speaker 1: within those three absolutely. 49 00:02:43,320 --> 00:02:45,440 Speaker 3: I mean, we've been talking about hydrogen as the fuel 50 00:02:45,480 --> 00:02:47,400 Speaker 3: of the future, going back to the eighteen hundreds. The 51 00:02:47,480 --> 00:02:50,320 Speaker 3: reality is it's been around for a long time, and 52 00:02:50,560 --> 00:02:53,480 Speaker 3: so called gray hydrogen, so hydrogen made from fossil fuels. 53 00:02:53,800 --> 00:02:56,040 Speaker 3: We use about one hundred migain tons of DOT today, 54 00:02:56,240 --> 00:03:00,120 Speaker 3: mostly in refineries to crack oil into fuel products or 55 00:03:00,320 --> 00:03:03,160 Speaker 3: to make ammonia, which is an essential fertilizer products. A 56 00:03:04,080 --> 00:03:07,400 Speaker 3: nitrogen based fertilizers get their nitrogen from ammonia. So that's 57 00:03:07,440 --> 00:03:10,720 Speaker 3: gray hydrogen, usually made from natural gas or coal. In 58 00:03:10,800 --> 00:03:14,400 Speaker 3: China in particular, that is made at about one to 59 00:03:14,520 --> 00:03:17,640 Speaker 3: three dollars per kilogram, depending on where natural gas prices 60 00:03:17,680 --> 00:03:20,440 Speaker 3: are at. But that's roughly the range for gray hydrogen 61 00:03:20,480 --> 00:03:21,320 Speaker 3: production and. 62 00:03:21,280 --> 00:03:24,799 Speaker 1: On the gray hydrogen sidamen is really a necessary fuel 63 00:03:24,840 --> 00:03:27,560 Speaker 1: for those industries, so it's not looking to decarbonize anything, 64 00:03:27,600 --> 00:03:31,120 Speaker 1: it's just looking to create this necessary hydrogen for as 65 00:03:31,120 --> 00:03:33,280 Speaker 1: you mentioned, fertilizer or crack it exactly. 66 00:03:33,560 --> 00:03:33,800 Speaker 2: Today. 67 00:03:33,840 --> 00:03:36,520 Speaker 3: It's not even a fuel, it's a chemical feedstock. So 68 00:03:36,560 --> 00:03:39,280 Speaker 3: you need the hydrogen for its chemical properties rather than 69 00:03:39,320 --> 00:03:40,960 Speaker 3: to burn it as a fuel. I mean, it has 70 00:03:41,000 --> 00:03:43,320 Speaker 3: great properties as a fuel because it doesn't contain carbon, 71 00:03:43,360 --> 00:03:45,760 Speaker 3: so when you burn it, there's no direct emissions with it, 72 00:03:45,800 --> 00:03:47,840 Speaker 3: which is why a lot of people are talking about 73 00:03:47,880 --> 00:03:49,600 Speaker 3: the use of it as a fuel going. 74 00:03:49,400 --> 00:03:51,840 Speaker 1: Forward, which then brings us to blue and green. 75 00:03:52,360 --> 00:03:55,920 Speaker 3: Yeah, so two ways of de carbonizing hydrogen today would 76 00:03:55,960 --> 00:03:58,960 Speaker 3: be one blue hydrogen, which is essentially just taking the 77 00:03:59,080 --> 00:04:02,720 Speaker 3: existing process of making gray hydrogen, which is splitting natural 78 00:04:02,760 --> 00:04:06,520 Speaker 3: gas into carbon monoxide and hydrogen, and then adding carbon 79 00:04:06,560 --> 00:04:09,520 Speaker 3: capturn storage to it to capture the carbon emissions that 80 00:04:09,560 --> 00:04:12,160 Speaker 3: come from that process. With that, you can probably reduce 81 00:04:12,240 --> 00:04:14,960 Speaker 3: the emissions by about seventy percent or so, but you 82 00:04:15,000 --> 00:04:18,000 Speaker 3: still suffer from the upstream methane leakage from transporting and 83 00:04:18,040 --> 00:04:20,640 Speaker 3: extracting the gas, and carbon capture is not perfect, so 84 00:04:20,680 --> 00:04:22,919 Speaker 3: you get maybe ninety percent of the emissions on site 85 00:04:23,000 --> 00:04:25,839 Speaker 3: in best cases maybe ninety five percent. There's still residual 86 00:04:25,839 --> 00:04:29,760 Speaker 3: emissions with that, but adding carbon capture and storage is 87 00:04:30,320 --> 00:04:33,440 Speaker 3: still one of the cheapest ways of decarbonizing hydrogen today. 88 00:04:33,520 --> 00:04:35,880 Speaker 3: Let's say gray hydroen costs between one to three dollars. 89 00:04:36,200 --> 00:04:38,520 Speaker 3: Adding carbon carptron storage that will make it like four 90 00:04:38,600 --> 00:04:40,760 Speaker 3: or five maybe six dollars in the worst cases, but 91 00:04:40,839 --> 00:04:43,400 Speaker 3: really just four five dollars per kilogram. So that's one 92 00:04:43,400 --> 00:04:46,479 Speaker 3: way of decarbonizing hydrogen. The other one, and probably the 93 00:04:46,520 --> 00:04:49,479 Speaker 3: one that gets the most policy push, is so called 94 00:04:49,560 --> 00:04:52,640 Speaker 3: green hydrogen. That's a completely different way of making hydrogen. 95 00:04:52,839 --> 00:04:55,920 Speaker 3: That's where you take the hydrogen from water. So water 96 00:04:56,000 --> 00:04:58,760 Speaker 3: is H two zero, so it contains hydrogen atoms in it, 97 00:04:58,800 --> 00:05:01,960 Speaker 3: and you extract the hydrogen by splitting it using electricity 98 00:05:02,080 --> 00:05:05,320 Speaker 3: in an ideal scenario that's renewable electricity from solar and wind, 99 00:05:05,400 --> 00:05:07,919 Speaker 3: and you split the water molecule into hydrogen and oxygen, 100 00:05:08,040 --> 00:05:10,680 Speaker 3: essentially using in a machine called an electroalizer, something we 101 00:05:10,720 --> 00:05:13,080 Speaker 3: have that's been around for a long time already but 102 00:05:13,200 --> 00:05:15,839 Speaker 3: really hasn't been scaled to like one hundred megawatt gigowot 103 00:05:15,880 --> 00:05:18,280 Speaker 3: scale yet and that's where we are at today that 104 00:05:18,320 --> 00:05:19,680 Speaker 3: we're trying to do that well. 105 00:05:19,720 --> 00:05:21,839 Speaker 1: So then let's stick on the green side of things 106 00:05:21,880 --> 00:05:26,640 Speaker 1: for a moment. How heavily adopted has green hydrogen been 107 00:05:26,800 --> 00:05:28,880 Speaker 1: around the world? Like where is it popular and is 108 00:05:28,920 --> 00:05:31,960 Speaker 1: it the dominant source outside of you know this as 109 00:05:31,960 --> 00:05:34,320 Speaker 1: a feedstock hydrogen that you were talking about before, where 110 00:05:34,440 --> 00:05:37,120 Speaker 1: that's kind of a different market, But as a opportunity 111 00:05:37,160 --> 00:05:40,240 Speaker 1: for decarbonization, is green hydrogen really taking off? And where? 112 00:05:40,240 --> 00:05:42,280 Speaker 1: Because I know you recently did some analysis where you 113 00:05:42,360 --> 00:05:44,880 Speaker 1: actually looked at pretty much went all over the world 114 00:05:44,960 --> 00:05:47,279 Speaker 1: and tried to look at the different geographies and compare 115 00:05:47,320 --> 00:05:49,360 Speaker 1: them to each other. So what was the finding in. 116 00:05:49,320 --> 00:05:52,280 Speaker 3: Our latest outlook looking at low carbon hydrogen? What do 117 00:05:52,360 --> 00:05:55,680 Speaker 3: you find generally today? Green hydrogen or blue hydrogen photomatter 118 00:05:55,760 --> 00:05:58,000 Speaker 3: doesn't really exist today. Out of the hundred million tons, 119 00:05:58,080 --> 00:06:01,600 Speaker 3: maybe zero point one percent of that are from electrolysis, 120 00:06:01,760 --> 00:06:04,240 Speaker 3: And in total, if you add the blue hydrogen and 121 00:06:04,279 --> 00:06:06,360 Speaker 3: top out of thee hundred million tons, maybe half a 122 00:06:06,360 --> 00:06:09,359 Speaker 3: million ton are from both blue and green hydrogen, roughly 123 00:06:09,400 --> 00:06:11,640 Speaker 3: half and half. So blue and green hydroen are not 124 00:06:11,680 --> 00:06:14,000 Speaker 3: really a thing today, but that is about to change 125 00:06:14,040 --> 00:06:16,200 Speaker 3: over the next few years, driven by the amount of 126 00:06:16,240 --> 00:06:18,440 Speaker 3: policy that is coming across from governments, and because we 127 00:06:18,480 --> 00:06:21,159 Speaker 3: need to scale up these technologies and these fuels to 128 00:06:21,240 --> 00:06:24,040 Speaker 3: decommonize a number of sectors where electricity at loan doesn't 129 00:06:24,120 --> 00:06:26,479 Speaker 3: do the job. In our outlook, what we get to 130 00:06:26,560 --> 00:06:29,400 Speaker 3: when we looked at every single announced projects and there's 131 00:06:29,400 --> 00:06:31,320 Speaker 3: one thousand, six hundred of them that want to make 132 00:06:31,320 --> 00:06:33,960 Speaker 3: some form of low carbon hydrogen, what we found is 133 00:06:33,960 --> 00:06:36,479 Speaker 3: that the majority of them will never get built by 134 00:06:36,680 --> 00:06:40,359 Speaker 3: twenty thirty. A lot of them will likely be delayed 135 00:06:40,400 --> 00:06:43,000 Speaker 3: simply because there isn't enough policy support to support all 136 00:06:43,080 --> 00:06:43,360 Speaker 3: of them. 137 00:06:43,400 --> 00:06:44,200 Speaker 2: But where we get to. 138 00:06:44,160 --> 00:06:45,760 Speaker 3: In our outlook is from the half a million tons 139 00:06:45,800 --> 00:06:48,599 Speaker 3: of low carbon hydrogen production today to about sixteen million 140 00:06:48,680 --> 00:06:51,240 Speaker 3: tons by twenty thirty or so. That's about a thirty 141 00:06:51,400 --> 00:06:55,159 Speaker 3: x growth in supply of low carbon hydrogen versus today. 142 00:06:55,560 --> 00:06:57,359 Speaker 1: And where is that going to be? And I'm thinking 143 00:06:57,360 --> 00:06:59,760 Speaker 1: about you know, we actually featured a panel from our 144 00:06:59,839 --> 00:07:02,120 Speaker 1: New Work Summit on this show a few weeks back, 145 00:07:02,160 --> 00:07:03,840 Speaker 1: and it focused on some of the tax credits in 146 00:07:03,880 --> 00:07:06,400 Speaker 1: the US and the Inflation Reduction Act in the US 147 00:07:06,440 --> 00:07:10,040 Speaker 1: being very pro hydrogen, although there are certainly things that 148 00:07:10,080 --> 00:07:12,600 Speaker 1: these panelists were pointing out that needed to be improved 149 00:07:12,640 --> 00:07:14,880 Speaker 1: in order for the market really to take off. Is 150 00:07:14,880 --> 00:07:18,000 Speaker 1: the US really where the hydrogen on the supply side 151 00:07:18,080 --> 00:07:21,080 Speaker 1: is looking to grow or are there other markets that 152 00:07:21,160 --> 00:07:23,680 Speaker 1: maybe we're missing that have really good policy incentives. 153 00:07:24,080 --> 00:07:26,960 Speaker 3: Yeah, globally speaking, is really just three markets where there's 154 00:07:26,960 --> 00:07:29,760 Speaker 3: a strong regulation for hydrogen uptic where we see uptakes. 155 00:07:29,760 --> 00:07:32,679 Speaker 3: So over eighty percent of the supply until twenty thirty 156 00:07:32,840 --> 00:07:35,760 Speaker 3: comes from the US, Europe and China, none of the 157 00:07:35,760 --> 00:07:37,760 Speaker 3: other markets where there's lots of projects announced but not 158 00:07:37,840 --> 00:07:40,760 Speaker 3: enough policy support built many hydroen projects. In our view, 159 00:07:40,880 --> 00:07:44,200 Speaker 3: the US is the single largest producer of low carbon 160 00:07:44,280 --> 00:07:47,920 Speaker 3: hydrogen in our outlook, meaning it's about thirty eight percent 161 00:07:47,960 --> 00:07:50,480 Speaker 3: of global supply. Let's say forty percent of global supply 162 00:07:50,760 --> 00:07:53,160 Speaker 3: just comes from the US, and that's really driven by 163 00:07:53,360 --> 00:07:56,720 Speaker 3: big blue hydrogen projects which are quite advanced already. 164 00:07:56,920 --> 00:07:59,080 Speaker 1: And is it the reason that it's so much blue 165 00:07:59,160 --> 00:08:01,360 Speaker 1: hydrogen the fact that the US is really a big 166 00:08:01,360 --> 00:08:04,520 Speaker 1: producer and exporter of natural gas and is still actively 167 00:08:04,520 --> 00:08:07,240 Speaker 1: building that renewable capacity or are there other things that 168 00:08:07,320 --> 00:08:08,840 Speaker 1: have to do with the economics of it that they're 169 00:08:08,880 --> 00:08:09,400 Speaker 1: focused on. 170 00:08:09,640 --> 00:08:11,640 Speaker 3: I mean, natural gas is one of the main reasons. 171 00:08:11,800 --> 00:08:14,560 Speaker 3: The US is one of the cheapest places to extract 172 00:08:14,640 --> 00:08:17,720 Speaker 3: natural gas. It's today probably about two dollars per mmbit 173 00:08:17,760 --> 00:08:20,080 Speaker 3: to you, whereas the landed cost of natural gas in 174 00:08:20,120 --> 00:08:22,360 Speaker 3: Europe is probably more like ten dollars permmb to you. 175 00:08:22,520 --> 00:08:26,280 Speaker 3: So making blue hydrogen in the US is relatively cheap 176 00:08:26,360 --> 00:08:28,720 Speaker 3: compared to everywhere else in the world. The other part 177 00:08:28,800 --> 00:08:31,160 Speaker 3: is that there's lots of companies which are already in 178 00:08:31,160 --> 00:08:33,400 Speaker 3: the oil and gas space or in the fertilizer space, 179 00:08:33,520 --> 00:08:35,760 Speaker 3: which know how to handle natural gas and use it 180 00:08:35,800 --> 00:08:38,840 Speaker 3: already to do fertilizer, to do other products from it, 181 00:08:38,960 --> 00:08:42,840 Speaker 3: or hydrogen and some of these cases. So there's some 182 00:08:42,920 --> 00:08:46,280 Speaker 3: familiarity with building big blue hydrogen project as well, because 183 00:08:46,280 --> 00:08:48,240 Speaker 3: it's doing the same thing that we've already done before 184 00:08:48,280 --> 00:08:50,160 Speaker 3: and just adding common capture and storage to it. So 185 00:08:50,440 --> 00:08:52,960 Speaker 3: it's a bit more mature in that sense and cheaper. 186 00:08:53,040 --> 00:08:55,240 Speaker 3: So that's why we see a lot of focus on 187 00:08:55,240 --> 00:08:57,720 Speaker 3: it in the US. The other big part is really 188 00:08:57,760 --> 00:09:00,719 Speaker 3: tax credits, and as you mentioned, tax is really what's 189 00:09:00,760 --> 00:09:03,679 Speaker 3: driving uptake in the US. So what blue hydrogen will 190 00:09:03,720 --> 00:09:06,240 Speaker 3: benefit from, we think, is the carbon capture and storage 191 00:09:06,480 --> 00:09:08,880 Speaker 3: tax for it forty five q which if you store 192 00:09:08,920 --> 00:09:11,640 Speaker 3: the carbon after you've captured it, gives you a tax 193 00:09:11,640 --> 00:09:14,240 Speaker 3: strait of eighty five dollars per ton over twelve years. 194 00:09:14,280 --> 00:09:17,880 Speaker 3: With that, blue hydrogen is roughly competitive with gray hydrogen, 195 00:09:18,160 --> 00:09:20,520 Speaker 3: especially if you think about exporting that blue hydrogen in 196 00:09:20,559 --> 00:09:22,760 Speaker 3: some form to Europe, where natural gas prices are much 197 00:09:22,800 --> 00:09:24,320 Speaker 3: higher and energy is just more expensive. 198 00:09:24,679 --> 00:09:27,720 Speaker 1: So tell me about China, because we talk about China 199 00:09:27,800 --> 00:09:29,760 Speaker 1: a lot on this show, and it's driven down the 200 00:09:29,760 --> 00:09:32,200 Speaker 1: cost of so many different things in the transition from 201 00:09:32,320 --> 00:09:35,760 Speaker 1: solar to batteries. What role does China play in hydrogen 202 00:09:35,800 --> 00:09:37,959 Speaker 1: given that you just said that on the supply side, 203 00:09:38,000 --> 00:09:40,640 Speaker 1: the US is over eighty percent of that market. 204 00:09:40,920 --> 00:09:44,240 Speaker 3: Much like in many other clean tech sectors, China has 205 00:09:44,240 --> 00:09:48,600 Speaker 3: been absolutely dominant in the green hydro and slash electrolyizer 206 00:09:48,640 --> 00:09:51,720 Speaker 3: space as well. For the past few years, most electoralizers 207 00:09:51,720 --> 00:09:54,800 Speaker 3: were installed in China, and seventy percent of the manufacturing 208 00:09:54,800 --> 00:09:56,800 Speaker 3: capacity for the machines that you need to make green 209 00:09:56,840 --> 00:09:59,720 Speaker 3: hydrogen is also based in China. So China is trying 210 00:09:59,760 --> 00:10:02,600 Speaker 3: to absolutely dominate the manufacturing space as they are in 211 00:10:02,679 --> 00:10:04,079 Speaker 3: solar and batteries and so on. 212 00:10:04,280 --> 00:10:06,160 Speaker 1: So they have a really important role to play in 213 00:10:06,200 --> 00:10:08,719 Speaker 1: making the equipment, but maybe not necessarily setting up the 214 00:10:08,720 --> 00:10:11,520 Speaker 1: projects themselves that are actually doing the hydrogen projects the 215 00:10:11,520 --> 00:10:12,240 Speaker 1: way the US is. 216 00:10:12,480 --> 00:10:14,400 Speaker 3: That's a good question. I think that's something that we're 217 00:10:14,440 --> 00:10:17,120 Speaker 3: still somewhat uncertain about. I mean, China is already today 218 00:10:17,120 --> 00:10:20,440 Speaker 3: the largest user of hydrogen because just because it's populous, 219 00:10:20,480 --> 00:10:22,040 Speaker 3: it needs a lot of fertilizer. It has a huge 220 00:10:22,040 --> 00:10:24,760 Speaker 3: refining complex uses about I think thirty million tons of 221 00:10:24,840 --> 00:10:26,760 Speaker 3: hydrogen or so that it needs to be carbonized over 222 00:10:26,800 --> 00:10:29,000 Speaker 3: time as well. So there's lots of potential lots of 223 00:10:29,000 --> 00:10:32,040 Speaker 3: domestic demand as well, and we see the largest electrolysis 224 00:10:32,120 --> 00:10:34,880 Speaker 3: projects also being deployed there. What we don't know about 225 00:10:34,960 --> 00:10:38,400 Speaker 3: China yet is what is this strategy going into twenty 226 00:10:38,480 --> 00:10:41,400 Speaker 3: thirty or so, and what is the policy. 227 00:10:41,120 --> 00:10:43,280 Speaker 2: Driving up more and more hydrogen uptake. 228 00:10:43,480 --> 00:10:45,400 Speaker 3: So over the last few years, what was driving up 229 00:10:45,440 --> 00:10:48,320 Speaker 3: these electoralizer plants of what made State On companies built 230 00:10:48,360 --> 00:10:51,559 Speaker 3: these electoralizer plants were really two reasons. Once China's carbon 231 00:10:51,559 --> 00:10:54,200 Speaker 3: neutrality target that state on companies are trying to comply with. 232 00:10:54,280 --> 00:10:57,280 Speaker 3: And the second one is that even for private companies, 233 00:10:57,320 --> 00:11:00,000 Speaker 3: it was harder and harder to get environmental permits for 234 00:11:00,000 --> 00:11:03,520 Speaker 3: aossil fuel plants of different kinds, So they built electoralizer 235 00:11:03,600 --> 00:11:07,640 Speaker 3: plants as a way of showing compliance with environmental regulation. 236 00:11:07,920 --> 00:11:11,120 Speaker 3: And we're finding it easier to get access to environmental permits. 237 00:11:11,160 --> 00:11:13,560 Speaker 3: And in some provinces there were diversification roles. So if 238 00:11:13,600 --> 00:11:15,960 Speaker 3: you wanted to build let's say, Gigglewa scale solar farm, 239 00:11:16,000 --> 00:11:17,920 Speaker 3: you needed to add something else to it, let's say 240 00:11:17,960 --> 00:11:21,280 Speaker 3: battery storage, electoralizers or so on. Electorizers are relatively cheap 241 00:11:21,280 --> 00:11:23,880 Speaker 3: in China, so a lot of Chinese products ended up 242 00:11:23,880 --> 00:11:25,520 Speaker 3: building very large ones for us. 243 00:11:25,559 --> 00:11:27,280 Speaker 2: The question is will that continue? 244 00:11:27,320 --> 00:11:29,520 Speaker 3: Right Like, even operating and electrillized in China today is 245 00:11:29,840 --> 00:11:32,120 Speaker 3: not very economic. Companies would rather not do it if 246 00:11:32,120 --> 00:11:34,800 Speaker 3: they had an option not to. So why China in 247 00:11:34,840 --> 00:11:37,480 Speaker 3: our outlook, and coming back to our outlook is only 248 00:11:37,679 --> 00:11:40,320 Speaker 3: the third in terms of low carbon hydron production is 249 00:11:40,360 --> 00:11:42,640 Speaker 3: the fact that we don't know what the policy direction is. 250 00:11:42,760 --> 00:11:44,920 Speaker 3: The thing is, what I would say is that the 251 00:11:45,080 --> 00:11:49,200 Speaker 3: Chinese electoralized environment is so nimble and fast. It only 252 00:11:49,360 --> 00:11:52,040 Speaker 3: takes about six months to deliver and electualize maybe a 253 00:11:52,080 --> 00:11:54,280 Speaker 3: year to install an electoralizer in China versus two to 254 00:11:54,320 --> 00:11:57,400 Speaker 3: three years in most Western countries. Slight policy changes over 255 00:11:57,400 --> 00:11:59,880 Speaker 3: the next few years, and a government target to say, actually, 256 00:12:00,160 --> 00:12:02,720 Speaker 3: we want this industry to be much bigger domestically, could 257 00:12:02,720 --> 00:12:05,959 Speaker 3: mean much more deployment in China, not just manufacturing of 258 00:12:06,000 --> 00:12:08,040 Speaker 3: the equipment, and that's something to look out for. That's 259 00:12:08,040 --> 00:12:09,720 Speaker 3: something we are not sure about either, and. 260 00:12:09,800 --> 00:12:12,400 Speaker 1: Could really change the game very quickly in a matter 261 00:12:12,440 --> 00:12:15,000 Speaker 1: of just a couple of years. Talk to me about 262 00:12:15,080 --> 00:12:17,440 Speaker 1: a couple of the projects that are being worked on 263 00:12:17,520 --> 00:12:20,880 Speaker 1: right now, because you would reference that of the twenty 264 00:12:20,920 --> 00:12:24,040 Speaker 1: thirty targets that exist to increase the amount of hydrogen production, 265 00:12:24,520 --> 00:12:27,679 Speaker 1: there aren't that many that are actually underway. But invariably 266 00:12:27,720 --> 00:12:29,800 Speaker 1: this industry is kind of still getting going. What are 267 00:12:29,800 --> 00:12:32,200 Speaker 1: the projects, where are the projects, and what are some 268 00:12:32,240 --> 00:12:33,240 Speaker 1: of the things that you're seeing. 269 00:12:33,480 --> 00:12:36,160 Speaker 3: I think what's important to understand and what really drives 270 00:12:36,160 --> 00:12:39,400 Speaker 3: our forecast is like, especially large hydrogen projects take a 271 00:12:39,480 --> 00:12:42,560 Speaker 3: long time to build. We think at least five to 272 00:12:42,640 --> 00:12:45,600 Speaker 3: six years from announcements to operations. But if you do 273 00:12:45,679 --> 00:12:48,160 Speaker 3: all the engineering studies before that, and maybe three to 274 00:12:48,160 --> 00:12:49,840 Speaker 3: four is to actually build the planned once you have 275 00:12:49,880 --> 00:12:52,520 Speaker 3: taken an investment decision, which is why that only plans 276 00:12:52,559 --> 00:12:55,400 Speaker 3: have already taken an investment decision today is the ones 277 00:12:55,440 --> 00:12:58,160 Speaker 3: that will be producing by twenty twenty seven twenty twenty eight, 278 00:12:58,240 --> 00:13:00,480 Speaker 3: So most of the capacity or supply is kind of 279 00:13:00,520 --> 00:13:03,160 Speaker 3: already baked in. And if you look at that where 280 00:13:03,240 --> 00:13:06,840 Speaker 3: those plants are again mostly in the US. The largest 281 00:13:07,000 --> 00:13:10,040 Speaker 3: low carbon hydrogen project currently in construction is from Air 282 00:13:10,040 --> 00:13:13,559 Speaker 3: Products in Louisiana that's going to produce by twenty twenty 283 00:13:13,559 --> 00:13:16,000 Speaker 3: eight about six hundred thousand tons of hydrogen, which is 284 00:13:16,040 --> 00:13:18,520 Speaker 3: absolutely huge. To give you a frame of reference, if 285 00:13:18,559 --> 00:13:21,160 Speaker 3: you did the same through electrolyzers, you would need six 286 00:13:21,240 --> 00:13:23,640 Speaker 3: gigawatts of electrolyizers just to be able to produce those 287 00:13:23,640 --> 00:13:26,960 Speaker 3: six hundredands tons of hydrogen. The world only sold or 288 00:13:27,040 --> 00:13:29,600 Speaker 3: is expected to sell four gigawats over the next year 289 00:13:29,720 --> 00:13:32,080 Speaker 3: or so, right in one year across the world. So 290 00:13:32,120 --> 00:13:34,880 Speaker 3: this project alone, which is already under construction, is producing 291 00:13:34,880 --> 00:13:37,640 Speaker 3: so much hydrogen then most projects that we've seen on 292 00:13:37,679 --> 00:13:40,439 Speaker 3: the electrolyzer side, So that's one we've seen a lot 293 00:13:40,480 --> 00:13:43,160 Speaker 3: of big ammonia producers in the US also trying to 294 00:13:43,200 --> 00:13:46,760 Speaker 3: retrofit their existing ammonia plants so to produce blue ammonia, 295 00:13:46,760 --> 00:13:48,880 Speaker 3: which is hydrogen where you capture the emissions and they 296 00:13:48,880 --> 00:13:51,319 Speaker 3: make ammonia from it. CF Industries is building one and 297 00:13:51,360 --> 00:13:53,840 Speaker 3: it's at it's Donaldsonville Complex. And then there is a 298 00:13:53,840 --> 00:13:55,800 Speaker 3: few others on the green hydrogen side. I think the 299 00:13:55,840 --> 00:13:58,160 Speaker 3: one that is worth mentioning the world's largest green hydron 300 00:13:58,160 --> 00:14:01,480 Speaker 3: project currently under construction is the project in Saudi Arabia 301 00:14:01,520 --> 00:14:03,800 Speaker 3: two point two gig or what's the electrolyzers producing about 302 00:14:03,800 --> 00:14:06,040 Speaker 3: two hundred thousand tons of green hydrogen. 303 00:14:06,280 --> 00:14:10,040 Speaker 1: Now, how about trade? Is the hydrogen trade industry really 304 00:14:10,040 --> 00:14:13,120 Speaker 1: starting to show up as we look at these sources 305 00:14:13,120 --> 00:14:16,040 Speaker 1: of supply and then where future demand could potentially be. 306 00:14:16,320 --> 00:14:18,480 Speaker 1: And when I think about hydrogen, I think about trade. 307 00:14:18,480 --> 00:14:20,320 Speaker 1: You know, when we brought it up on this show, 308 00:14:20,480 --> 00:14:24,040 Speaker 1: we've talked often about converting the hydrogen into something else, 309 00:14:24,080 --> 00:14:26,480 Speaker 1: so changing it into ammonia and then converting it back 310 00:14:26,480 --> 00:14:28,440 Speaker 1: to hydrogen when it gets through to the other side 311 00:14:28,520 --> 00:14:30,960 Speaker 1: and moving on ships. But almost like you know, transformers, 312 00:14:31,040 --> 00:14:33,360 Speaker 1: robots in disguise. It's got to change shape each time 313 00:14:33,360 --> 00:14:35,160 Speaker 1: in order to make it to where it needs to be. 314 00:14:35,480 --> 00:14:38,600 Speaker 1: Are we still seeing a lot of discussion around the 315 00:14:38,640 --> 00:14:42,640 Speaker 1: potential to convert hydrogen into various different things in order 316 00:14:42,640 --> 00:14:44,320 Speaker 1: to get it where it needs to go, or are 317 00:14:44,600 --> 00:14:48,560 Speaker 1: countries starting to increasingly think about actually having the demand 318 00:14:48,920 --> 00:14:51,560 Speaker 1: near the supply, or actually the supply near the demand 319 00:14:51,640 --> 00:14:53,200 Speaker 1: would be the direction you would do that in. 320 00:14:54,080 --> 00:14:55,760 Speaker 3: I think there's a bit a bit of a disparity 321 00:14:55,760 --> 00:14:58,360 Speaker 3: between like what countries want to do and what's actually 322 00:14:58,400 --> 00:15:01,800 Speaker 3: happening on the ground. If you look at country strategies, 323 00:15:02,000 --> 00:15:05,720 Speaker 3: particularly a lot in Europe. Germany is a big one there, 324 00:15:05,760 --> 00:15:08,400 Speaker 3: but also Japan and Korea are looking to import vast 325 00:15:08,480 --> 00:15:12,080 Speaker 3: quantities of hydrogen in various forms to meet their demand. 326 00:15:12,280 --> 00:15:14,600 Speaker 3: What's really happening on the ground today is that most 327 00:15:14,600 --> 00:15:17,080 Speaker 3: early projects are co locating with demand. Just because the 328 00:15:17,080 --> 00:15:19,640 Speaker 3: infrastructure are transported isn't really there. If you're trying to 329 00:15:19,680 --> 00:15:21,560 Speaker 3: transport it overseas, as you said, you need to convert 330 00:15:21,560 --> 00:15:24,240 Speaker 3: it to something else to make it cheap. That's usually ammonia, 331 00:15:24,280 --> 00:15:26,440 Speaker 3: because we already know how to transport ammonia. If you 332 00:15:26,520 --> 00:15:28,240 Speaker 3: need hydrogen at the end of it, you need to 333 00:15:28,240 --> 00:15:31,760 Speaker 3: crack back ammonia to hydrogen. That's a process that's still 334 00:15:31,760 --> 00:15:34,440 Speaker 3: at demonstration scale and a bit expensive, so we haven't 335 00:15:34,440 --> 00:15:36,320 Speaker 3: really seen projects go ahead off the back of that. 336 00:15:36,600 --> 00:15:37,320 Speaker 2: But in our. 337 00:15:37,240 --> 00:15:38,920 Speaker 3: Outlook, what we see is that out of the sixteen 338 00:15:38,960 --> 00:15:43,400 Speaker 3: million tons, about five million tons of supply are export oriented, 339 00:15:43,480 --> 00:15:46,120 Speaker 3: so some share of that will be exported. That is 340 00:15:46,160 --> 00:15:47,840 Speaker 3: not to say all five million will be because we 341 00:15:47,840 --> 00:15:49,920 Speaker 3: don't see a market for five million tons of trade, 342 00:15:49,960 --> 00:15:52,200 Speaker 3: but five million tons comes from projects that are looking 343 00:15:52,200 --> 00:15:54,680 Speaker 3: to export as well. How much that maybe that's two 344 00:15:54,720 --> 00:15:56,640 Speaker 3: million tons three million tons of real exports in the 345 00:15:56,640 --> 00:15:59,280 Speaker 3: form of ammonia, and most of these projects are targeting 346 00:15:59,280 --> 00:16:02,480 Speaker 3: ammonia's exps. So that's where we see really the traded market. 347 00:16:02,480 --> 00:16:05,040 Speaker 3: What's interesting within that is really just going to three places, 348 00:16:05,040 --> 00:16:07,920 Speaker 3: as I said, Europe, Japan, and Korea. Japan and Korea 349 00:16:08,000 --> 00:16:11,120 Speaker 3: are taking ammonia to put it into copower plants to 350 00:16:11,160 --> 00:16:13,520 Speaker 3: co fired it and reduce the emissions of these plants 351 00:16:13,560 --> 00:16:16,000 Speaker 3: that way. It's a very expensive process, but Japan and 352 00:16:16,040 --> 00:16:18,000 Speaker 3: Korea are willing to subsidize that, which is why we 353 00:16:18,040 --> 00:16:20,240 Speaker 3: see a lot of demand for it, particularly for blue 354 00:16:20,240 --> 00:16:23,120 Speaker 3: ammonia because it's cheaper, so they just want the cheapest 355 00:16:23,120 --> 00:16:26,200 Speaker 3: low carbon molecule. Europe is a lot more focused on 356 00:16:26,520 --> 00:16:30,080 Speaker 3: green hydrogen or green ammonia imports, and what we're seeing 357 00:16:30,080 --> 00:16:32,480 Speaker 3: within that is that we see some demand from Europe 358 00:16:32,520 --> 00:16:34,160 Speaker 3: as well to have these imports. 359 00:16:34,240 --> 00:16:38,840 Speaker 2: But what I think is. 360 00:16:37,000 --> 00:16:39,400 Speaker 3: A big conclusion from our report is that when we 361 00:16:39,480 --> 00:16:44,240 Speaker 3: looked at subsidized supply coming online in Europe, and making 362 00:16:44,280 --> 00:16:47,000 Speaker 3: hydroen in Europe is expensive, so subsidies really drive a 363 00:16:47,040 --> 00:16:48,800 Speaker 3: lot of the build out in Europe out the next 364 00:16:48,840 --> 00:16:51,000 Speaker 3: few years. What we find is that there's actually lots 365 00:16:51,000 --> 00:16:54,120 Speaker 3: of supply coming online, particularly the Nordics in Iberia, and 366 00:16:54,160 --> 00:16:57,480 Speaker 3: if there was just inter European trade, so think pipelines 367 00:16:57,520 --> 00:17:00,600 Speaker 3: from Spain to Germany, that would be enough apply to 368 00:17:00,720 --> 00:17:04,600 Speaker 3: meet most of the existing demand in markets where there's 369 00:17:04,600 --> 00:17:09,960 Speaker 3: a deficit and hydrogen for domestic production. That's Germany, Poland's, 370 00:17:10,080 --> 00:17:12,719 Speaker 3: Eastern Europe in general. So the question is will these 371 00:17:12,760 --> 00:17:15,800 Speaker 3: pipelines be available, and if there are, then a Spain 372 00:17:16,040 --> 00:17:19,159 Speaker 3: or a Nordic country can meet that demand. If it's not, 373 00:17:19,280 --> 00:17:21,360 Speaker 3: a Germany will rely more on overseas imports. 374 00:17:21,840 --> 00:17:24,600 Speaker 1: So these projects, as you've established, take a long time 375 00:17:24,760 --> 00:17:27,320 Speaker 1: to get off the ground on the production side, and 376 00:17:27,560 --> 00:17:31,360 Speaker 1: it's very clear that the policy environment and tax incentives 377 00:17:31,359 --> 00:17:34,920 Speaker 1: and whatever shape it takes is extraordinarily important in order 378 00:17:34,960 --> 00:17:38,680 Speaker 1: for projects to succeed. So the companies engaging in these projects, 379 00:17:38,720 --> 00:17:42,480 Speaker 1: are they essentially raising debt in order to get these 380 00:17:42,520 --> 00:17:45,119 Speaker 1: projects done? And I guess really the question at the 381 00:17:45,119 --> 00:17:48,399 Speaker 1: heart of it is who is financing these given the 382 00:17:48,480 --> 00:17:52,119 Speaker 1: long timelines, and really what part of the community of 383 00:17:52,119 --> 00:17:55,520 Speaker 1: investors that invariably have to be involved have the tolerance 384 00:17:55,600 --> 00:17:59,400 Speaker 1: for something that takes that long to actually see through fruition. 385 00:18:00,000 --> 00:18:02,080 Speaker 3: I think it really depends on the size of the project. 386 00:18:02,200 --> 00:18:04,480 Speaker 3: If it's a small scale project, and we here we're 387 00:18:04,480 --> 00:18:08,640 Speaker 3: talking about ten megawats, twenty megawats or less, electoralizer size, 388 00:18:08,720 --> 00:18:11,960 Speaker 3: large companies can afford to finances of their balance sheet 389 00:18:11,960 --> 00:18:13,960 Speaker 3: without needing to raise external financing at all. 390 00:18:14,080 --> 00:18:16,160 Speaker 1: So this is why we see a lot of companies 391 00:18:16,160 --> 00:18:18,040 Speaker 1: in the energy space, so we're actually getting into this 392 00:18:18,119 --> 00:18:20,439 Speaker 1: and this just becomes an arm of their business that 393 00:18:20,480 --> 00:18:21,639 Speaker 1: they're then looking into. 394 00:18:21,960 --> 00:18:25,240 Speaker 3: Yeah, but once the scale really exceeds a few hundred 395 00:18:25,200 --> 00:18:28,320 Speaker 3: megawats or a gigawad or so even large companies don't 396 00:18:28,320 --> 00:18:30,600 Speaker 3: want to have that on the balance sheet, and obviously 397 00:18:30,680 --> 00:18:32,919 Speaker 3: raising external that will be cheaper in terms of the 398 00:18:32,960 --> 00:18:35,119 Speaker 3: financing costs of that project. So if you look at 399 00:18:35,119 --> 00:18:38,160 Speaker 3: the largest projects, these are typical project finance deals, right, 400 00:18:38,280 --> 00:18:41,080 Speaker 3: sixty seventy percent of the capital that you need is 401 00:18:41,080 --> 00:18:44,040 Speaker 3: is debt from various banks and the rest is equity 402 00:18:44,080 --> 00:18:47,200 Speaker 3: from the company involved and any other shareholder in the project. 403 00:18:47,359 --> 00:18:50,040 Speaker 3: What these banks need to finance these deals, because these 404 00:18:50,040 --> 00:18:53,000 Speaker 3: are first of a kind project is long term off take. 405 00:18:53,040 --> 00:18:55,520 Speaker 3: So a buyer who's willing to buy the hydrogen or 406 00:18:55,520 --> 00:18:58,880 Speaker 3: ammonia for like ten, fifteen, maybe even twenty years at 407 00:18:58,920 --> 00:19:02,120 Speaker 3: a certain price with some variable range around that. Without that, 408 00:19:02,640 --> 00:19:04,639 Speaker 3: very few banks are willing to finance it. So if 409 00:19:04,680 --> 00:19:07,200 Speaker 3: you look at for example, Neon, that's eight and a 410 00:19:07,240 --> 00:19:10,080 Speaker 3: half billion dollars in capex, So that's a huge capital outly. 411 00:19:10,280 --> 00:19:12,760 Speaker 3: I believe about six billion out of that comes from 412 00:19:12,920 --> 00:19:14,240 Speaker 3: debt from external banks. 413 00:19:14,560 --> 00:19:17,159 Speaker 1: And are these projects difficult to get financed or the 414 00:19:17,160 --> 00:19:20,199 Speaker 1: banks essentially kind of falling all over themselves and fighting 415 00:19:20,200 --> 00:19:22,640 Speaker 1: off each other to actually get involved because there are 416 00:19:22,920 --> 00:19:25,040 Speaker 1: you know. I think about green bonds, there was a 417 00:19:25,400 --> 00:19:29,639 Speaker 1: point when the supply certainly did not meet the demand 418 00:19:29,680 --> 00:19:32,920 Speaker 1: for green bonds. Where do these hydrogen projects actually fall 419 00:19:32,960 --> 00:19:33,919 Speaker 1: in that spectrum? 420 00:19:34,040 --> 00:19:36,880 Speaker 3: I would say that again depends. Most of the projects 421 00:19:36,880 --> 00:19:40,080 Speaker 3: are struggling to secure an off taker, so no one 422 00:19:40,119 --> 00:19:42,359 Speaker 3: wants to even touch that in terms of financing because 423 00:19:42,359 --> 00:19:44,800 Speaker 3: it's risky, right, new technology. We don't know how that 424 00:19:44,880 --> 00:19:47,919 Speaker 3: scales and how that works. No guaranteed offtake or buyers 425 00:19:48,000 --> 00:19:50,000 Speaker 3: or the revenue isn't guaranteed, so no one wants to 426 00:19:50,000 --> 00:19:52,520 Speaker 3: finance that type of project. And the vast majority today 427 00:19:52,560 --> 00:19:54,920 Speaker 3: I think twelve percent of the supply until twenty thirty 428 00:19:54,960 --> 00:19:56,480 Speaker 3: we think has identified an off taker. 429 00:19:56,520 --> 00:19:56,800 Speaker 2: Today. 430 00:19:56,840 --> 00:19:58,720 Speaker 3: Out of that ten percent or so is binding. So 431 00:19:58,800 --> 00:20:02,359 Speaker 3: one percent of supply announced until twenty thirty has a 432 00:20:02,359 --> 00:20:04,560 Speaker 3: binding off take behind it. But I think if you 433 00:20:04,600 --> 00:20:07,000 Speaker 3: are within that one percent to have a binding off 434 00:20:07,040 --> 00:20:09,680 Speaker 3: take over ten years, fifteen years or so. What we're 435 00:20:09,720 --> 00:20:12,719 Speaker 3: seeing in the first large scale projects, particularly if they 436 00:20:12,720 --> 00:20:16,760 Speaker 3: have government backing on the financing side, which is credit guarantees, 437 00:20:17,240 --> 00:20:20,280 Speaker 3: cheaper loans from governments, and in some ways banks are 438 00:20:20,320 --> 00:20:22,520 Speaker 3: actually trying to compete to be able to finance that 439 00:20:22,760 --> 00:20:26,320 Speaker 3: neon was oversubscribed. Hay Shreulgreen Steel, which was a European 440 00:20:26,359 --> 00:20:29,199 Speaker 3: example for a hydrogen to steal project over subscribed in 441 00:20:29,280 --> 00:20:31,640 Speaker 3: terms of lending, and the margins that these lenders charge, 442 00:20:31,640 --> 00:20:34,359 Speaker 3: which is a reflection of the risk that they're looking 443 00:20:34,359 --> 00:20:36,520 Speaker 3: to take, is relatively small. So when you have all 444 00:20:36,560 --> 00:20:38,920 Speaker 3: the elements in place, which is particularly a binding off 445 00:20:38,920 --> 00:20:41,280 Speaker 3: take long term off take, and the revenue is secured, 446 00:20:41,400 --> 00:20:43,920 Speaker 3: this becomes very competitive. When you don't, which is true 447 00:20:43,960 --> 00:20:46,760 Speaker 3: for most projects, then no one really wants to finance it. 448 00:20:47,080 --> 00:20:49,080 Speaker 1: So Addie, one of the things I think is probably 449 00:20:49,080 --> 00:20:51,199 Speaker 1: really fun about looking at this space is that it's 450 00:20:51,240 --> 00:20:53,800 Speaker 1: actively evolving, right, There's so much to keep track of 451 00:20:53,840 --> 00:20:55,520 Speaker 1: and a lot of movement, but at the same time 452 00:20:55,960 --> 00:20:58,560 Speaker 1: really difficult to then make a forecast and to think 453 00:20:58,560 --> 00:21:00,640 Speaker 1: about the future in any sort of and great ways. 454 00:21:00,680 --> 00:21:03,560 Speaker 1: So how confident are you in your look into the 455 00:21:03,600 --> 00:21:06,080 Speaker 1: future and some of the forecasts that you're putting forward. 456 00:21:06,359 --> 00:21:09,280 Speaker 3: Yeah, I mean, as they say, all forecasts are wrong, 457 00:21:09,320 --> 00:21:12,040 Speaker 3: it's just about how wrong you are and how confident 458 00:21:12,040 --> 00:21:14,159 Speaker 3: you are in the results. What I would say is like, 459 00:21:14,520 --> 00:21:16,479 Speaker 3: this is the first time we're ever doing a bottom 460 00:21:16,560 --> 00:21:20,000 Speaker 3: up forecast for low common hydrogen. It doesn't really exist 461 00:21:20,040 --> 00:21:22,919 Speaker 3: out there, simply because it's such a new market with 462 00:21:23,320 --> 00:21:26,400 Speaker 3: relatively a big lack of track record to say like, Okay, 463 00:21:26,400 --> 00:21:28,200 Speaker 3: this market evolves this way. That's why we can say 464 00:21:28,200 --> 00:21:30,840 Speaker 3: this confidently. What we have done is like, because we 465 00:21:30,920 --> 00:21:33,240 Speaker 3: looked at every single announced project and decided like about 466 00:21:33,240 --> 00:21:36,399 Speaker 3: five hundred of them are somewhat advanced, we have somewhat 467 00:21:36,400 --> 00:21:39,120 Speaker 3: of a confidence that at least like these advanced projects 468 00:21:39,160 --> 00:21:41,920 Speaker 3: are likely to happen over the next few years or so. 469 00:21:41,920 --> 00:21:44,399 Speaker 3: So out of the sixteen million tons I mentioned, about 470 00:21:44,440 --> 00:21:47,880 Speaker 3: ten million tons are at some form of advanced stage. 471 00:21:47,960 --> 00:21:50,200 Speaker 3: So really what I would say is like our forecast 472 00:21:50,280 --> 00:21:52,720 Speaker 3: is somewhere between ten to sixteen million tons. If it's 473 00:21:52,760 --> 00:21:55,040 Speaker 3: within that range, I think if it ends up being 474 00:21:55,040 --> 00:21:57,480 Speaker 3: in that range, I think that's pretty good from today's perspective. 475 00:21:57,600 --> 00:21:59,560 Speaker 3: So there is still a lot of variability. What I 476 00:21:59,560 --> 00:22:02,200 Speaker 3: would say biggest uncertainties are China. China could build a 477 00:22:02,240 --> 00:22:04,399 Speaker 3: lot more than what we're seeing within our outlook, and 478 00:22:04,440 --> 00:22:07,560 Speaker 3: then that's a lot of the policy that has been announced. 479 00:22:07,640 --> 00:22:11,080 Speaker 3: Auctions across Europe for electualized deployment don't happen or don't 480 00:22:11,080 --> 00:22:14,720 Speaker 3: happen on time. That could also delay, particularly the policy 481 00:22:14,800 --> 00:22:17,600 Speaker 3: driven part of our outlook. Right, maybe if I break 482 00:22:17,640 --> 00:22:20,800 Speaker 3: it down, the sixteen million tons breaks into about two 483 00:22:20,840 --> 00:22:23,040 Speaker 3: point seven million tons of projects that have already taken 484 00:22:23,080 --> 00:22:25,080 Speaker 3: a final investment decision or already operation. 485 00:22:25,320 --> 00:22:26,680 Speaker 2: That's pretty sure to happen. 486 00:22:26,760 --> 00:22:29,720 Speaker 3: Right, you really have to have a big change for 487 00:22:29,840 --> 00:22:32,960 Speaker 3: these projects to not come online. Then another as I said, 488 00:22:33,000 --> 00:22:35,639 Speaker 3: seven eight million tons or so are in advanced planning, 489 00:22:35,680 --> 00:22:37,879 Speaker 3: so they are in discussions with an off taker. They 490 00:22:37,920 --> 00:22:40,040 Speaker 3: have already done all the engineering studies that you need 491 00:22:40,119 --> 00:22:41,800 Speaker 3: to do to be able to take an FID. All 492 00:22:41,840 --> 00:22:43,320 Speaker 3: they need to do, I means still a big step 493 00:22:43,440 --> 00:22:45,560 Speaker 3: is to raise financing for these projects and then take 494 00:22:45,600 --> 00:22:48,240 Speaker 3: this final investment decision. As long as the policy environment 495 00:22:48,320 --> 00:22:50,760 Speaker 3: is there and as long as they have a project 496 00:22:50,760 --> 00:22:53,280 Speaker 3: that is solid, then these are likely to happen. And 497 00:22:53,280 --> 00:22:55,199 Speaker 3: then there's another six million tons or so that are 498 00:22:55,240 --> 00:22:58,080 Speaker 3: still at early stages but could happen if these auctions 499 00:22:58,119 --> 00:23:01,280 Speaker 3: in Europe, go aheads and other side obsoity programs come 500 00:23:01,480 --> 00:23:02,880 Speaker 3: to fruition as they are announced. 501 00:23:03,160 --> 00:23:05,959 Speaker 1: Given the role that the US Inflation Reduction Act plays 502 00:23:06,000 --> 00:23:08,199 Speaker 1: in the supply side. How closely are you watching the 503 00:23:08,280 --> 00:23:09,040 Speaker 1: US elections. 504 00:23:09,480 --> 00:23:12,399 Speaker 3: We are watching the elections. The good thing for the 505 00:23:12,480 --> 00:23:16,960 Speaker 3: hydrogen industry is that the hydrogen tax credit as announced 506 00:23:16,960 --> 00:23:20,520 Speaker 3: has bipartisan support, So no matter what way it swings, 507 00:23:20,720 --> 00:23:23,360 Speaker 3: I would say, from today's perspective, at least I would 508 00:23:23,359 --> 00:23:26,119 Speaker 3: think that the hydrogen tax credit would stay as is. 509 00:23:26,359 --> 00:23:28,760 Speaker 3: I think where the biggest changes could happen is in 510 00:23:28,800 --> 00:23:31,199 Speaker 3: the implementation of the tax credits. So I think you 511 00:23:31,240 --> 00:23:34,240 Speaker 3: mentioned it before. There's still lots of discussion around who 512 00:23:34,240 --> 00:23:36,680 Speaker 3: can access the tax credit and how the project needs 513 00:23:36,680 --> 00:23:39,400 Speaker 3: to be designed from an emissions perspective to access these 514 00:23:39,440 --> 00:23:42,000 Speaker 3: tax credits. And this discussion has been going on since 515 00:23:42,040 --> 00:23:44,320 Speaker 3: the last two years in the US around the forty 516 00:23:44,320 --> 00:23:46,439 Speaker 3: five V tax credit. We still don't have clarity and 517 00:23:46,440 --> 00:23:49,080 Speaker 3: that's holding back projects. So no green hydroen project wants 518 00:23:49,080 --> 00:23:51,719 Speaker 3: to take investment decision today without having clarity and how 519 00:23:51,720 --> 00:23:54,200 Speaker 3: they can access these crucial track tax credits, and that 520 00:23:54,200 --> 00:23:55,960 Speaker 3: we're seeing that in our outlook. A lot of projects 521 00:23:55,960 --> 00:23:57,840 Speaker 3: are getting delayed because of that. So what you first 522 00:23:57,840 --> 00:24:00,399 Speaker 3: need is clarity, and like once that happens, that hopefully 523 00:24:00,440 --> 00:24:02,359 Speaker 3: happens over the next few months or so, you'll see 524 00:24:02,440 --> 00:24:05,160 Speaker 3: decisions being made. I think the two things that could 525 00:24:05,240 --> 00:24:07,719 Speaker 3: change what will happen to the US is after the election, 526 00:24:07,840 --> 00:24:09,960 Speaker 3: any change to the tax credit. There's this thing called 527 00:24:10,000 --> 00:24:12,399 Speaker 3: the Congressional Review Act that, like any law that has 528 00:24:12,440 --> 00:24:15,760 Speaker 3: passed quite late towards like a change in the Congress, 529 00:24:15,840 --> 00:24:18,000 Speaker 3: can be reviewed and changed as well. That also creates 530 00:24:18,080 --> 00:24:20,920 Speaker 3: uncertainty for investors. So all of those could still change 531 00:24:20,920 --> 00:24:23,080 Speaker 3: your outlook for the US, But as of now, we're 532 00:24:23,080 --> 00:24:26,119 Speaker 3: confident that the HydroD tax credit at least stays in place. 533 00:24:26,680 --> 00:24:29,760 Speaker 1: Tell me a bit about targets and whether or not 534 00:24:29,840 --> 00:24:32,600 Speaker 1: that is something that is really driving this space forward, 535 00:24:32,640 --> 00:24:35,679 Speaker 1: And if countries, in addition to creating the different policy 536 00:24:35,760 --> 00:24:38,920 Speaker 1: environments that are actually seeing hydrogen forward, are they also 537 00:24:38,960 --> 00:24:42,320 Speaker 1: setting targets that are committing outwardly to the rest of 538 00:24:42,359 --> 00:24:45,040 Speaker 1: the world their level of commitment to this industry as 539 00:24:45,160 --> 00:24:46,960 Speaker 1: a source of decarbonization. 540 00:24:47,520 --> 00:24:49,960 Speaker 3: Yeah, pretty much every major economy in the world has 541 00:24:50,040 --> 00:24:53,280 Speaker 3: now set out a hydrogen strategy. Within that they have 542 00:24:53,480 --> 00:24:56,119 Speaker 3: a target for twenty thirty, twenty forty, twenty fifty or so. 543 00:24:56,320 --> 00:25:00,280 Speaker 3: If you aggregate those targets governments across the world want 544 00:25:00,320 --> 00:25:03,440 Speaker 3: to produce about thirty four million metric tons of hydrogen. 545 00:25:03,640 --> 00:25:06,000 Speaker 3: So in our outlook, what we're getting to is that 546 00:25:06,080 --> 00:25:09,359 Speaker 3: governments will miss their aggregate targets by half. Why that 547 00:25:09,440 --> 00:25:13,159 Speaker 3: really happens is one very ambitious target setting before we 548 00:25:13,320 --> 00:25:16,480 Speaker 3: really understood how quickly this industry could scale. Policy implementation 549 00:25:16,520 --> 00:25:18,639 Speaker 3: has been much slower than expected, so a lot of 550 00:25:18,680 --> 00:25:21,840 Speaker 3: these auctions and subsidies haven't come through as quickly as 551 00:25:22,000 --> 00:25:24,960 Speaker 3: initially announced. And I think some of these targets, particularly 552 00:25:25,000 --> 00:25:27,240 Speaker 3: when we look at the EU, the most recent target, 553 00:25:27,320 --> 00:25:30,200 Speaker 3: the EU wants to produce ten million tons of green 554 00:25:30,240 --> 00:25:33,480 Speaker 3: hydrogen domestically and import another ten million tons by twenty thirty. 555 00:25:33,600 --> 00:25:37,000 Speaker 3: Those were set in response of the Russian invasion of Ukraine, 556 00:25:37,119 --> 00:25:39,960 Speaker 3: so the EU needed to react and wanted to get 557 00:25:40,040 --> 00:25:42,800 Speaker 3: rid of as much Russian natural gas as possible. Hydrogen 558 00:25:42,880 --> 00:25:44,920 Speaker 3: was one of the potential solutions, so they set the 559 00:25:45,040 --> 00:25:48,160 Speaker 3: very ambitious target for twenty thirty, which we don't think 560 00:25:48,440 --> 00:25:51,119 Speaker 3: is realistically met. So we think the EU will produce 561 00:25:51,160 --> 00:25:53,080 Speaker 3: two point four million tons a quarter of what they 562 00:25:53,119 --> 00:25:56,239 Speaker 3: actually want to make domestically. So partly the reason is 563 00:25:56,240 --> 00:25:59,199 Speaker 3: like policy implementation, but also these targets were set at 564 00:25:59,240 --> 00:26:02,480 Speaker 3: a time as response and a bit too ambitiously. Then 565 00:26:02,600 --> 00:26:04,800 Speaker 3: we think what could be realistically achieved. 566 00:26:05,040 --> 00:26:07,520 Speaker 1: So we've talked a lot about the important role of policy, 567 00:26:07,600 --> 00:26:09,359 Speaker 1: and it seems like a lot of that support is 568 00:26:09,480 --> 00:26:12,679 Speaker 1: really on the supply side, whether it's the projects themselves 569 00:26:12,720 --> 00:26:16,440 Speaker 1: to create hydrogen or even in the manufacture of electrolyizers. 570 00:26:16,480 --> 00:26:20,520 Speaker 1: But what are policy makers doing about demand? Because in 571 00:26:20,600 --> 00:26:23,760 Speaker 1: order to create an industry, you need supply and demand. 572 00:26:24,000 --> 00:26:25,160 Speaker 2: Yeah, I would say not enough. 573 00:26:25,640 --> 00:26:27,920 Speaker 3: That's something we've been highlighting over the last year or 574 00:26:28,000 --> 00:26:30,719 Speaker 3: so that we see a lot of support for supply, 575 00:26:31,000 --> 00:26:34,000 Speaker 3: so lots of subsidies to make hydrogen, but not enough 576 00:26:34,040 --> 00:26:37,960 Speaker 3: incentives for potential buyers of hydrogen to actually switch to 577 00:26:38,080 --> 00:26:40,400 Speaker 3: any form of low carbon hydrogen and sign a long 578 00:26:40,480 --> 00:26:44,040 Speaker 3: term off take that these projects need. So most governments 579 00:26:44,160 --> 00:26:47,160 Speaker 3: subsidize supply through some sort of production subsidy, whether that's 580 00:26:47,200 --> 00:26:49,560 Speaker 3: a contracts with difference program, a tax credit or something 581 00:26:49,600 --> 00:26:52,359 Speaker 3: like that, but only a few governments has se any incentives. 582 00:26:52,359 --> 00:26:56,840 Speaker 3: Most of these incentives for buyers are carbon prices quotas. 583 00:26:56,920 --> 00:27:01,080 Speaker 3: The USS established quotas for hydrogen use, same as South Korea, 584 00:27:01,119 --> 00:27:03,720 Speaker 3: but that's the only two areas in the world where 585 00:27:03,760 --> 00:27:06,439 Speaker 3: you have quotas for hydrogen UPTIC. I think more widespread 586 00:27:06,480 --> 00:27:10,239 Speaker 3: use of potentially quotas could increase uptick, particularly as if 587 00:27:10,280 --> 00:27:12,560 Speaker 3: the penalties are large for not meeting them, because what 588 00:27:12,600 --> 00:27:15,840 Speaker 3: that does it creates a willingness to pay, So buyers 589 00:27:16,119 --> 00:27:19,440 Speaker 3: are willing to pay up for green hydrogen over fossil fuels, 590 00:27:19,480 --> 00:27:21,600 Speaker 3: and that enables a lot of these projects to go ahead. 591 00:27:21,600 --> 00:27:24,120 Speaker 3: I think something we have been starting to say as well, 592 00:27:24,400 --> 00:27:27,800 Speaker 3: this industry is built by production subsidies making products a 593 00:27:27,800 --> 00:27:30,920 Speaker 3: bit cheaper than they are today, but also buyers willing 594 00:27:30,960 --> 00:27:33,439 Speaker 3: to pre pay a premium over fossil fuel, So you 595 00:27:33,520 --> 00:27:36,200 Speaker 3: need both to come together for these projects to go ahead. 596 00:27:36,480 --> 00:27:38,320 Speaker 1: We did a previous show, and I think it was 597 00:27:38,359 --> 00:27:40,720 Speaker 1: a couple of years back now, where we went through 598 00:27:40,960 --> 00:27:44,359 Speaker 1: all of the different colors for hydrogen. So I mean 599 00:27:44,400 --> 00:27:47,880 Speaker 1: it was pink and purple and then invariably the gray 600 00:27:47,880 --> 00:27:49,879 Speaker 1: and blue that we're talking about here, and lots of 601 00:27:49,920 --> 00:27:52,959 Speaker 1: other colors actually, but it does seem to be that 602 00:27:53,000 --> 00:27:56,080 Speaker 1: what we're really talking about when it comes to decarbonizing 603 00:27:56,240 --> 00:27:59,240 Speaker 1: and using hydrogen, green and blue are going to play 604 00:27:59,400 --> 00:28:03,200 Speaker 1: dominant role in the future. What does your forecast tell 605 00:28:03,240 --> 00:28:06,080 Speaker 1: you about which of the two, what's the balance going 606 00:28:06,119 --> 00:28:08,800 Speaker 1: to be? And if this was a race, who's winning. 607 00:28:09,400 --> 00:28:12,879 Speaker 3: Even though we have the US leading on low carbon 608 00:28:12,960 --> 00:28:16,240 Speaker 3: hydrogen supply and that most of that being blue hydrogen 609 00:28:16,400 --> 00:28:19,160 Speaker 3: the US and very few markets and exception to the rule, 610 00:28:19,280 --> 00:28:21,880 Speaker 3: which is across the world there is more policy support 611 00:28:21,880 --> 00:28:26,399 Speaker 3: for green hydrogen using electualizers. So globally speaking, sixty percent 612 00:28:26,400 --> 00:28:29,520 Speaker 3: of the supply until twenty thirty we think comes from electrolysis, 613 00:28:29,520 --> 00:28:32,520 Speaker 3: so called green hydrogen, and forty percent comes from blue 614 00:28:32,520 --> 00:28:34,600 Speaker 3: and that forty percent is really the US, the UK, 615 00:28:34,760 --> 00:28:37,280 Speaker 3: and some a few other smaller countries. Most of the 616 00:28:37,320 --> 00:28:39,960 Speaker 3: world produces green hydrogen in our outlook as well. 617 00:28:40,280 --> 00:28:42,640 Speaker 1: Addie, thank you very much for joining today and providing 618 00:28:42,720 --> 00:28:45,600 Speaker 1: us an update on what's happening in hydrogen. I know 619 00:28:45,680 --> 00:28:47,840 Speaker 1: all eyes are on it at the moment and really 620 00:28:47,880 --> 00:28:51,640 Speaker 1: appreciate you having a forecast because figuring out where this 621 00:28:51,680 --> 00:28:53,800 Speaker 1: is going to go with all this potential is certainly 622 00:28:53,840 --> 00:28:55,959 Speaker 1: something that a lot of people are watching closely. 623 00:28:56,400 --> 00:29:04,640 Speaker 2: Thanks Dana. 624 00:29:05,840 --> 00:29:08,960 Speaker 1: Today's episode of Switched On was produced by cam Gray 625 00:29:09,200 --> 00:29:12,840 Speaker 1: with production assistance from Kamala shelling. 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