WEBVTT - US Leads Clean Hydrogen Charge But Who Will Buy It? 0:00:00.520 --> 0:00:03.560 This is Dana Perkins and you're listening to Switched on 0:00:03.840 --> 0:00:06.320 the b and EF podcast, where we bring you some 0:00:06.480 --> 0:00:10.479 of our latest analysis on the future of the energy transition. Now, 0:00:10.560 --> 0:00:13.680 today we're going to discuss hydrogen with Aditya Basham from 0:00:13.720 --> 0:00:16.599 bnaf's hydrogen team. It's a buzzy topic, which would be 0:00:16.600 --> 0:00:20.080 why we have revisited it several times on this show. 0:00:20.320 --> 0:00:23.360 Clean hydrogen supply has the potential to increase by a 0:00:23.400 --> 0:00:26.720 factor of thirty by twenty thirty. So if you're focused 0:00:26.760 --> 0:00:30.840 on decarbonizing industry, you're probably looking at hydrogen and also 0:00:30.920 --> 0:00:33.199 thinking about how to transport it, how to store it, 0:00:33.280 --> 0:00:36.239 and also what it's going to cost. And those who 0:00:36.280 --> 0:00:39.840 are looking most intensely at the decarbonizing side of things 0:00:39.920 --> 0:00:42.800 are also looking at green hydrogen. That's the hydrogen that 0:00:42.920 --> 0:00:45.960 is made from renewable energy. It can be used to 0:00:46.000 --> 0:00:49.760 decarbonize industries with high temperature heating demand, but it is 0:00:49.880 --> 0:00:53.720 not a silver bullet. As the hydrogen industry matures, we 0:00:53.880 --> 0:00:58.120 are increasingly separating the real potential from the hype. Today 0:00:58.240 --> 0:01:00.640 we talk about some of the regional force is at play. 0:01:00.800 --> 0:01:03.920 We get into things like Europe's carbon border adjustment, mechanism, 0:01:04.160 --> 0:01:08.360 or the US's Inflation Reduction Act or China's shear Green 0:01:08.440 --> 0:01:11.760 hydrogen production capacity. We also talk about the gap that 0:01:11.760 --> 0:01:14.840 we're seeing between supply and demand as we pull from 0:01:14.920 --> 0:01:19.679 bn EF's recent supply side focused research notes, including Hydrogen 0:01:19.680 --> 0:01:23.520 Supply out Look twenty twenty four a reality check, alongside 0:01:23.520 --> 0:01:25.760 some of the regional deep dives that we've done. B 0:01:25.840 --> 0:01:28.119 andF subscribers are going to be able to find these 0:01:28.200 --> 0:01:32.240 at BNAF dot com or at BNAF on the Bloomberg terminal. Now, 0:01:32.240 --> 0:01:34.720 if you like today's show, subscribe or give us a 0:01:34.760 --> 0:01:37.480 review and that'll help other people find us. But right now, 0:01:37.560 --> 0:01:40.600 let's hear from Addie with an update on what's happening 0:01:40.760 --> 0:01:51.920 in hydrogen. Addie, thank you for coming on the show. 0:01:51.680 --> 0:01:52.960 Today, Thank you for having me. 0:01:53.080 --> 0:01:55.320 We're here to do a status update on what's happening 0:01:55.560 --> 0:01:58.800 in hydrogen and there, as always is a lot of 0:01:58.840 --> 0:02:02.640 attention and excitement about the potential of the role that 0:02:02.720 --> 0:02:05.960 hydrogen could play in the energy transition, in particular for 0:02:06.000 --> 0:02:08.280 some of the really heavy emitting spaces where this could 0:02:08.280 --> 0:02:10.960 be a real source of a near term pivot. But 0:02:11.240 --> 0:02:14.880 of course there are challenges. Nothing is perfect and hydrogen 0:02:15.120 --> 0:02:18.800 has historically been plagued with some pretty high prices, So 0:02:18.880 --> 0:02:22.600 can we actually start with where we are from a 0:02:22.680 --> 0:02:26.320 pricing standpoint with hydrogen. I realize that that then brings 0:02:26.320 --> 0:02:29.360 into question the fuel source. And we're going to focus 0:02:29.400 --> 0:02:33.040 today on kind of three colors, so gray, blue, and green. 0:02:33.240 --> 0:02:35.880 So if you can actually also explain what those colors 0:02:35.919 --> 0:02:38.600 are so that everyone listening today knows what we're talking 0:02:38.600 --> 0:02:41.240 about as we go through the hydrogen color wheel, just 0:02:41.280 --> 0:02:43.239 within those three absolutely. 0:02:43.320 --> 0:02:45.440 I mean, we've been talking about hydrogen as the fuel 0:02:45.480 --> 0:02:47.400 of the future, going back to the eighteen hundreds. The 0:02:47.480 --> 0:02:50.320 reality is it's been around for a long time, and 0:02:50.560 --> 0:02:53.480 so called gray hydrogen, so hydrogen made from fossil fuels. 0:02:53.800 --> 0:02:56.040 We use about one hundred migain tons of DOT today, 0:02:56.240 --> 0:03:00.120 mostly in refineries to crack oil into fuel products or 0:03:00.320 --> 0:03:03.160 to make ammonia, which is an essential fertilizer products. A 0:03:04.080 --> 0:03:07.400 nitrogen based fertilizers get their nitrogen from ammonia. So that's 0:03:07.440 --> 0:03:10.720 gray hydrogen, usually made from natural gas or coal. In 0:03:10.800 --> 0:03:14.400 China in particular, that is made at about one to 0:03:14.520 --> 0:03:17.640 three dollars per kilogram, depending on where natural gas prices 0:03:17.680 --> 0:03:20.440 are at. But that's roughly the range for gray hydrogen 0:03:20.480 --> 0:03:21.320 production and. 0:03:21.280 --> 0:03:24.799 On the gray hydrogen sidamen is really a necessary fuel 0:03:24.840 --> 0:03:27.560 for those industries, so it's not looking to decarbonize anything, 0:03:27.600 --> 0:03:31.120 it's just looking to create this necessary hydrogen for as 0:03:31.120 --> 0:03:33.280 you mentioned, fertilizer or crack it exactly. 0:03:33.560 --> 0:03:33.800 Today. 0:03:33.840 --> 0:03:36.520 It's not even a fuel, it's a chemical feedstock. So 0:03:36.560 --> 0:03:39.280 you need the hydrogen for its chemical properties rather than 0:03:39.320 --> 0:03:40.960 to burn it as a fuel. I mean, it has 0:03:41.000 --> 0:03:43.320 great properties as a fuel because it doesn't contain carbon, 0:03:43.360 --> 0:03:45.760 so when you burn it, there's no direct emissions with it, 0:03:45.800 --> 0:03:47.840 which is why a lot of people are talking about 0:03:47.880 --> 0:03:49.600 the use of it as a fuel going. 0:03:49.400 --> 0:03:51.840 Forward, which then brings us to blue and green. 0:03:52.360 --> 0:03:55.920 Yeah, so two ways of de carbonizing hydrogen today would 0:03:55.960 --> 0:03:58.960 be one blue hydrogen, which is essentially just taking the 0:03:59.080 --> 0:04:02.720 existing process of making gray hydrogen, which is splitting natural 0:04:02.760 --> 0:04:06.520 gas into carbon monoxide and hydrogen, and then adding carbon 0:04:06.560 --> 0:04:09.520 capturn storage to it to capture the carbon emissions that 0:04:09.560 --> 0:04:12.160 come from that process. With that, you can probably reduce 0:04:12.240 --> 0:04:14.960 the emissions by about seventy percent or so, but you 0:04:15.000 --> 0:04:18.000 still suffer from the upstream methane leakage from transporting and 0:04:18.040 --> 0:04:20.640 extracting the gas, and carbon capture is not perfect, so 0:04:20.680 --> 0:04:22.919 you get maybe ninety percent of the emissions on site 0:04:23.000 --> 0:04:25.839 in best cases maybe ninety five percent. There's still residual 0:04:25.839 --> 0:04:29.760 emissions with that, but adding carbon capture and storage is 0:04:30.320 --> 0:04:33.440 still one of the cheapest ways of decarbonizing hydrogen today. 0:04:33.520 --> 0:04:35.880 Let's say gray hydroen costs between one to three dollars. 0:04:36.200 --> 0:04:38.520 Adding carbon carptron storage that will make it like four 0:04:38.600 --> 0:04:40.760 or five maybe six dollars in the worst cases, but 0:04:40.839 --> 0:04:43.400 really just four five dollars per kilogram. So that's one 0:04:43.400 --> 0:04:46.479 way of decarbonizing hydrogen. The other one, and probably the 0:04:46.520 --> 0:04:49.479 one that gets the most policy push, is so called 0:04:49.560 --> 0:04:52.640 green hydrogen. That's a completely different way of making hydrogen. 0:04:52.839 --> 0:04:55.920 That's where you take the hydrogen from water. So water 0:04:56.000 --> 0:04:58.760 is H two zero, so it contains hydrogen atoms in it, 0:04:58.800 --> 0:05:01.960 and you extract the hydrogen by splitting it using electricity 0:05:02.080 --> 0:05:05.320 in an ideal scenario that's renewable electricity from solar and wind, 0:05:05.400 --> 0:05:07.919 and you split the water molecule into hydrogen and oxygen, 0:05:08.040 --> 0:05:10.680 essentially using in a machine called an electroalizer, something we 0:05:10.720 --> 0:05:13.080 have that's been around for a long time already but 0:05:13.200 --> 0:05:15.839 really hasn't been scaled to like one hundred megawatt gigowot 0:05:15.880 --> 0:05:18.280 scale yet and that's where we are at today that 0:05:18.320 --> 0:05:19.680 we're trying to do that well. 0:05:19.720 --> 0:05:21.839 So then let's stick on the green side of things 0:05:21.880 --> 0:05:26.640 for a moment. How heavily adopted has green hydrogen been 0:05:26.800 --> 0:05:28.880 around the world? Like where is it popular and is 0:05:28.920 --> 0:05:31.960 it the dominant source outside of you know this as 0:05:31.960 --> 0:05:34.320 a feedstock hydrogen that you were talking about before, where 0:05:34.440 --> 0:05:37.120 that's kind of a different market, But as a opportunity 0:05:37.160 --> 0:05:40.240 for decarbonization, is green hydrogen really taking off? And where? 0:05:40.240 --> 0:05:42.280 Because I know you recently did some analysis where you 0:05:42.360 --> 0:05:44.880 actually looked at pretty much went all over the world 0:05:44.960 --> 0:05:47.279 and tried to look at the different geographies and compare 0:05:47.320 --> 0:05:49.360 them to each other. So what was the finding in. 0:05:49.320 --> 0:05:52.280 Our latest outlook looking at low carbon hydrogen? What do 0:05:52.360 --> 0:05:55.680 you find generally today? Green hydrogen or blue hydrogen photomatter 0:05:55.760 --> 0:05:58.000 doesn't really exist today. Out of the hundred million tons, 0:05:58.080 --> 0:06:01.600 maybe zero point one percent of that are from electrolysis, 0:06:01.760 --> 0:06:04.240 And in total, if you add the blue hydrogen and 0:06:04.279 --> 0:06:06.360 top out of thee hundred million tons, maybe half a 0:06:06.360 --> 0:06:09.359 million ton are from both blue and green hydrogen, roughly 0:06:09.400 --> 0:06:11.640 half and half. So blue and green hydroen are not 0:06:11.680 --> 0:06:14.000 really a thing today, but that is about to change 0:06:14.040 --> 0:06:16.200 over the next few years, driven by the amount of 0:06:16.240 --> 0:06:18.440 policy that is coming across from governments, and because we 0:06:18.480 --> 0:06:21.159 need to scale up these technologies and these fuels to 0:06:21.240 --> 0:06:24.040 decommonize a number of sectors where electricity at loan doesn't 0:06:24.120 --> 0:06:26.479 do the job. In our outlook, what we get to 0:06:26.560 --> 0:06:29.400 when we looked at every single announced projects and there's 0:06:29.400 --> 0:06:31.320 one thousand, six hundred of them that want to make 0:06:31.320 --> 0:06:33.960 some form of low carbon hydrogen, what we found is 0:06:33.960 --> 0:06:36.479 that the majority of them will never get built by 0:06:36.680 --> 0:06:40.359 twenty thirty. A lot of them will likely be delayed 0:06:40.400 --> 0:06:43.000 simply because there isn't enough policy support to support all 0:06:43.080 --> 0:06:43.360 of them. 0:06:43.400 --> 0:06:44.200 But where we get to. 0:06:44.160 --> 0:06:45.760 In our outlook is from the half a million tons 0:06:45.800 --> 0:06:48.599 of low carbon hydrogen production today to about sixteen million 0:06:48.680 --> 0:06:51.240 tons by twenty thirty or so. That's about a thirty 0:06:51.400 --> 0:06:55.159 x growth in supply of low carbon hydrogen versus today. 0:06:55.560 --> 0:06:57.359 And where is that going to be? And I'm thinking 0:06:57.360 --> 0:06:59.760 about you know, we actually featured a panel from our 0:06:59.839 --> 0:07:02.120 New Work Summit on this show a few weeks back, 0:07:02.160 --> 0:07:03.840 and it focused on some of the tax credits in 0:07:03.880 --> 0:07:06.400 the US and the Inflation Reduction Act in the US 0:07:06.440 --> 0:07:10.040 being very pro hydrogen, although there are certainly things that 0:07:10.080 --> 0:07:12.600 these panelists were pointing out that needed to be improved 0:07:12.640 --> 0:07:14.880 in order for the market really to take off. Is 0:07:14.880 --> 0:07:18.000 the US really where the hydrogen on the supply side 0:07:18.080 --> 0:07:21.080 is looking to grow or are there other markets that 0:07:21.160 --> 0:07:23.680 maybe we're missing that have really good policy incentives. 0:07:24.080 --> 0:07:26.960 Yeah, globally speaking, is really just three markets where there's 0:07:26.960 --> 0:07:29.760 a strong regulation for hydrogen uptic where we see uptakes. 0:07:29.760 --> 0:07:32.679 So over eighty percent of the supply until twenty thirty 0:07:32.840 --> 0:07:35.760 comes from the US, Europe and China, none of the 0:07:35.760 --> 0:07:37.760 other markets where there's lots of projects announced but not 0:07:37.840 --> 0:07:40.760 enough policy support built many hydroen projects. In our view, 0:07:40.880 --> 0:07:44.200 the US is the single largest producer of low carbon 0:07:44.280 --> 0:07:47.920 hydrogen in our outlook, meaning it's about thirty eight percent 0:07:47.960 --> 0:07:50.480 of global supply. Let's say forty percent of global supply 0:07:50.760 --> 0:07:53.160 just comes from the US, and that's really driven by 0:07:53.360 --> 0:07:56.720 big blue hydrogen projects which are quite advanced already. 0:07:56.920 --> 0:07:59.080 And is it the reason that it's so much blue 0:07:59.160 --> 0:08:01.360 hydrogen the fact that the US is really a big 0:08:01.360 --> 0:08:04.520 producer and exporter of natural gas and is still actively 0:08:04.520 --> 0:08:07.240 building that renewable capacity or are there other things that 0:08:07.320 --> 0:08:08.840 have to do with the economics of it that they're 0:08:08.880 --> 0:08:09.400 focused on. 0:08:09.640 --> 0:08:11.640 I mean, natural gas is one of the main reasons. 0:08:11.800 --> 0:08:14.560 The US is one of the cheapest places to extract 0:08:14.640 --> 0:08:17.720 natural gas. It's today probably about two dollars per mmbit 0:08:17.760 --> 0:08:20.080 to you, whereas the landed cost of natural gas in 0:08:20.120 --> 0:08:22.360 Europe is probably more like ten dollars permmb to you. 0:08:22.520 --> 0:08:26.280 So making blue hydrogen in the US is relatively cheap 0:08:26.360 --> 0:08:28.720 compared to everywhere else in the world. The other part 0:08:28.800 --> 0:08:31.160 is that there's lots of companies which are already in 0:08:31.160 --> 0:08:33.400 the oil and gas space or in the fertilizer space, 0:08:33.520 --> 0:08:35.760 which know how to handle natural gas and use it 0:08:35.800 --> 0:08:38.840 already to do fertilizer, to do other products from it, 0:08:38.960 --> 0:08:42.840 or hydrogen and some of these cases. So there's some 0:08:42.920 --> 0:08:46.280 familiarity with building big blue hydrogen project as well, because 0:08:46.280 --> 0:08:48.240 it's doing the same thing that we've already done before 0:08:48.280 --> 0:08:50.160 and just adding common capture and storage to it. So 0:08:50.440 --> 0:08:52.960 it's a bit more mature in that sense and cheaper. 0:08:53.040 --> 0:08:55.240 So that's why we see a lot of focus on 0:08:55.240 --> 0:08:57.720 it in the US. The other big part is really 0:08:57.760 --> 0:09:00.719 tax credits, and as you mentioned, tax is really what's 0:09:00.760 --> 0:09:03.679 driving uptake in the US. So what blue hydrogen will 0:09:03.720 --> 0:09:06.240 benefit from, we think, is the carbon capture and storage 0:09:06.480 --> 0:09:08.880 tax for it forty five q which if you store 0:09:08.920 --> 0:09:11.640 the carbon after you've captured it, gives you a tax 0:09:11.640 --> 0:09:14.240 strait of eighty five dollars per ton over twelve years. 0:09:14.280 --> 0:09:17.880 With that, blue hydrogen is roughly competitive with gray hydrogen, 0:09:18.160 --> 0:09:20.520 especially if you think about exporting that blue hydrogen in 0:09:20.559 --> 0:09:22.760 some form to Europe, where natural gas prices are much 0:09:22.800 --> 0:09:24.320 higher and energy is just more expensive. 0:09:24.679 --> 0:09:27.720 So tell me about China, because we talk about China 0:09:27.800 --> 0:09:29.760 a lot on this show, and it's driven down the 0:09:29.760 --> 0:09:32.200 cost of so many different things in the transition from 0:09:32.320 --> 0:09:35.760 solar to batteries. What role does China play in hydrogen 0:09:35.800 --> 0:09:37.959 given that you just said that on the supply side, 0:09:38.000 --> 0:09:40.640 the US is over eighty percent of that market. 0:09:40.920 --> 0:09:44.240 Much like in many other clean tech sectors, China has 0:09:44.240 --> 0:09:48.600 been absolutely dominant in the green hydro and slash electrolyizer 0:09:48.640 --> 0:09:51.720 space as well. For the past few years, most electoralizers 0:09:51.720 --> 0:09:54.800 were installed in China, and seventy percent of the manufacturing 0:09:54.800 --> 0:09:56.800 capacity for the machines that you need to make green 0:09:56.840 --> 0:09:59.720 hydrogen is also based in China. So China is trying 0:09:59.760 --> 0:10:02.600 to absolutely dominate the manufacturing space as they are in 0:10:02.679 --> 0:10:04.079 solar and batteries and so on. 0:10:04.280 --> 0:10:06.160 So they have a really important role to play in 0:10:06.200 --> 0:10:08.719 making the equipment, but maybe not necessarily setting up the 0:10:08.720 --> 0:10:11.520 projects themselves that are actually doing the hydrogen projects the 0:10:11.520 --> 0:10:12.240 way the US is. 0:10:12.480 --> 0:10:14.400 That's a good question. I think that's something that we're 0:10:14.440 --> 0:10:17.120 still somewhat uncertain about. I mean, China is already today 0:10:17.120 --> 0:10:20.440 the largest user of hydrogen because just because it's populous, 0:10:20.480 --> 0:10:22.040 it needs a lot of fertilizer. It has a huge 0:10:22.040 --> 0:10:24.760 refining complex uses about I think thirty million tons of 0:10:24.840 --> 0:10:26.760 hydrogen or so that it needs to be carbonized over 0:10:26.800 --> 0:10:29.000 time as well. So there's lots of potential lots of 0:10:29.000 --> 0:10:32.040 domestic demand as well, and we see the largest electrolysis 0:10:32.120 --> 0:10:34.880 projects also being deployed there. What we don't know about 0:10:34.960 --> 0:10:38.400 China yet is what is this strategy going into twenty 0:10:38.480 --> 0:10:41.400 thirty or so, and what is the policy. 0:10:41.120 --> 0:10:43.280 Driving up more and more hydrogen uptake. 0:10:43.480 --> 0:10:45.400 So over the last few years, what was driving up 0:10:45.440 --> 0:10:48.320 these electoralizer plants of what made State On companies built 0:10:48.360 --> 0:10:51.559 these electoralizer plants were really two reasons. Once China's carbon 0:10:51.559 --> 0:10:54.200 neutrality target that state on companies are trying to comply with. 0:10:54.280 --> 0:10:57.280 And the second one is that even for private companies, 0:10:57.320 --> 0:11:00.000 it was harder and harder to get environmental permits for 0:11:00.000 --> 0:11:03.520 aossil fuel plants of different kinds, So they built electoralizer 0:11:03.600 --> 0:11:07.640 plants as a way of showing compliance with environmental regulation. 0:11:07.920 --> 0:11:11.120 And we're finding it easier to get access to environmental permits. 0:11:11.160 --> 0:11:13.560 And in some provinces there were diversification roles. So if 0:11:13.600 --> 0:11:15.960 you wanted to build let's say, Gigglewa scale solar farm, 0:11:16.000 --> 0:11:17.920 you needed to add something else to it, let's say 0:11:17.960 --> 0:11:21.280 battery storage, electoralizers or so on. Electorizers are relatively cheap 0:11:21.280 --> 0:11:23.880 in China, so a lot of Chinese products ended up 0:11:23.880 --> 0:11:25.520 building very large ones for us. 0:11:25.559 --> 0:11:27.280 The question is will that continue? 0:11:27.320 --> 0:11:29.520 Right Like, even operating and electrillized in China today is 0:11:29.840 --> 0:11:32.120 not very economic. Companies would rather not do it if 0:11:32.120 --> 0:11:34.800 they had an option not to. So why China in 0:11:34.840 --> 0:11:37.480 our outlook, and coming back to our outlook is only 0:11:37.679 --> 0:11:40.320 the third in terms of low carbon hydron production is 0:11:40.360 --> 0:11:42.640 the fact that we don't know what the policy direction is. 0:11:42.760 --> 0:11:44.920 The thing is, what I would say is that the 0:11:45.080 --> 0:11:49.200 Chinese electoralized environment is so nimble and fast. It only 0:11:49.360 --> 0:11:52.040 takes about six months to deliver and electualize maybe a 0:11:52.080 --> 0:11:54.280 year to install an electoralizer in China versus two to 0:11:54.320 --> 0:11:57.400 three years in most Western countries. Slight policy changes over 0:11:57.400 --> 0:11:59.880 the next few years, and a government target to say, actually, 0:12:00.160 --> 0:12:02.720 we want this industry to be much bigger domestically, could 0:12:02.720 --> 0:12:05.959 mean much more deployment in China, not just manufacturing of 0:12:06.000 --> 0:12:08.040 the equipment, and that's something to look out for. That's 0:12:08.040 --> 0:12:09.720 something we are not sure about either, and. 0:12:09.800 --> 0:12:12.400 Could really change the game very quickly in a matter 0:12:12.440 --> 0:12:15.000 of just a couple of years. Talk to me about 0:12:15.080 --> 0:12:17.440 a couple of the projects that are being worked on 0:12:17.520 --> 0:12:20.880 right now, because you would reference that of the twenty 0:12:20.920 --> 0:12:24.040 thirty targets that exist to increase the amount of hydrogen production, 0:12:24.520 --> 0:12:27.679 there aren't that many that are actually underway. But invariably 0:12:27.720 --> 0:12:29.800 this industry is kind of still getting going. What are 0:12:29.800 --> 0:12:32.200 the projects, where are the projects, and what are some 0:12:32.240 --> 0:12:33.240 of the things that you're seeing. 0:12:33.480 --> 0:12:36.160 I think what's important to understand and what really drives 0:12:36.160 --> 0:12:39.400 our forecast is like, especially large hydrogen projects take a 0:12:39.480 --> 0:12:42.560 long time to build. We think at least five to 0:12:42.640 --> 0:12:45.600 six years from announcements to operations. But if you do 0:12:45.679 --> 0:12:48.160 all the engineering studies before that, and maybe three to 0:12:48.160 --> 0:12:49.840 four is to actually build the planned once you have 0:12:49.880 --> 0:12:52.520 taken an investment decision, which is why that only plans 0:12:52.559 --> 0:12:55.400 have already taken an investment decision today is the ones 0:12:55.440 --> 0:12:58.160 that will be producing by twenty twenty seven twenty twenty eight, 0:12:58.240 --> 0:13:00.480 So most of the capacity or supply is kind of 0:13:00.520 --> 0:13:03.160 already baked in. And if you look at that where 0:13:03.240 --> 0:13:06.840 those plants are again mostly in the US. The largest 0:13:07.000 --> 0:13:10.040 low carbon hydrogen project currently in construction is from Air 0:13:10.040 --> 0:13:13.559 Products in Louisiana that's going to produce by twenty twenty 0:13:13.559 --> 0:13:16.000 eight about six hundred thousand tons of hydrogen, which is 0:13:16.040 --> 0:13:18.520 absolutely huge. To give you a frame of reference, if 0:13:18.559 --> 0:13:21.160 you did the same through electrolyzers, you would need six 0:13:21.240 --> 0:13:23.640 gigawatts of electrolyizers just to be able to produce those 0:13:23.640 --> 0:13:26.960 six hundredands tons of hydrogen. The world only sold or 0:13:27.040 --> 0:13:29.600 is expected to sell four gigawats over the next year 0:13:29.720 --> 0:13:32.080 or so, right in one year across the world. So 0:13:32.120 --> 0:13:34.880 this project alone, which is already under construction, is producing 0:13:34.880 --> 0:13:37.640 so much hydrogen then most projects that we've seen on 0:13:37.679 --> 0:13:40.439 the electrolyzer side, So that's one we've seen a lot 0:13:40.480 --> 0:13:43.160 of big ammonia producers in the US also trying to 0:13:43.200 --> 0:13:46.760 retrofit their existing ammonia plants so to produce blue ammonia, 0:13:46.760 --> 0:13:48.880 which is hydrogen where you capture the emissions and they 0:13:48.880 --> 0:13:51.319 make ammonia from it. CF Industries is building one and 0:13:51.360 --> 0:13:53.840 it's at it's Donaldsonville Complex. And then there is a 0:13:53.840 --> 0:13:55.800 few others on the green hydrogen side. I think the 0:13:55.840 --> 0:13:58.160 one that is worth mentioning the world's largest green hydron 0:13:58.160 --> 0:14:01.480 project currently under construction is the project in Saudi Arabia 0:14:01.520 --> 0:14:03.800 two point two gig or what's the electrolyzers producing about 0:14:03.800 --> 0:14:06.040 two hundred thousand tons of green hydrogen. 0:14:06.280 --> 0:14:10.040 Now, how about trade? Is the hydrogen trade industry really 0:14:10.040 --> 0:14:13.120 starting to show up as we look at these sources 0:14:13.120 --> 0:14:16.040 of supply and then where future demand could potentially be. 0:14:16.320 --> 0:14:18.480 And when I think about hydrogen, I think about trade. 0:14:18.480 --> 0:14:20.320 You know, when we brought it up on this show, 0:14:20.480 --> 0:14:24.040 we've talked often about converting the hydrogen into something else, 0:14:24.080 --> 0:14:26.480 so changing it into ammonia and then converting it back 0:14:26.480 --> 0:14:28.440 to hydrogen when it gets through to the other side 0:14:28.520 --> 0:14:30.960 and moving on ships. But almost like you know, transformers, 0:14:31.040 --> 0:14:33.360 robots in disguise. It's got to change shape each time 0:14:33.360 --> 0:14:35.160 in order to make it to where it needs to be. 0:14:35.480 --> 0:14:38.600 Are we still seeing a lot of discussion around the 0:14:38.640 --> 0:14:42.640 potential to convert hydrogen into various different things in order 0:14:42.640 --> 0:14:44.320 to get it where it needs to go, or are 0:14:44.600 --> 0:14:48.560 countries starting to increasingly think about actually having the demand 0:14:48.920 --> 0:14:51.560 near the supply, or actually the supply near the demand 0:14:51.640 --> 0:14:53.200 would be the direction you would do that in. 0:14:54.080 --> 0:14:55.760 I think there's a bit a bit of a disparity 0:14:55.760 --> 0:14:58.360 between like what countries want to do and what's actually 0:14:58.400 --> 0:15:01.800 happening on the ground. If you look at country strategies, 0:15:02.000 --> 0:15:05.720 particularly a lot in Europe. Germany is a big one there, 0:15:05.760 --> 0:15:08.400 but also Japan and Korea are looking to import vast 0:15:08.480 --> 0:15:12.080 quantities of hydrogen in various forms to meet their demand. 0:15:12.280 --> 0:15:14.600 What's really happening on the ground today is that most 0:15:14.600 --> 0:15:17.080 early projects are co locating with demand. Just because the 0:15:17.080 --> 0:15:19.640 infrastructure are transported isn't really there. If you're trying to 0:15:19.680 --> 0:15:21.560 transport it overseas, as you said, you need to convert 0:15:21.560 --> 0:15:24.240 it to something else to make it cheap. That's usually ammonia, 0:15:24.280 --> 0:15:26.440 because we already know how to transport ammonia. If you 0:15:26.520 --> 0:15:28.240 need hydrogen at the end of it, you need to 0:15:28.240 --> 0:15:31.760 crack back ammonia to hydrogen. That's a process that's still 0:15:31.760 --> 0:15:34.440 at demonstration scale and a bit expensive, so we haven't 0:15:34.440 --> 0:15:36.320 really seen projects go ahead off the back of that. 0:15:36.600 --> 0:15:37.320 But in our. 0:15:37.240 --> 0:15:38.920 Outlook, what we see is that out of the sixteen 0:15:38.960 --> 0:15:43.400 million tons, about five million tons of supply are export oriented, 0:15:43.480 --> 0:15:46.120 so some share of that will be exported. That is 0:15:46.160 --> 0:15:47.840 not to say all five million will be because we 0:15:47.840 --> 0:15:49.920 don't see a market for five million tons of trade, 0:15:49.960 --> 0:15:52.200 but five million tons comes from projects that are looking 0:15:52.200 --> 0:15:54.680 to export as well. How much that maybe that's two 0:15:54.720 --> 0:15:56.640 million tons three million tons of real exports in the 0:15:56.640 --> 0:15:59.280 form of ammonia, and most of these projects are targeting 0:15:59.280 --> 0:16:02.480 ammonia's exps. So that's where we see really the traded market. 0:16:02.480 --> 0:16:05.040 What's interesting within that is really just going to three places, 0:16:05.040 --> 0:16:07.920 as I said, Europe, Japan, and Korea. Japan and Korea 0:16:08.000 --> 0:16:11.120 are taking ammonia to put it into copower plants to 0:16:11.160 --> 0:16:13.520 co fired it and reduce the emissions of these plants 0:16:13.560 --> 0:16:16.000 that way. It's a very expensive process, but Japan and 0:16:16.040 --> 0:16:18.000 Korea are willing to subsidize that, which is why we 0:16:18.040 --> 0:16:20.240 see a lot of demand for it, particularly for blue 0:16:20.240 --> 0:16:23.120 ammonia because it's cheaper, so they just want the cheapest 0:16:23.120 --> 0:16:26.200 low carbon molecule. Europe is a lot more focused on 0:16:26.520 --> 0:16:30.080 green hydrogen or green ammonia imports, and what we're seeing 0:16:30.080 --> 0:16:32.480 within that is that we see some demand from Europe 0:16:32.520 --> 0:16:34.160 as well to have these imports. 0:16:34.240 --> 0:16:38.840 But what I think is. 0:16:37.000 --> 0:16:39.400 A big conclusion from our report is that when we 0:16:39.480 --> 0:16:44.240 looked at subsidized supply coming online in Europe, and making 0:16:44.280 --> 0:16:47.000 hydroen in Europe is expensive, so subsidies really drive a 0:16:47.040 --> 0:16:48.800 lot of the build out in Europe out the next 0:16:48.840 --> 0:16:51.000 few years. What we find is that there's actually lots 0:16:51.000 --> 0:16:54.120 of supply coming online, particularly the Nordics in Iberia, and 0:16:54.160 --> 0:16:57.480 if there was just inter European trade, so think pipelines 0:16:57.520 --> 0:17:00.600 from Spain to Germany, that would be enough apply to 0:17:00.720 --> 0:17:04.600 meet most of the existing demand in markets where there's 0:17:04.600 --> 0:17:09.960 a deficit and hydrogen for domestic production. That's Germany, Poland's, 0:17:10.080 --> 0:17:12.719 Eastern Europe in general. So the question is will these 0:17:12.760 --> 0:17:15.800 pipelines be available, and if there are, then a Spain 0:17:16.040 --> 0:17:19.159 or a Nordic country can meet that demand. If it's not, 0:17:19.280 --> 0:17:21.360 a Germany will rely more on overseas imports. 0:17:21.840 --> 0:17:24.600 So these projects, as you've established, take a long time 0:17:24.760 --> 0:17:27.320 to get off the ground on the production side, and 0:17:27.560 --> 0:17:31.360 it's very clear that the policy environment and tax incentives 0:17:31.359 --> 0:17:34.920 and whatever shape it takes is extraordinarily important in order 0:17:34.960 --> 0:17:38.680 for projects to succeed. So the companies engaging in these projects, 0:17:38.720 --> 0:17:42.480 are they essentially raising debt in order to get these 0:17:42.520 --> 0:17:45.119 projects done? And I guess really the question at the 0:17:45.119 --> 0:17:48.399 heart of it is who is financing these given the 0:17:48.480 --> 0:17:52.119 long timelines, and really what part of the community of 0:17:52.119 --> 0:17:55.520 investors that invariably have to be involved have the tolerance 0:17:55.600 --> 0:17:59.400 for something that takes that long to actually see through fruition. 0:18:00.000 --> 0:18:02.080 I think it really depends on the size of the project. 0:18:02.200 --> 0:18:04.480 If it's a small scale project, and we here we're 0:18:04.480 --> 0:18:08.640 talking about ten megawats, twenty megawats or less, electoralizer size, 0:18:08.720 --> 0:18:11.960 large companies can afford to finances of their balance sheet 0:18:11.960 --> 0:18:13.960 without needing to raise external financing at all. 0:18:14.080 --> 0:18:16.160 So this is why we see a lot of companies 0:18:16.160 --> 0:18:18.040 in the energy space, so we're actually getting into this 0:18:18.119 --> 0:18:20.439 and this just becomes an arm of their business that 0:18:20.480 --> 0:18:21.639 they're then looking into. 0:18:21.960 --> 0:18:25.240 Yeah, but once the scale really exceeds a few hundred 0:18:25.200 --> 0:18:28.320 megawats or a gigawad or so even large companies don't 0:18:28.320 --> 0:18:30.600 want to have that on the balance sheet, and obviously 0:18:30.680 --> 0:18:32.919 raising external that will be cheaper in terms of the 0:18:32.960 --> 0:18:35.119 financing costs of that project. So if you look at 0:18:35.119 --> 0:18:38.160 the largest projects, these are typical project finance deals, right, 0:18:38.280 --> 0:18:41.080 sixty seventy percent of the capital that you need is 0:18:41.080 --> 0:18:44.040