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Speaker 1: This is Cobalt barn Degree, and you're listening to Switched

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Speaker 1: on the podcast brought to you by Bloomberg and EF.

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Speaker 1: Hydrogen was once expected to power much of the clean

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Speaker 1: energy transition, but progress has been slower than many had hoped.

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Speaker 1: Costs remain high, policy support uneven, and global production forecasts

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Speaker 1: have fallen sharply, now sitting at just five point five

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Speaker 1: million tons by twenty thirty, half the estimate we made

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Speaker 1: in twenty nineteen. Even so, governments and companies are pressing ahead.

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Speaker 1: Europe is pushing ambitious but complex targets, the US is

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Speaker 1: betting on blue hydrogen through generous subsidies, and China is

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Speaker 1: scaling rapidly on green So as different regions forge their

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Speaker 1: own paths, the question now is whether hydrogen can find

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Speaker 1: its footing and deliver at scale. On today's show, I'm

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Speaker 1: joined by Martin Tangler, beanef's head of hydrogen Research, to

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Speaker 1: discuss some of his team's recent notes, including Hydrogen Supply

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Speaker 1: Outlook twenty twenty five, Blue Who Takes the Lead, and

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Speaker 1: Ammonia Supply Outlook twenty twenty five Tenders Shape Demand. BNF

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Speaker 1: clients can find these notes along with our other hydrogen

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Speaker 1: research by heading to BNF go on the Bloomberg terminal

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Speaker 1: or BNF dot com. If you'd like to learn more

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Speaker 1: about how BNF approaches strategic research on the energy transition,

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Speaker 1: including developments in commodity markets, trends across different sectors, and

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Speaker 1: the cross cutting technologies shaping the future. You can find

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Speaker 1: more information on BNF dot com and if you'd like

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Speaker 1: to speak with a member of our team about becoming

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Speaker 1: a client, email US at sales dot BNF at Bloomberg

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Speaker 1: dot net. So let's explore the outlook for clean hydrogen

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Speaker 1: and what it will take for the sector to turn

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Speaker 1: ambition into action. Well, today we have a very special

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Speaker 1: guest on the Switched On podcast. We have Martin Tengler,

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Speaker 1: who is the head of hydrogen Research. Welcome Martin, Hi Colbat.

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Speaker 1: Hydrogen has a special place in my heart because about

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Speaker 1: five years ago, well maybe a bit more, Martin and

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Speaker 1: I together started be in e F coverage of hydrogen.

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Speaker 1: So it's wonderful to dive back into the topic and

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Speaker 1: spend some time understanding what's the latest in the sector. So, Martin,

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Speaker 1: if we start off by just sort of taking stock

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Speaker 1: of where hydrogen is at for years, hydrogen has been

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Speaker 1: talked up as being the Swiss Army Knife of the

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Speaker 1: energy transition, of having this enormous potential in multiple sectors.

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Speaker 1: But in the last sort of view or two, it

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Speaker 1: really seems like that bubble of inflated expectations has burst.

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Speaker 1: Is that where we still are what's the latest status?

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Speaker 1: So the hydrogen sector right now, to be honest, is

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Speaker 1: not doing too well. And let me pick you up

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Speaker 1: actually on that Swiss army knife analogy, because that's quite

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Speaker 1: topical and you hear it everywhere. There's two camps, two

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Speaker 1: interpretations of this Swiss army knife theory. The first one

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Speaker 1: is just what you said. It's something you can use

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Speaker 1: for everything. You can use it as a fuel, you

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Speaker 1: can use it as a chemical feedstock.

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Speaker 2: Pretty much. You could run a whole economy on hydrogen

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Speaker 2: in theory. But this is the second camp. I'll tell

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Speaker 2: you that's true. But just like with a Swiss army knife,

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Speaker 2: in practice, there's very often a better tool than a

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Speaker 2: Swiss army knife. So for example, would you cut your

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Speaker 2: bread with a Swiss army knife or would you get

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Speaker 2: a proper knife for your bread, or would you cut

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Speaker 2: your hair with the little scissors on the Swiss Army knife.

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Speaker 1: Or would you rather get a clipper.

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Speaker 2: So there's these two camps about hydrogen, and I think

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Speaker 2: I certainly belong into the second camp, where there's clearly

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Speaker 2: some very very important uses for the Swiss Army knife,

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Speaker 2: where it is the best tool, especially if net zero

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Speaker 2: is the thing that we are aiming to achieve. And

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Speaker 2: this is probably the main problem is we are at

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Speaker 2: this moment not headed, at least in my humble view,

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Speaker 2: towards a twenty fifteen net zero scenario, which we had

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Speaker 2: been f model and in which we would see a

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Speaker 2: lot of hydrogen demand. So right now the problem is

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Speaker 2: we're not heading towards at zero as fast as we

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Speaker 2: should probably if we want to hit it by twenty fifty.

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Speaker 2: As a result, we're not seeing nearly as much demand

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Speaker 2: for hydrogen because hydrogen is expensive. It's more expensive than

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Speaker 2: most of the other technologies we use right now that

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Speaker 2: are fossil based. If we're going to use hydrogen that's

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Speaker 2: more expensive than these fossil based technologies, we need something

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Speaker 2: to breage that cost gap.

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Speaker 1: For the moment.

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Speaker 2: That would need to be policy, and that policy has

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Speaker 2: not been as strong in most places as have many

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Speaker 2: developers without hope.

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Speaker 1: So, Matt, you mentioned in there that there are a

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Speaker 1: couple of good uses for hydrogen. What are your favorites?

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Speaker 1: Where does it have the most potential.

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Speaker 2: They're really the same ones that we identified already back

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Speaker 2: in twenty nineteen when you and I started with a

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Speaker 2: couple of our colleagues as well this hydrogen team at BNF.

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Speaker 2: The most obvious ones are where we already use hydrogen today.

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Speaker 2: We use gray hydrogen, well one hundred million tons of

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Speaker 2: it to produce things like fertilizers, which is something we

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Speaker 2: really really need. We want to sustain a population of

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Speaker 2: eight billion people and growing. But we use gray hydrogen.

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Speaker 2: We could replace that with green hydrogen, at least to

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Speaker 2: some extent. We use hydrogen for oil refining. Is kind

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Speaker 2: of a funny thing because we could decarbonized oil refining.

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Speaker 2: But in a world that's headed towards net zero, you

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Speaker 2: would think there's not going to be as much use

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Speaker 2: of oil, but there will still be some and a

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Speaker 2: whole bunch of other chemicals, methanol being the most important one.

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Speaker 2: So that's your current uses of gray hydrogen. We're replacing

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Speaker 2: that gray hydrogen with green or blue or clean decarbonized

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Speaker 2: hydrogen makes a lot of sense. Then you've got news

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Speaker 2: sectors where hydrogen has not been used to date where

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Speaker 2: it could be used in the future, and the ones

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Speaker 2: that we model at B and EF as being the

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Speaker 2: most likely to adopt hydrogen in that net zero scenario

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Speaker 2: the more we get to that net zero scenario. Those

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Speaker 2: are shipping, aviation, and steel production. Now, shipping in aviation

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Speaker 2: would not use hydrogen in its form of H two,

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Speaker 2: They would use it in the form of another chemical

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Speaker 2: in shipping, most likely methanol or ammonia, which are molecules

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Speaker 2: that contain hydrogen, And in the aviation most likely in

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Speaker 2: the form of kerosene that's been made with green hydrogen,

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Speaker 2: even though that is very expensive and there's probably cheaper

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Speaker 2: ways to actually decarbonize ITSH.

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Speaker 1: So those are the promising use cases today, but development

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Speaker 1: so far has been slow. So your team has just

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Speaker 1: published the Hydrogen Supply Outlook twenty twenty five, and in

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Speaker 1: that you've mentioned there's an overall slowdown in clean hydrogen deployment.

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Speaker 1: So what is the status of things and what are

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Speaker 1: the real headwinds that the sector is basic?

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Speaker 2: So the outlook that we published is an annual outlook.

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Speaker 2: Think of it as a forecast or our best guess

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Speaker 2: of what is going to happen in the next five

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Speaker 2: years in the clean so that's green and blue hydrogen market,

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Speaker 2: mostly focusing on the supply side, on the producers and

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Speaker 2: the projects that produce this hydrogen. To give you some

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Speaker 2: high level numbers, first, this outlook we just published is

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Speaker 2: certainly small then the outlook we published last year because

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Speaker 2: of some negative policy developments in the meantime, such as

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Speaker 2: significant reduction in green hydrogen tax credits in the US.

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Speaker 2: But that's not the only policy change that has impacted

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Speaker 2: our forecast.

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Speaker 1: So expectations to continue to get revised down.

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Speaker 2: They do continue. We kind of have this joke running

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Speaker 2: at our team, which you know, every time you look

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Speaker 2: at being of solar forecast, we always seem to get

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Speaker 2: it wrong because the solar market always exceeds our expectations.

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Speaker 2: With hydrogen, so far, it's been the other way around,

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Speaker 2: and every forecast we've published so far, we found ourselves

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Speaker 2: revising it downwards the next time around. So that's been

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Speaker 2: the reality so far, which doesn't mean there is no role.

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Speaker 2: It doesn't mean there's.

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Speaker 1: No hydrogen being used today.

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Speaker 2: There is is just the expectations that were set back

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Speaker 2: in twenty eighteen twenty nineteen by the industry and certain

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Speaker 2: lobby groups that are still active today were perhaps too high,

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Speaker 2: and once these expectations have started deflating, so have the forecasts.

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Speaker 1: And even we should eat some humble pie here, because

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Speaker 1: our original forecasts when we first looked at this, we're

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Speaker 1: also very high at least of the prospective potential role

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Speaker 1: that hydrogen could play. So it is you're right. It

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Speaker 1: is one of the very few elements of the energy

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Speaker 1: transition where the forecast get revised down rather than not.

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Speaker 1: So it has that unwanted honor really, or that unwanted

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Speaker 1: record of being a technology which is really underperforming in

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Speaker 1: the transition so far.

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Speaker 2: But you know what, that actually makes it really interesting

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Speaker 2: as well, because we all know that the future is

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Speaker 2: going to be full of solar, full of wind, full

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Speaker 2: of batteries for ellth electric vehicles. The trends are clearly there,

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Speaker 2: and they've been there for at least the past ten

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Speaker 2: twenty years at least for in the case of solar.

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Speaker 2: For hydrogen, we know there will be a role for it,

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Speaker 2: but it's much more nuanced than saying everybody is going

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Speaker 2: to be using hydrogen, just like we say everybody's going

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Speaker 2: to be using solo electricity, because you just connect your

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Speaker 2: solar panels with the grid and there you go. Everybody's

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Speaker 2: using solelectricity. Hours with hydrogen is just much more limited,

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Speaker 2: but the role is important if net zero or super

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Speaker 2: low emissions is what we're aiming for.

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Speaker 1: So in the next couple of years, what's our current

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Speaker 1: expectation how much capacity will actually come online and how

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Speaker 1: much hydrogen will be produced.

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Speaker 2: So we have right now in our forecast for twenty

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Speaker 2: thirty five and a half million tons of green and

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Speaker 2: blue hydrogen. It's about evenly split, slightly more blue than green,

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Speaker 2: so slightly more produced from fossil fuels natural gas, with

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Speaker 2: the CO two captured at least some of the CO

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Speaker 2: two captured and stored, and the rest produced through electrolysis

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Speaker 2: using reneo of electricity.

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Speaker 1: So that's green.

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Speaker 2: Hydrogen five and a half million tons by twenty thirty

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Speaker 2: compared to probably about half a million tons so today.

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Speaker 2: So there's still quite some significant growth to twenty thirtys

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Speaker 2: just not as high as people would have hoped. And

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Speaker 2: also in terms of comparing that to a couple key numbers.

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Speaker 2: The first key number is the one hundred million tons

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Speaker 2: of gray hydrogen we use today, so that's just five

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Speaker 2: percent or so of that global gray hydrogen supply is

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Speaker 2: going to now be supplemented with green and blue hydrogen.

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Speaker 2: When you and I started this project back in twenty nineteen,

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Speaker 2: every day we just opened the news and there was

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Speaker 2: a gigawatts scale project being announced somewhere in Australia, in Africa,

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Speaker 2: in South America and North America, Europe, just everywhere. And

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Speaker 2: we started making this database which now has two thousand,

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Speaker 2: three hundred or twenty four hundred projects by twenty thirty.

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Speaker 2: That's about seventy two million tons of green and blue

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Speaker 2: hydrogen that developers want to produce, and more than two

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Speaker 2: hundred million tons overall. So there's even bigger ambitions beyond

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Speaker 2: twenty thirty. So seventy million tons or so in ambition

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Speaker 2: by developers, we have about twenty five million tons or

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Speaker 2: so of ambitions for twenty thirty by different governments around

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Speaker 2: the world, and those five and a half million tons

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Speaker 2: of our forecast, So clearly we're undershooting the expectations by

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Speaker 2: governments and certainly by the developers a wide margin.

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Speaker 1: That is a very wide margin and one that I

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Speaker 1: think policy makers in particular would be very disappointed to hear.

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Speaker 1: So what's going wrong.

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Speaker 2: Well, the first thing that's going wrong is the cost right.

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Speaker 2: One of the mistakes that we made that you alluded

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Speaker 2: to early, is we forecasted a bit too much hydrogen,

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Speaker 2: probably about twice as much as we do now in

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Speaker 2: our new New Energy Outlook, in that outlook we published

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Speaker 2: in twenty nineteen together, and that was because we expected

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Speaker 2: costs of green hydrogen, especially green hygien to go down

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Speaker 2: much faster than actually happened in practice, and that we

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Speaker 2: now expect to happen in practice as well. So higher

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Speaker 2: costs means that gap between green and non green hydrogen

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Speaker 2: or green hygien and fossil fuels is larger and is

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Speaker 2: going to stay larger for longer. What do you need

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Speaker 2: to fix that. You need deployment, And how do you

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Speaker 2: get that deployment. You need incentives from the government. Right now,

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Speaker 2: that's really the only way to get large deployment of

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Speaker 2: green hydrogen and blue hydrogen. There's only a very limited

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Speaker 2: number of places where these incentives exist, and even in

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Speaker 2: the places where they do exist, they're by far not perfect.

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Speaker 2: And I'll start with Europe because that is the biggest

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Speaker 2: market for green hydrogen. European Union has some very ambitious

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Speaker 2: goals ten million tons of green hydrogen production within the

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Speaker 2: EU in twenty thirty, so that's already twice our global

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Speaker 2: volume for twenty thirty I've just mentioned, and another ten

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Speaker 2: million tons of imports from the rest of the world.

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Speaker 1: Lots of ambition, and Europe has a relatively strong policy

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Speaker 1: framework to try and deliver those codes, doesn't it. It does.

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Speaker 2: So the thing that Europe has is demand signed incentives. So,

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Speaker 2: like I've said, demand is low because cost is high.

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Speaker 2: How do you fix that? Well, you need to increase

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Speaker 2: demand through policy. You can do two things. You can

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Speaker 2: either give some carrots to producers or users, which the

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Speaker 2: European Union is also doing, and you can also use

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Speaker 2: some sticks. And in Europe these sticks are mostly in

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Speaker 2: the of quotas and the carbon prices. And the quotas

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Speaker 2: work simple. You just say, if you are an industrial

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Speaker 2: company like an ammonia producer or refinery, then by twenty

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Speaker 2: thirty you're going to have to use a certain amount

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Speaker 2: of green hydrogen. And if you don't you're going to

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Speaker 2: have to pay a penalty. Or if you're an airline

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Speaker 2: or if you're an air aviation fuel supplier, you're going

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Speaker 2: to have to deliver a certain amount of ekerosene or

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Speaker 2: kerosine made with green hydrogen. If you don't, you're going

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Speaker 2: to have to pay a fine. And those are policies

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Speaker 2: that do exist in the EU, but their enforcement has

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Speaker 2: turned out to be a lot more complicated than people

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Speaker 2: would have expected or developers would have hoped. So. Within

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Speaker 2: the case of the quotas for industry, which are called

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Speaker 2: RED three, which stands for the renew Blandagy Directive, those

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Speaker 2: quotas are implemented on the members state level. You have

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Speaker 2: twenty seven member states in the European Union, vast majority

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Speaker 2: of whom have yet to legislate these quotas in their

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Speaker 2: domestic law, which means they're good companies based on the

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Speaker 2: refiners and the ammonia producers based and those markets are

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Speaker 2: not going to rush into producing or using this very

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Speaker 2: expensive greenigen if they're not sure that they're actually going

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Speaker 2: to have to, and they're at the same time lobbying,

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Speaker 2: many of them are lobbying their domestic governments or all

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Speaker 2: the Commission to water down or postpone these quotas.

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Speaker 1: So even though the policy exists at the European Parliament level,

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Speaker 1: it's not really binding until it's been entrined in domestic law,

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Speaker 1: that's right, And even then, you know the way.

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Speaker 2: I like to give one example, which is my own

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Speaker 2: Czech Republic, which is where I live, is one of

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Speaker 2: the few EU members states that have actually passed these

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Speaker 2: read three quotas into their domestic legislation. But there is

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Speaker 2: no way in my assessment that Czech Republic is actually

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Speaker 2: going to meet these twenty thirty quotas, because if you

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Speaker 2: talk to any of the companies that are obligated under

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Speaker 2: these quotas to start using green hydrogen, they will tell you, yeah,

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Speaker 2: it's just too expensive here, and the fine that the

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Speaker 2: government has said, it's probably just cheaper for us to

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Speaker 2: pay the fine and hope that in the meantime, Commission

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Speaker 2: water is it down anyway, that we don't have to

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Speaker 2: worry for a while yet to come. So a lot

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Speaker 2: of companies just think like this, and they'd rather just

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Speaker 2: pay the fines than get moving with green hydrogen because

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Speaker 2: they believe and hope and lobby at the same time

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Speaker 2: that this quote does will get watered down.

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Speaker 1: But that's a good indication that the hydrogen sector is

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Speaker 1: just not able to supply the hydrogen at the price

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Speaker 1: that policymakers are willing to support.

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Speaker 2: Yeah, that's absolutely true, and that's just the red three

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Speaker 2: quote does. And you've got another quote in the EU

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Speaker 2: which is much stronger because that one is implemented on

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Speaker 2: the EU level. That's the aviation quote does the refuel

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Speaker 2: EU aviation regulation where if you are an airline, you're

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Speaker 2: going to have to start using by twenty thirty a

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Speaker 2: very small amount is just over one percent of all

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Speaker 2: of your kerosene. Your jet fuel will have to be

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Speaker 2: this E fuel made from green hydrogen, and if you don't,

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Speaker 2: you're going to have to pay a fine that's twice

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Speaker 2: the cost of actually using this jet fuel clean jet fuel,

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Speaker 2: and next year are going to have to comply again anyway,

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Speaker 2: So it's not like you've paid the fine and you're

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Speaker 2: off the hook. And yet, even with a quota like this,

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Speaker 2: where you would think theoretically the willingness to pay should

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Speaker 2: be almost infinite, we're still not seeing companies buying this,

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Speaker 2: and we're still seeing a lot of hedging. Still seeing

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Speaker 2: a lot of lobbying the Commission that says they're not

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Speaker 2: going to budge, but then we know that they're still

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Speaker 2: talking to companies and we know companies are waiting, especially

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Speaker 2: the aviation fuel suppliers are apparently the bottleneck from what

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Speaker 2: we've heard from some of the airline companies, where they

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Speaker 2: just don't see themselves benefiting from producing. If they do

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Speaker 2: and the regulation gets wodded down, then they've just produced

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Speaker 2: this really expensive fuel and what are they going to

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Speaker 2: do with it? And if they don't, then they're just

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Speaker 2: going to pass on then higher costs the fine onto

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Speaker 2: the airlines. So it's perhaps not the best to have

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Speaker 2: put this burden on the aviation fuel suppliers in this way.

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Speaker 2: Perhaps there's a way this regulation could be improved to

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Speaker 2: make it bite a little bit better.

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Speaker 1: So in Europe there's a mixture. The sector is sort

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Speaker 1: of lagging due to a mixture of the policy implementation

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Speaker 1: being imperfect and not fully legislated through to the member

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Speaker 1: state level, but also just that the economics are too

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Speaker 1: far away for companies to comply with those incentives or

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Speaker 1: o those But either the character of the sticks.

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Speaker 2: Absolutely and an example that I like to give in.

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Speaker 2: I just gave this example of the presentation in Brussels recently,

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Speaker 2: is there's a lot of stars that need to align

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Speaker 2: for a company to decide to sign a binding offtake

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Speaker 2: agreement in Europe or anywhere else for that matter. And

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Speaker 2: then the example I like to give is this off

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Speaker 2: take agreement that was signed earlier in the year between

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Speaker 2: the German utility company RWE and the French refiner Total Energies.

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Speaker 2: They've signed an off take agreement for thirty thousand tons

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Speaker 2: of green hydrogen per year to be supplied for fifteen

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Speaker 2: years from RWE, which has a project to produce this

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Speaker 2: hygien in the west of Germany in this town called Lincoln,

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Speaker 2: to be supplied to the east of Germany six hundred

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Speaker 2: kilometers away to a refinery in the city of Loyina

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Speaker 2: that's owned by Total Energy. So how did this happen? Well,

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Speaker 2: first you had these massive subsidies, massive carrot coming from

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Speaker 2: the German government of six hundred and nineteen million euros

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Speaker 2: that just think about this is crazy. That's really really

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Speaker 2: a lot of money to go to just one company

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Speaker 2: to build one project, almost ten euros per every German

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Speaker 2: citizen that has helped reduce the cost, based on our

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Speaker 2: estimates of that hydrogen, from ten dollars per kilogram to

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Speaker 2: about seven dollars per kilogram. But seven dollars per kilogram

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Speaker 2: is still a lot because Totel is probably using hydrogen

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Speaker 2: gray hydrogen today that cost it about two dollars per kilogram.

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Speaker 2: So why the hell would Totel want to buy green

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Speaker 2: hygien for seven But the first reason is that Germany

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Speaker 2: is likely to be implementing and forcing this red three

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Speaker 2: regulation that I talked, so Total will need to decarbonize

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Speaker 2: its refineries. And also there's a carbon price in Germany

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Speaker 2: where refiners have to pay for every ton of COE

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Speaker 2: to release during refining, but they get to triple count

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Speaker 2: each time reduced if it has been reduced by using

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Speaker 2: green hydrogen, and that gives totalent a very large incentive

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Speaker 2: to adopt green hydrogen. And based on our math, we

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Speaker 2: think Total is probably wanting to pay about seven dollars

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Speaker 2: pe kulogram for that hydrogen because of this policy, which

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Speaker 2: is just about how much rwe, based on our calculations,

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Speaker 2: would need to receive, including that six hunt nineteen million

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Speaker 2: grant to make it worthwhile for themselves. So that's three

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Speaker 2: really really important stars. You've got this supply side subsidy

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Speaker 2: six unction and nineteen million euro subsidy to RWE. You've

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Speaker 2: got this EU regulation to decarbonized refineries worth three. You've

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Speaker 2: got a carbon price in Germany. And the final piece

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Speaker 2: is the midstream because these places are six hundred kilometers apart,

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Speaker 2: and the the only way you're going to deliver that

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Speaker 2: hydrogen from the west to the east is through a pipeline,

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Speaker 2: which the German government is now supporting. But if this

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Speaker 2: pipeline does not end up getting built, then no matter

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Speaker 2: which what price these two companies agreed on the hydrogen,

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Speaker 2: it's just not going to be delivered. So having a

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Speaker 2: midstream network, a pipeline and storage network to deliver this hydrogen,

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Speaker 2: to store the hydrogen is also going to be absolutely essential.

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Speaker 2: And not all places are developing that. Germany is one

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Speaker 2: of the few that is. But also there's likely to

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Speaker 2: be some delays and there's probably going to be the

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Speaker 2: eight or nine thousand kilometers that Germany is planning today,

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Speaker 2: it's probably going to be scaled down eventually quite a

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Speaker 2: lot because of the current government, the new government.

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Speaker 1: So Martin, let's we've only got about ten minutes left,

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Speaker 1: so let's try and move quickly through some of the

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Speaker 1: other countries and do a round of the ground. So

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Speaker 1: Europe sluggish. What's the situation like in the United States

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Speaker 1: where the Trump administration has has not been very friendly

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Speaker 1: towards green hydrogen? Are they more positive towards blue hydrogen

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Speaker 1: or hydrogen made with carbon captrine storage?

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Speaker 2: Yeah, So in that outlook that we have of five

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Speaker 2: and a half million tons by twenty thirty, US is

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Speaker 2: the biggest producer with about two million tons. Europe has

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Speaker 2: about one point two million tons, and China also has

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Speaker 2: one point two million tons. So why is the US

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Speaker 2: the biggest? It is because it's of its support for

401
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Speaker 2: blue hydrogen and because of relatively strong fundamentals for blue hydrogen.

402
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Speaker 2: So after the Trump administration came in, there was a

403
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Speaker 2: lot of uncertainty what's going to happen with the really

404
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Speaker 2: generous tax cred its passed by the Biden administration. The

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Speaker 2: tax cit is for green hydrogen got scaled down quite

406
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Speaker 2: a bit, but for blue hydrogen they did not. And

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Speaker 2: blue hygien projects are quite big. They produce hygroen that's

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Speaker 2: much cheaper than green today, and there is demand for

409
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Speaker 2: that blue hydrogen or blue ammonia, because the US is

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Speaker 2: most likely to be putting that hydrogen, converting it to ammonia,

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Speaker 2: and putting the ship and exporting it to the rest

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Speaker 2: of the world, to all the places which have some

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Speaker 2: demand side incentives like Europe which has a carbon price,

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Speaker 2: like Japan which wants to burn ammonia with coal in

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Speaker 2: their power plants, and the same goes for Korea, although

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Speaker 2: they they now appear to have potentially scaled down.

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Speaker 1: On that policy.

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Speaker 2: So that's why we see the US as being the

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Speaker 2: biggest producer. The top five projects in our forecast are

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Speaker 2: all US blue hydrogen projects, so.

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Speaker 1: The Trump administration is continuing to have a supported posture

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Speaker 1: towards blue hydrogen.

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Speaker 2: Yes.

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Speaker 1: Next, if we look at Japan, which you mentioned has

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Speaker 1: the hydrogen sixty tracking there, Japan one of the earliest

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Speaker 1: proponents and longest running proponents of a hydrogen economy as

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Speaker 1: it used to be called.

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Speaker 2: So Japan has a demand side incentive for companies to

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Speaker 2: use hydrogen. They've put about nineteen billion dollars on the

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Speaker 2: line or so, so it's a significant amount of money.

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Speaker 2: We think most of this will end up being used

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Speaker 2: for co firing, hydrogen co firing ammonia, probably blue ammonia

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Speaker 2: with coal in Japanese co fired power plants, which is

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Speaker 2: really expensive and certainly not something that BNF projects to

435
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Speaker 2: be the most effective way of hydrogen in at zero

436
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Speaker 2: scenario or in any other scenario. So for Japan, if

437
00:23:04,720 --> 00:23:06,800
Speaker 2: you're a supplier to Japan, there's still some money to

438
00:23:06,840 --> 00:23:08,960
Speaker 2: be made right here a US blue hygien producer, and

439
00:23:09,000 --> 00:23:11,399
Speaker 2: Japanese are willing to pay you. We're going to deliver

440
00:23:11,480 --> 00:23:14,280
Speaker 2: them the ammonia because there's a business case for you.

441
00:23:14,359 --> 00:23:17,200
Speaker 2: So for the suppliers, this is great for the Japanese taxpayers.

442
00:23:17,200 --> 00:23:20,320
Speaker 2: I think this is terrible and sad thing about Japan

443
00:23:20,440 --> 00:23:22,240
Speaker 2: is if they were the first country to even have

444
00:23:22,280 --> 00:23:25,000
Speaker 2: a hydrogen strategy back in twenty fourteen when very few

445
00:23:25,000 --> 00:23:27,679
Speaker 2: others were actually talking very much about hydrogen. But the

446
00:23:27,680 --> 00:23:31,080
Speaker 2: problem is that the Japanese, if you rank the possible

447
00:23:31,200 --> 00:23:34,440
Speaker 2: uses of hydrogen from the best ones, most effective ones

448
00:23:34,480 --> 00:23:37,760
Speaker 2: that we've talked about, like ammonia and the royal refining,

449
00:23:37,800 --> 00:23:41,480
Speaker 2: et cetera, to the least effective ones which include cars

450
00:23:41,760 --> 00:23:45,960
Speaker 2: and ammonia co firing, the least competitive ones, the Japanese

451
00:23:46,000 --> 00:23:48,439
Speaker 2: have been picking from the bottom. They've been picking all

452
00:23:48,480 --> 00:23:51,280
Speaker 2: the wrong uses, and we've written about that so many

453
00:23:51,320 --> 00:23:54,760
Speaker 2: times at B and EF and unfortunately that doesn't seem

454
00:23:54,760 --> 00:23:57,439
Speaker 2: to have changed, and we still see the Japanese carmakers

455
00:23:57,520 --> 00:24:01,040
Speaker 2: doubling down on their efforts to improve with the Toyotami

456
00:24:01,119 --> 00:24:05,280
Speaker 2: Rai hydrogen fuel cell car to start producing trucks fueled

457
00:24:05,280 --> 00:24:07,639
Speaker 2: by hydrogen at the time when in the rest of

458
00:24:07,640 --> 00:24:09,840
Speaker 2: the world most companies are actually giving up on it

459
00:24:10,040 --> 00:24:12,680
Speaker 2: or have given up on it already. So the sad

460
00:24:12,720 --> 00:24:15,359
Speaker 2: thing about Japan is that they had this opportunity to

461
00:24:15,440 --> 00:24:18,000
Speaker 2: be a real leader in the hydrogen sector, but they

462
00:24:18,080 --> 00:24:21,280
Speaker 2: just picked all the wrong users, all the uneconomical uses,

463
00:24:21,480 --> 00:24:23,960
Speaker 2: and they will still be using some of it, but

464
00:24:24,119 --> 00:24:26,359
Speaker 2: it's just going to be really expensive and I would

465
00:24:26,480 --> 00:24:28,760
Speaker 2: certainly not call them a leader at this point.

466
00:24:29,200 --> 00:24:32,520
Speaker 1: So a low value use of a very expensive fuel

467
00:24:32,640 --> 00:24:36,080
Speaker 1: and not a recipe for success, unfortunately for Japan. And

468
00:24:36,480 --> 00:24:41,760
Speaker 1: Korea another strong proponent of hydrogen, but just recently had

469
00:24:41,760 --> 00:24:45,280
Speaker 1: to cancel an auction for procurement of hydrogen. So what's

470
00:24:45,320 --> 00:24:47,040
Speaker 1: the status there, Yeah, the idea was the same.

471
00:24:47,119 --> 00:24:49,600
Speaker 2: Korea is actually quite similar to Japan. They want to

472
00:24:49,720 --> 00:24:53,440
Speaker 2: burn ammonia with coal or wanted to. But you may

473
00:24:53,480 --> 00:24:57,040
Speaker 2: have noticed Korea has at some political turmoil this past

474
00:24:57,119 --> 00:25:00,480
Speaker 2: year with a coup and a new president being elected.

475
00:25:00,560 --> 00:25:04,520
Speaker 2: And this new president, President Lee, is much more pro

476
00:25:04,560 --> 00:25:07,280
Speaker 2: renewable and anti coal, so he now has a target

477
00:25:07,359 --> 00:25:10,040
Speaker 2: to get rid of coal from the power system by

478
00:25:10,040 --> 00:25:12,760
Speaker 2: twenty forty which is inconsistent with some of the previous

479
00:25:12,760 --> 00:25:16,280
Speaker 2: policies passed to support co firing of ammonia with coal

480
00:25:16,320 --> 00:25:19,160
Speaker 2: by twenty forty three. So they canceled the auction, probably

481
00:25:19,160 --> 00:25:21,359
Speaker 2: because of this reason, but no reason was actually given,

482
00:25:21,440 --> 00:25:24,440
Speaker 2: and there's going to be an auction announced by the

483
00:25:24,520 --> 00:25:26,320
Speaker 2: end of the year according to the government. We just

484
00:25:26,359 --> 00:25:27,800
Speaker 2: don't know what kind of an auction it will be,

485
00:25:27,840 --> 00:25:31,000
Speaker 2: whether they'll shorten the limit that the duration of the support,

486
00:25:31,119 --> 00:25:34,480
Speaker 2: whether they just shift to green hydrogen as opposed to ammonia,

487
00:25:34,600 --> 00:25:37,000
Speaker 2: or green as opposed to blue. There's a couple of

488
00:25:37,080 --> 00:25:40,240
Speaker 2: theories we just wrote about that, but it's clear that

489
00:25:40,359 --> 00:25:44,040
Speaker 2: Korea might be moving away from this ammonia co firing

490
00:25:44,160 --> 00:25:45,080
Speaker 2: faster than Japan.

491
00:25:45,560 --> 00:25:50,760
Speaker 1: Another use of hydrogen which had some optimism was for shipping.

492
00:25:50,920 --> 00:25:55,560
Speaker 1: As you would earlier mentioned the International Maritime Organization recently

493
00:25:55,640 --> 00:25:58,879
Speaker 1: just had their mating and deciding on the future of

494
00:25:58,960 --> 00:26:02,399
Speaker 1: day in sen tives and goals for use of clean fuel.

495
00:26:02,440 --> 00:26:04,240
Speaker 1: So how was that shaken out for hydrogen?

496
00:26:04,440 --> 00:26:07,159
Speaker 2: Yeah, so there was a vote on the seventeenth of

497
00:26:07,160 --> 00:26:12,600
Speaker 2: October where the members of the International Maritime Organization, which

498
00:26:12,760 --> 00:26:16,159
Speaker 2: pretty much every country in the world have, voted to

499
00:26:16,240 --> 00:26:21,720
Speaker 2: postpone a proposal to establish a carbon tax on the

500
00:26:21,840 --> 00:26:25,159
Speaker 2: use of fossil based fuels in shipping, which would have

501
00:26:25,520 --> 00:26:29,800
Speaker 2: forced the use of some cleaner fuels, starting probably with LNG,

502
00:26:30,080 --> 00:26:33,320
Speaker 2: but moving to things like methanol and ammonia that we

503
00:26:33,440 --> 00:26:37,160
Speaker 2: talked about earlier. So question is the vote was postponed

504
00:26:37,160 --> 00:26:38,840
Speaker 2: by a year. Is it going to get any better

505
00:26:38,880 --> 00:26:41,919
Speaker 2: next year? I think that's unlikely because the vote was

506
00:26:41,960 --> 00:26:45,240
Speaker 2: postponed mostly because of pressure from the US from President Trump,

507
00:26:45,320 --> 00:26:49,359
Speaker 2: who was very vocal about wanting countries not to vote

508
00:26:49,400 --> 00:26:52,600
Speaker 2: for this proposal and was threatening tariffs if you are

509
00:26:52,640 --> 00:26:55,240
Speaker 2: a country that voted for it. So lots of countries

510
00:26:55,320 --> 00:26:58,200
Speaker 2: ended up voting for this. Postpone meant of the vote.

511
00:26:58,240 --> 00:27:00,920
Speaker 2: So what's going to happen next year? Ask me, Probably

512
00:27:01,000 --> 00:27:03,720
Speaker 2: there's going to be another boat to postpone, which could

513
00:27:03,720 --> 00:27:06,359
Speaker 2: happen for a couple more years in a row. So

514
00:27:06,520 --> 00:27:09,920
Speaker 2: that's unfortunate because that could have been a source of demand.

515
00:27:09,920 --> 00:27:12,640
Speaker 2: But there is still a demand source for shipping fuels

516
00:27:12,760 --> 00:27:14,760
Speaker 2: lead shipping fuels, which is the EU. So there's the

517
00:27:15,320 --> 00:27:19,159
Speaker 2: fuel EU Maritime regulation just the third important source of

518
00:27:19,240 --> 00:27:22,760
Speaker 2: demand for green hydrogen coming out of the European Union.

519
00:27:22,840 --> 00:27:25,439
Speaker 2: And there are companies that are applying to supply these fuels

520
00:27:25,480 --> 00:27:27,600
Speaker 2: based on this regulation, and there's probably going to be

521
00:27:27,680 --> 00:27:30,280
Speaker 2: some fuels delivered based on that regulation. So that's for

522
00:27:30,320 --> 00:27:32,040
Speaker 2: ships calling at European ports.

523
00:27:32,240 --> 00:27:33,840
Speaker 1: So now if we pivot to looking at some of

524
00:27:33,880 --> 00:27:36,479
Speaker 1: the good news stories, some of the chips that are

525
00:27:36,560 --> 00:27:39,520
Speaker 1: landing in the favorable direction for the hydrogen industry, there's

526
00:27:39,560 --> 00:27:44,719
Speaker 1: been some promising results for ammonia tenders in India, I believe.

527
00:27:45,000 --> 00:27:48,840
Speaker 2: Yeah, so India is a really interesting place because India

528
00:27:48,920 --> 00:27:53,120
Speaker 2: has managed to start producing electrolyzers, so that's the machines

529
00:27:53,160 --> 00:27:56,000
Speaker 2: to produce green hydrogen very cheaply or more cheaply than

530
00:27:56,240 --> 00:27:59,400
Speaker 2: most other places. And they also have very very low

531
00:27:59,480 --> 00:28:03,800
Speaker 2: costles with actually a quite a high capacity factor sixty

532
00:28:03,880 --> 00:28:07,840
Speaker 2: seventy percent capacity factor for what they call complex renewables

533
00:28:07,920 --> 00:28:10,399
Speaker 2: or complex renewables auctions, which which has which have been

534
00:28:10,400 --> 00:28:13,639
Speaker 2: going on in India, and that's resulted, together with some

535
00:28:13,800 --> 00:28:16,600
Speaker 2: very generous subsidies from the government and probably a little

536
00:28:16,640 --> 00:28:20,240
Speaker 2: bit of coaxing as well, that's resulted in the lowest

537
00:28:20,400 --> 00:28:23,480
Speaker 2: price for green ammonia that we've seen anywhere on the

538
00:28:23,480 --> 00:28:27,080
Speaker 2: planet so far, below six hundred dollars per ton for

539
00:28:27,240 --> 00:28:29,960
Speaker 2: green ammonia, just still more than the Indian companies pay

540
00:28:30,000 --> 00:28:32,320
Speaker 2: for gray but not that much more. They pay about

541
00:28:32,359 --> 00:28:33,600
Speaker 2: five hundred dollars.

542
00:28:33,440 --> 00:28:36,560
Speaker 1: So there's some implicit subsidies in there that are making

543
00:28:37,280 --> 00:28:40,480
Speaker 1: the price that low. It's not really a true market price,

544
00:28:40,680 --> 00:28:41,160
Speaker 1: no it's not.

545
00:28:41,320 --> 00:28:44,000
Speaker 2: So there's definitely there's a grid free waiver which is

546
00:28:44,080 --> 00:28:46,640
Speaker 2: very important, so they can connect to the grid without

547
00:28:46,800 --> 00:28:51,640
Speaker 2: paying for the transmission of the electricity. There's subsidies for

548
00:28:51,720 --> 00:28:57,360
Speaker 2: capex and for operation of the electoralizer. Also state subsidies

549
00:28:57,480 --> 00:28:59,920
Speaker 2: on top of that, so there's a lot of support

550
00:29:00,200 --> 00:29:01,680
Speaker 2: in the off shore, so.

551
00:29:01,800 --> 00:29:05,280
Speaker 1: Variety of layers. But still India is still the country

552
00:29:05,280 --> 00:29:09,480
Speaker 1: with the most favorable fundamental building blocks for hydrogen economics,

553
00:29:09,640 --> 00:29:13,800
Speaker 1: from low cost electoralizers to cheap and abundant renewable power.

554
00:29:14,200 --> 00:29:17,600
Speaker 1: And if any country is leading the energy transition today,

555
00:29:17,840 --> 00:29:22,240
Speaker 1: it is China's China embracing hydrogen and investing in hydrogen

556
00:29:22,280 --> 00:29:25,440
Speaker 1: with the same enthusiasm and scale that it does in

557
00:29:25,560 --> 00:29:26,360
Speaker 1: wind and solar.

558
00:29:26,600 --> 00:29:29,920
Speaker 2: Yes, it is actually much more so now than at

559
00:29:29,960 --> 00:29:30,800
Speaker 2: the beginning of this year.

560
00:29:30,920 --> 00:29:32,680
Speaker 1: So China has already.

561
00:29:32,360 --> 00:29:35,400
Speaker 2: Is the biggest producer of green hydrogen today globally, the

562
00:29:35,440 --> 00:29:39,640
Speaker 2: biggest producers of electoralizers globally, and that was despite having

563
00:29:39,920 --> 00:29:43,480
Speaker 2: no policy or very little official policy support for the

564
00:29:43,600 --> 00:29:46,200
Speaker 2: use or production of green hydrogen. But now the government

565
00:29:46,240 --> 00:29:48,800
Speaker 2: has come out with a number of policies. Now we

566
00:29:48,920 --> 00:29:51,640
Speaker 2: count at these five really important policies. Some of them

567
00:29:51,680 --> 00:29:56,720
Speaker 2: are sticks forcing state owned companies and provinces to use

568
00:29:57,000 --> 00:29:59,520
Speaker 2: green hydrogen. So we expect, actually there's going to be

569
00:29:59,560 --> 00:30:01,920
Speaker 2: some important developments in China. At the same time, China

570
00:30:01,960 --> 00:30:05,600
Speaker 2: is making it easier to export electoralizers and hydrogen and

571
00:30:05,840 --> 00:30:09,560
Speaker 2: methanol and all these derivatives of hydrogen by aligning standards

572
00:30:09,760 --> 00:30:12,959
Speaker 2: with Europe, for example. So previously the challenge was if

573
00:30:12,960 --> 00:30:14,880
Speaker 2: you buy a Chinese electoralizer, it says there has a

574
00:30:14,880 --> 00:30:17,480
Speaker 2: certain efficiency, you actually plug it into the grid in

575
00:30:17,480 --> 00:30:19,480
Speaker 2: Europe and you realize, oh, no, the efficiency is actually

576
00:30:19,480 --> 00:30:21,760
Speaker 2: about ten percent worse. Why is that because the Chinese

577
00:30:21,840 --> 00:30:24,040
Speaker 2: used to define it differently. Now they define it the

578
00:30:24,080 --> 00:30:26,479
Speaker 2: same as the Europeans to well, So there's many different

579
00:30:26,520 --> 00:30:29,080
Speaker 2: things that we're just writing another piece that's looking at

580
00:30:29,080 --> 00:30:32,680
Speaker 2: a twenty percent support for CAPEX for all these green

581
00:30:32,720 --> 00:30:35,960
Speaker 2: hygen green steel projects. So China, long story short, we

582
00:30:36,040 --> 00:30:38,640
Speaker 2: see as being the second biggest producer of hygrogen that

583
00:30:38,800 --> 00:30:41,360
Speaker 2: outlook we talked about by twenty thirty one point two

584
00:30:41,360 --> 00:30:44,440
Speaker 2: million tons, all of it green. And now this enhanced

585
00:30:44,440 --> 00:30:47,800
Speaker 2: support from the Chinese government for all I know, maybe

586
00:30:47,840 --> 00:30:50,560
Speaker 2: next year's outlook we'll actually be revising upwards for China.

587
00:30:50,800 --> 00:30:53,560
Speaker 1: So there you have it. The rivalry between the US

588
00:30:53,560 --> 00:30:57,520
Speaker 1: and China extends into the hydrogen sphere, with the US

589
00:30:57,560 --> 00:31:01,520
Speaker 1: backing the blue hydrogen carbon capture root horse and the

590
00:31:01,600 --> 00:31:05,760
Speaker 1: Chinese backing the green hydrogen horse, with an interesting battle

591
00:31:05,840 --> 00:31:07,840
Speaker 1: yet to come. So if anybody's going to make green

592
00:31:07,880 --> 00:31:10,440
Speaker 1: hydrogen work, it looks like it it would be the Chinese.

593
00:31:10,520 --> 00:31:14,160
Speaker 1: So perhaps not all these lasts for hydrogen, yet there

594
00:31:14,240 --> 00:31:17,840
Speaker 1: is some chance of the costs falling and fullcast being

595
00:31:17,880 --> 00:31:20,720
Speaker 1: revised up Martin. Thank you very much for johnn Us.

596
00:31:20,880 --> 00:31:32,840
Speaker 1: Thank you, Cobin. Today's episode of Switched On was produced

597
00:31:32,880 --> 00:31:36,280
Speaker 1: by Cam Gray with production assistance from Kamala Shelling.

598
00:31:36,480 --> 00:31:39,640
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599
00:31:39,800 --> 00:31:42,840
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600
00:31:42,840 --> 00:31:46,040
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601
00:31:46,080 --> 00:31:48,880
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602
00:31:48,920 --> 00:31:52,320
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