Speaker 1: Hi, this is Dana Perkins and you're listening to Switch
Speaker 1: on the b F podcast. Today, we're going to talk
Speaker 1: about hydrogen electrolyzers. With a number of favorable policy incentives,
Speaker 1: we really expect to see this market take off over
Speaker 1: the next decade, and this is going to be around
Speaker 1: the world, from the US to Europe to China. The
Speaker 1: conditions are right for growth, but let's think about how
Speaker 1: much money is this actually going to require, and what
Speaker 1: technologies are the front runners, and also what will be
Speaker 1: the emerging fuel source to make all of this hydrogen,
Speaker 1: and will it be more locally produced or shipped around
Speaker 1: the world, and a lot of other questions. So on
Speaker 1: today's episode, I get to speak with Adithia Bashum and
Speaker 1: Matthew Bravante. They are both hydrogen analysts at b F.
Speaker 1: Note that B and EF does not provide investment or
Speaker 1: strategy advice, and we have a full disclaimer at the
Speaker 1: end of the show. But now I want to talk
Speaker 1: about hydrogen with Addie and Matt. Let's have a listen. Addie,
Speaker 1: thank you for joining the show today. Hight A great
Speaker 1: to be here, and Matt thank you for joining as well. Thanks. Dana,
Speaker 1: happy to be here great, So we have two members
Speaker 1: of our team that focus on hydrogen here to talk
Speaker 1: about electrolyzers. And for the uninitiated, that begs the question,
Speaker 1: what is an electrolyzer. An electrolyzer is it's fundamentally a
Speaker 1: piece of equipment to gas separating piece of equipment. So
Speaker 1: it takes water and electricity and separates that into two gases,
Speaker 1: hydrogen and oxygen. So it's a way to produce hydrogen gas,
Speaker 1: which we'll get into as a range of applications. But
Speaker 1: it's a way to produce hydrogen gas without any sort
Speaker 1: of residual carbon leading the system. So it starts with
Speaker 1: a carbon free source of hydrogen water and ends up
Speaker 1: with a hydrogen product that can be considered zero carbon
Speaker 1: emissions depending on the electricity source. And the zero carbon
Speaker 1: emissions aspect is why hydrogen is likely to take off?
Speaker 1: Is that correct? Yeah? I think hydrogen it's gone through
Speaker 1: many boom and bus phases of excitement, but fundamentally, the
Speaker 1: thing that's exciting about it is it can be used
Speaker 1: as a molecule for chemical applications. It can be used
Speaker 1: as an energy molecule, but at the point of use
Speaker 1: because it's a molecule with no embedded carbon. So when
Speaker 1: you think of conventional hydrocarbons, they're usually some amount of
Speaker 1: carbon molecules some amount of hydrogen molecules, and when they're
Speaker 1: combusted or used in industry, there's usually some sort of
Speaker 1: oxidation reaction which creates c O two, which is released
Speaker 1: in the atmosphere, and we all know that is a
Speaker 1: negative outcome with hydrogen, but there is no carbon in
Speaker 1: the molecule, so when it's oxidized or used in some
Speaker 1: other chemical application, usually the byproduct is a bit of
Speaker 1: heat and some water, So much better for the world
Speaker 1: in terms of carbon question. What's interesting about hydrogen or
Speaker 1: low carbon hydrant specifically is that as a molecule it
Speaker 1: can replace uses where it's already being used today, where
Speaker 1: it's produced from fossil fuels, for example as a feedstock
Speaker 1: for industry, but to produce ammonia in oil refineries, to
Speaker 1: produce methanol, all these chemicals that we really depend on,
Speaker 1: and also as a molecule to decarbonize other sectors with
Speaker 1: hydrogen is not used today, for example in steel, where
Speaker 1: it can help reduce iron oxide to iron and be
Speaker 1: precursor to green steel. So an important molecule for the future,
Speaker 1: would we think about decarbonizing And what we're going to
Speaker 1: talk about today really is you've done this forward looking
Speaker 1: market outlook on the electroalizer market, and to use your
Speaker 1: own term, you say that the market is about to
Speaker 1: take off. What do you mean by that? And why
Speaker 1: is it about to take off? I guess there'll be
Speaker 1: a lot of this kind of onion to unpeel here.
Speaker 1: I guess In short, what is it that has put
Speaker 1: us at this precipice our starting point? Our Global Electoralizer
Speaker 1: Outlook twenty thirty is really the Hydrogant team's first attempt
Speaker 1: at assessing policies by region, looking at announced projects and
Speaker 1: aggregate and looking at the economics of producing carbon hydrogen
Speaker 1: in certain locations, putting all of that knowledge together in
Speaker 1: one document and come up with an estimate for how
Speaker 1: many giga outs of electrolyzer capacity we can see deployed
Speaker 1: by the end of this decade. Yeah, I think the
Speaker 1: reference you're onion the first kind of thing to peel back,
Speaker 1: and the real impetus around this report is just, at
Speaker 1: least in my mind, it's the funding that we've seen
Speaker 1: come online for hydrogen in the past twelve to eighteen
Speaker 1: months from very large federal or regional government levels, and
Speaker 1: I think when you think about the long term or
Speaker 1: the the medium to long term out a lot of
Speaker 1: that activity is going to be driven by public financing,
Speaker 1: public support. It's very analogous to the way wind and
Speaker 1: solar initially got their boost and climbed down the cost curves.
Speaker 1: We think we're seeing similar type of incentives for hydrogen,
Speaker 1: and we think that will help hydrogen climb down the
Speaker 1: same sort of cost curves get to a point where
Speaker 1: we're going from now where we hardly use what we
Speaker 1: would call renewable hydrogen or electrolytic hydrogen to a point
Speaker 1: where in ten years we could be using a serious
Speaker 1: amount of this stuff. And it really starts with many
Speaker 1: million billions of dollars that we see coming across the
Speaker 1: world from different governments to help this technology get a footing,
Speaker 1: so in ten years the cost declines, maybe at a
Speaker 1: place where private industry is ready to take it over.
Speaker 1: If you are really going to draw that parallel between
Speaker 1: solar and wind and other renewables that have a really
Speaker 1: low levelised cost of electricity. So now that we're talking
Speaker 1: about hydrogen the fact that policy plays such an important
Speaker 1: role in the next decade. For it where in the world,
Speaker 1: and I guess which governments are supporting it. So where
Speaker 1: we see the strongest policy support within our global electrocalizer
Speaker 1: outlook is within Europe, US and China. Like the biggest
Speaker 1: markets leading on hydrogen will be these in terms of deployment.
Speaker 1: We can talk about each one individually, but I'll start
Speaker 1: with Europe. Europe really wants to become a hydrogen champion
Speaker 1: in terms of technology deployment, in terms of expertise, it
Speaker 1: is developing within this sector and has been on the
Speaker 1: forefront of trying to set standards for hydrogen production and
Speaker 1: also setting the subsidies that they are leading. At the
Speaker 1: same time, China has been building manufacturing expertise within the sector,
Speaker 1: especially in electrolyzer technology. They have much larger factories already
Speaker 1: building much larger projects. So for comparison, we in Europe,
Speaker 1: the biggest project that we have today is about twenty
Speaker 1: megawats and sizes. In comparison, in China we already have
Speaker 1: about a hundred fifty megawat project commission and next year
Speaker 1: we expect another two hundred sixty megawats project to be commissioned.
Speaker 1: So in terms of size, China is already establishing projects
Speaker 1: that are an order of magnitude larger than what we're
Speaker 1: seeing in Europe. And the last one is the U
Speaker 1: S which I think Matt can comment on. Yeah, and
Speaker 1: just to bring in the global perspective on it, I
Speaker 1: think when we at a high level, when we think
Speaker 1: about how these governments subsidize hydrogen, there's a couple different
Speaker 1: ways to do it. In China, it's very much a
Speaker 1: heavy hand of government approach, having big industrial users of
Speaker 1: hydrogen adopt low carbon practices to kind of hit their
Speaker 1: emissions peak by twenty thirties at the national government it
Speaker 1: wants to hit. In the US, you see a very
Speaker 1: different approach. It's pretty much all on the supply side. Um.
Speaker 1: There was recently passed as a part of the Inflation
Speaker 1: Production Act hydrogen production tax credit, the first ever hydrogen
Speaker 1: production tax credit in the world, which is just gonna
Speaker 1: make hydrogen extremely cheap to produce in the States and
Speaker 1: then it will kind of be up to the demand
Speaker 1: side to figure out, now we have this cheap hydrogen,
Speaker 1: what are we gonna use it for? And then you
Speaker 1: see in Europe which you know Addie can talk about
Speaker 1: in much greater detail, kind of a hybrid approach where
Speaker 1: there's going to be a fiscal incentives on the production side,
Speaker 1: there's probably going to be some element of demand side
Speaker 1: incentives for the use of hydrogen. Were really kind of
Speaker 1: trying to balance the approach in the US UM specifically,
Speaker 1: and in North America Canada is taking. It looks like
Speaker 1: Canada's going to take a very similar approach, but it's
Speaker 1: really a supply side story driven by low economics. So
Speaker 1: the production tax credit that the US just passed is
Speaker 1: going to make without any other subsidies you know, coming
Speaker 1: online and other regions, is going to make the US
Speaker 1: the cheapest place to produce hydrogen in the entire world
Speaker 1: through when the tax credit expires. So we think that
Speaker 1: there's there was very little activity in the US before this.
Speaker 1: Europe has been signaling for a few years now that
Speaker 1: they had very strong hydrogen ambitions. China is much the same.
Speaker 1: In the US, it wasn't It was a pretty quiet
Speaker 1: market and then seemingly out of nowhere, really out of
Speaker 1: the last twelve months, we've gotten this hydrogen production tax
Speaker 1: credit ount of the Biden administration, which really changes the
Speaker 1: game in terms of level life costs of hydrogen and
Speaker 1: then in terms of what you can do with it
Speaker 1: as an energy molecule or chemical molecule when you have
Speaker 1: it at such a low price. What's really interesting right
Speaker 1: now in Europe is Europe, and in european industry is
Speaker 1: now looking at the US and the Inflation Reduction Act
Speaker 1: and seeing that as a huge opportunity to deploy capacity
Speaker 1: within the US and now using that as a way
Speaker 1: to justify more subsidies within Europe. So there's very much
Speaker 1: a race going on or like people, the industry is
Speaker 1: making it a race of like who has the better
Speaker 1: framework to deploy hydrogen projects. So both in the stories
Speaker 1: are currently learning from each other, which is interesting in
Speaker 1: terms of what what will come out of this. Yeah,
Speaker 1: and it's very much like a I mean, I don't
Speaker 1: know if we go so far as call it a competition.
Speaker 1: It's very much like who has the most funding, who
Speaker 1: has the best funding? You know, where do the project
Speaker 1: developers want to go? Where does the capital that's going
Speaker 1: to deploy this stuff want to go? And it's kind
Speaker 1: of been a five months ago it was all in
Speaker 1: Europe and the inflation reduction happens, and we're talking to
Speaker 1: folks in Europe who are quite jealous and see a
Speaker 1: lot of capital moving to the US. So it's very
Speaker 1: much a game of tag here between the US and
Speaker 1: you in terms public dollars in public support well in
Speaker 1: a forward looking race for cost declines in terms of
Speaker 1: hydrogen production, But what's it going to cost in order
Speaker 1: to drive that? And I guess how much money it's
Speaker 1: been committed to be spent on driving the cost down.
Speaker 1: So we tracked this every six months as part of
Speaker 1: a hydrogen market outlook globally. We're now seeing as of
Speaker 1: June this year, we're seeing about hundred twenty six billion
Speaker 1: dollars committed in funding for hydrogen or to which hydrogen
Speaker 1: projects can apply. So this includes both direct subsidies to
Speaker 1: the hydroen industry or technology neutral funds for climate protection
Speaker 1: in some sense where hydrogen projects can also apply. In
Speaker 1: terms of where we see it as funding being split
Speaker 1: out at the US and European Union are really leading
Speaker 1: within this funding. Whereas European Union fundings is capped by
Speaker 1: a budget, the US doesn't necessarily have a budget, and
Speaker 1: Matt can definitely speak to that as well. Yeah, I mean,
Speaker 1: it's an interesting one, and we can when we get
Speaker 1: into kind of analysis behind the report and kind of
Speaker 1: how we set our outlook here. We used a lot
Speaker 1: of the publicly available information the government, mainly how much
Speaker 1: money they thought they were going to spend. Some of
Speaker 1: the systems are a finite pool of money, so the
Speaker 1: government says we're going to get An example in the
Speaker 1: US is the Infrastructure Bill is going to give eight
Speaker 1: billion dollars to projects. And really the only variable you
Speaker 1: can play with when setting an outlook like this is
Speaker 1: how cheap is the equipment to produce the hydrogen? Because
Speaker 1: you get eight billion dollars to build it, and whatever
Speaker 1: that costs to do per unit of of capital cost,
Speaker 1: that's how much hydrogen you get. But then there are
Speaker 1: other buckets like the production tax credit, where there's a
Speaker 1: set of rules that a project developer has to adhere
Speaker 1: to around wage requirements, around life cycle emissions of the
Speaker 1: hydrogen production system. But if you qualify to those rules,
Speaker 1: you get the tax credit. And and the federal government
Speaker 1: has released their estimations on how much they think it
Speaker 1: will cost them, we actually think it's going to be
Speaker 1: a bit more expensive than they're anticipating, but it's really,
Speaker 1: however many people want to come get it and adhere
Speaker 1: to the rules, is going to be the final number
Speaker 1: that gets deployed financially speaking. So there's a bit of
Speaker 1: that in the US and around the world, and it'll
Speaker 1: it will certainly be interesting to see how accurate some
Speaker 1: of these forecasts from the budget offices of these various
Speaker 1: governments end up being. Now for a very short break,
Speaker 1: stay with us now, because hydrogen requires an energy source
Speaker 1: in order to make it, and I know we could
Speaker 1: spend time talking about the whole color wheel and all
Speaker 1: of the different colors associated with the different fuel sources,
Speaker 1: but let's actually instead talk about exactly what it is
Speaker 1: is that we want to get to renewables. If we're
Speaker 1: going to make hydrogen from renewables in the US, in China,
Speaker 1: in Europe, anywhere in the world. Is the amount of
Speaker 1: renewables required in order to actually supply all of that
Speaker 1: energy coming online? Is that being considered as a part
Speaker 1: of this hydrogen development. Sure, I can give you some
Speaker 1: numbers around our global Electrolyzer forecast that help frame this discussion.
Speaker 1: In our forecast that we've said based on policies across regions.
Speaker 1: We the hydrogen electrolyzer market girls from about two giga
Speaker 1: wats of electroalizers deployed by the end of this year
Speaker 1: to about two hundred forty gigawatts cumulatively deployed by the
Speaker 1: end of this decade by twenty thirty. That's about over
Speaker 1: a hundred fold increase in installed capacity. All of these electrolyzer,
Speaker 1: as you say, will need electricity, and likely renewable electricity,
Speaker 1: So we estimated these electroalizers need about one thousand, three
Speaker 1: hundred tera hours of electricity by twenty thirty. One thousand,
Speaker 1: three other terror hours is about four percent scent of
Speaker 1: all global electricity demand. And this four percent number is
Speaker 1: pretty much the same as we see, for example, electric
Speaker 1: vehicles and NEOs economic transition scenarios. To put that into context,
Speaker 1: so we need to be not only for electrifying vehicles
Speaker 1: industry and so on, but also hydro production in the
Speaker 1: same order of magnitude. What's interesting about sort of the
Speaker 1: electricity side of things as well for electrolyzers is that
Speaker 1: this number varies quite a bit. So while it might
Speaker 1: be four percent in China or the US, it's about
Speaker 1: eleven of all the electricity produced in Europe and manned
Speaker 1: in Europe will need to go to electrolyzers to deploy
Speaker 1: the capacity we see it in Europe. And this electrolyzing
Speaker 1: capacity if it comes from renewables. In a scenario where
Speaker 1: we assume that about half of this electrolyzed capacities electricity
Speaker 1: supply is supplied by its solar, we get to about
Speaker 1: six hundred seventy gigawatts of renewable energy capacity, so both solar,
Speaker 1: onshore wind, and offshore wind. And we compared that to
Speaker 1: b nfs A solar and wind forecasts out to twenty
Speaker 1: thirty And what this number really means is that sixteen
Speaker 1: percent of all the renewables that we estimate are built
Speaker 1: between now and twenty would need to go to electrolyzes.
Speaker 1: So either they are built on top of our existing
Speaker 1: forecast or some of it is diverted away from existing
Speaker 1: uses for that electricity. Wow, that is a huge amount
Speaker 1: of additional electricity that needs to be developed for this use.
Speaker 1: But then I guess that brings me to the question
Speaker 1: what is the potential for hydrogen to bring down emissions?
Speaker 1: Because hydrogen is oftentimes talked about is a fuel for
Speaker 1: the hard to abate space and the things that we
Speaker 1: really don't have, at least today, viable solutions for decarbonizing
Speaker 1: their emissions. So do we have a view on what
Speaker 1: the potential is for emissions reduction with this investment. I
Speaker 1: think there's a really important point that our team makes
Speaker 1: a lot, and it's probably seen as quite controversial in
Speaker 1: the hydrogen twitter verse or whatever public forum you're reading
Speaker 1: your hydrogen news in the context of how many go
Speaker 1: lots of renewables we will need just to get to
Speaker 1: and if you look at the production numbers of hydrogen,
Speaker 1: we're still not even close to replacing the hydrogen that
Speaker 1: we use today, the carbon intensive hydrogen. So I think
Speaker 1: in terms of emissions reduction essential the most important question
Speaker 1: to ask is what are we using the hydrogen for
Speaker 1: and is that the best use of the hydrogen from
Speaker 1: an emissions reduction standpoint. And we've been speaking about this
Speaker 1: long time. Our founder Mikelibrick famously has his hydrogen ladder.
Speaker 1: But there's a set of industries where we think hydrogen
Speaker 1: is going to be extremely critical to reducing the emissions intensity.
Speaker 1: Things like chemical production in methanol and ammonia fuels, refining,
Speaker 1: both conventional oil refining and also sustainable fuel refining, like
Speaker 1: sustainable aviation, fuels, renewable diesel, things such as that. Where
Speaker 1: hydrogen is really going to be needed no matter what,
Speaker 1: and what's going to be a really high impact area,
Speaker 1: we can get low carbon or carbon free hydrogen into
Speaker 1: the space. And there are other places where you know,
Speaker 1: you definitely can use hydrogen it's completely feasible, like road
Speaker 1: based transport, things like power generation. Hydrogen, at least in
Speaker 1: the near term, is going to be a pretty precious resource.
Speaker 1: So can we incentivize hydrogen to go into the areas
Speaker 1: where it's going to make the largest emissions impact. There's
Speaker 1: a big question. And if we can do that, then yeah,
Speaker 1: there's quite a bit of potential to reduce emissions from
Speaker 1: these hard to debate sectors. I fully agree with Matt
Speaker 1: on this. It really depends on where that hydrogen is
Speaker 1: being used. To give you an example, based on our outlook,
Speaker 1: all these electrolyzers that were saying are going to get
Speaker 1: built by twenty thirty produce about twenty five million tons
Speaker 1: of green hydrogen by twenty thirty. That's about a quarter
Speaker 1: a bit more than a quarter twenty seven percent of
Speaker 1: existing gray hydrogen demand. So hydrogen produced from fossil fuels.
Speaker 1: Current fossil fuel based hydrogen emits about eight to nine
Speaker 1: hundred million tons of carbon emissions a year, I believe.
Speaker 1: So if the green hydrogen that is that we see
Speaker 1: being produced here is replacing gray hydro and you're looking
Speaker 1: at replacing about a quarter of the existing gray hydrant emissions,
Speaker 1: that could be reduced. Now, there are other uses where
Speaker 1: emissions could be higher, for example in steel because steel
Speaker 1: is currently produced using a coal so the emissions intensity
Speaker 1: of producing that is quite high, So the benefit of
Speaker 1: using hydra and could be higher. But these are real
Speaker 1: choices and tradeoffs that need to be made. And on
Speaker 1: the demand side, how much of it do you see
Speaker 1: actually going to fuels versus industries That really depends. So
Speaker 1: I think in the near term a lot of the
Speaker 1: mandates and regulation that is being set around encouraging that
Speaker 1: the clean hydrant industry to develop, particularly is focused on
Speaker 1: industrial decarbonization, so that's where you see going into refineries,
Speaker 1: ammonia production, methanol production, and so on. At the same time,
Speaker 1: when you see a lot from private actors as well
Speaker 1: as a push for using hydra and as transport fuels.
Speaker 1: Here we see really see the big potential in heavy
Speaker 1: duty transport to think about ships, planes, and some very
Speaker 1: heavy trucks that go very long distances and so on.
Speaker 1: There is some porsh for that, for example, in Europe,
Speaker 1: as much as they want to decarbonized industry, at the
Speaker 1: same time there are mandates being put in place to
Speaker 1: decarbonized a small percentage of transport as well. But I
Speaker 1: think especially because in industry right now, hydrogen in the
Speaker 1: existing use cases is a drop in replacement. So ideally
Speaker 1: you can take out the gray hydrant and use the
Speaker 1: green hydrogen in your existing processes without changing much of
Speaker 1: the equipment. For fuels, you will need to build separate
Speaker 1: plans to produce them in the first place. So, for example,
Speaker 1: when we talk about fuels, particularly, the way we're seeing
Speaker 1: hydrant being used in ships and planes is not as
Speaker 1: pure hydrogen, but as methanol or ammonia or kerosene that
Speaker 1: is produced synthetically from green hydrant with a carbon source.
Speaker 1: And for that we need production plants that actually produce
Speaker 1: these fields as well. So let's talk a little bit
Speaker 1: about technology. There are a couple different technologies out there
Speaker 1: for hydrogen production, which ones are emerging as the front
Speaker 1: runner or is it too early to tell. I think
Speaker 1: we could talk about none of There's so many layers
Speaker 1: to the technology map of hydrogen technologies, but I think
Speaker 1: in its simplest form, the two most common technologies we
Speaker 1: often talk about our electrolytic pathways, so that's using electrolyzer
Speaker 1: technologies and some sort of power source. And then what
Speaker 1: we define as thermo chemical pathways, which most commonly is
Speaker 1: the reformation of messane and steam, or there is the
Speaker 1: restoration of methane and absence of just normal air. But
Speaker 1: within those two technologies, there's a subset of technologies. On
Speaker 1: the electrolytic side, there's really two electrolyzer technologies vying for dominance.
Speaker 1: There's line technologies and pen technologies, a proton exchange, membrane technologies,
Speaker 1: and we track these as as an input to our
Speaker 1: market outlook and other things, and I think the story
Speaker 1: really is still kind of a toss up in most
Speaker 1: parts of the world. So if you exclude China, which
Speaker 1: you know is a pretty big to exclude, but if
Speaker 1: you exclude China from our latest market outlook, it's roughly
Speaker 1: a fifty fifty split between pen technologies and alkaline technologies
Speaker 1: in terms of which electroalizers developers are choosing to procure.
Speaker 1: But China is such a large market and they have
Speaker 1: such a dominant alkaline industry already that when you aggravate
Speaker 1: all the numbers, it looks like alkaline is really the
Speaker 1: dominant technology. Or on the methane reformation side, there's really
Speaker 1: two technologies vying for dominance steam methane reformation and auto
Speaker 1: thermal reformation. There are two processes that are quite similar,
Speaker 1: and they have a couple of quirks that are different
Speaker 1: that we can get into. But we're actually seeing a
Speaker 1: lot of technology developers or project developers not making a call,
Speaker 1: a lot of unknown projects to date, but out of
Speaker 1: the projects that are announced, we see auto thermal reformation
Speaker 1: leading the way. So it's still, i would say, just
Speaker 1: thinking about the market as a whole, it's still probably
Speaker 1: too early to call which technologies are gonna dominate. They'll
Speaker 1: probably each have some success in their own right, but
Speaker 1: that's the market as we're seeing it right now, and
Speaker 1: within a forecast. The way we see is developing at
Speaker 1: the moment is that very likely within China, alkaline dominates
Speaker 1: and continues to dominate production capacity in Europe and the US.
Speaker 1: You'll see and even split between PM proto and exchange
Speaker 1: membrane technology and alkaline technology at the same time. So
Speaker 1: the cost China is such a dominant market, as Matt
Speaker 1: already said, until we see about seventy of capacity globally
Speaker 1: being alkaline electroalizers, and from then on the share of
Speaker 1: autlines slowly drops to about six until still the dominant technology.
Speaker 1: But you can see how proton exchange membrane technology is
Speaker 1: already making in rows in that by the end of
Speaker 1: this decade is taken up a larger and larger market share.
Speaker 1: Now for a very short break stay with us. So
Speaker 1: even with the right policy environment, you definitely have private
Speaker 1: companies that are building a lot of this technology and
Speaker 1: deploying it. So on the supply side, what are some
Speaker 1: of the key names that we should know, What are
Speaker 1: the companies that are doing this. There's definitely already established
Speaker 1: companies manufacturing companies who are looking into electoralizer as a
Speaker 1: new busines this area. These are for example, in Europe
Speaker 1: Siemens Energy, which produces other technologies like gas turbines already
Speaker 1: but also now getting into the business of producing electorallyzers,
Speaker 1: particularly proton exchange membering electoralizes that scale. In the US
Speaker 1: you have the same thing with companies like Commons who
Speaker 1: produce other equipment but now coming into electoralizing business. Same
Speaker 1: with again the synchropland others like big established manufacturers who
Speaker 1: are now looking at the electrocizing business. At the same time,
Speaker 1: you now have emerging pure play hydrogen players within this
Speaker 1: which do nothing else other than electoralizers and maybe some
Speaker 1: refueling stations. These are your nails of the world. So
Speaker 1: now in Norway, your I t M Power in the UK,
Speaker 1: your Plug Power in the US which also does other
Speaker 1: slightly other business but mostly focused on producing electrolyzers and
Speaker 1: fuel cells, so really focused on the hydrogen industry as
Speaker 1: a whole. The last players all add to what Ali
Speaker 1: just said is there are some folks on the demand side,
Speaker 1: so people who could either conventionally use hydrogen as a
Speaker 1: drop in replacement for industrial applications or see a pathway
Speaker 1: to using hydrogen in their business model in some way
Speaker 1: really leaning it and trying to develop a hydrogen business
Speaker 1: for themselves. This is like mining company in Australia for
Speaker 1: test key future industries. As you think of conventional energy players,
Speaker 1: oil players like the Exons and Chevrons of the world.
Speaker 1: You think of conventional gas producers, gas handlers, So the
Speaker 1: folks that make the carbon intensive hydrogen today, the air
Speaker 1: lia kids their products, the lens of the world, and
Speaker 1: then other folks, a lot of fertilizer companies getting into
Speaker 1: the ring, understanding that hydrogen is a major input to
Speaker 1: their process, maybe wanting to integrate a bit vertically up
Speaker 1: into the hydrogen production space. So it's a healthy combination
Speaker 1: of people producing the technology and the upstream people in
Speaker 1: the downstream getting interested in understanding a bit more about
Speaker 1: how the changes are gonna work and if there's any
Speaker 1: opportunity for their business in this low carbon transition. But
Speaker 1: it's a pretty good mix of companies up and down
Speaker 1: the supply chain putting their hand up and getting interested.
Speaker 1: So putting myself in the shoes of someone in the
Speaker 1: supply chain and putting my corporate strategist at on. If
Speaker 1: I'm working at one of these companies, what are some
Speaker 1: of the reasons I might be cautious and what are
Speaker 1: some of the barriers that may stand in the way
Speaker 1: of all of this growth? That we're talking about. So yeah,
Speaker 1: if I was in that position, you can see that
Speaker 1: governments are setting out huge targets, a lot of ambition
Speaker 1: on producing hydrogen, and the projects are not yet taking off,
Speaker 1: like very few final investment decisions in this space so far.
Speaker 1: And a lot of that is one because a lot
Speaker 1: of the subsidies is particularly in Europe for example, are
Speaker 1: announced but haven't been given out yet or allocated yet.
Speaker 1: For example, Europe is talking about contracts for difference mechanisms
Speaker 1: to really encourage commercial projects that not just our pilots
Speaker 1: and test facilities, but really commercial projects. Those subsidies are
Speaker 1: not available yet, they will be available over the next year.
Speaker 1: A lot of that still needs to be figured out.
Speaker 1: So one subsidy availability. The other one that both the
Speaker 1: US and Europe are trying to figure out is what
Speaker 1: actually counts a screen hydrogen. It's sound as simple as
Speaker 1: it is, but we don't have a clear definition across
Speaker 1: the board of under what conditions can hydrogen be produced
Speaker 1: and be considered a green product. So that's not only
Speaker 1: the emissions threshold which is being set by the US
Speaker 1: and Europe and other countries, but also how do I
Speaker 1: encourage more renewables deployment to overcome this gap and sort
Speaker 1: of not having enough renewable's capacity to supply all these
Speaker 1: hydrogen production, how do I make sure that all these
Speaker 1: electrolyzers don't add too much additional demand on the electricity
Speaker 1: grid and so on. So what the Europe is trying
Speaker 1: to define now the US is at the same point
Speaker 1: is can I produce hydrogen from renewables if I'm still
Speaker 1: connected to the grid, Like, under what conditions can I
Speaker 1: do that? Under what hour of the day can I
Speaker 1: do that? And so on. So that's really where a
Speaker 1: lot of the discussions is still going on, and then
Speaker 1: we don't have a resolution yet. Yeah, Dana, we could
Speaker 1: spend a whole separate podcast just talking about this question,
Speaker 1: the question around grid connection, the time of use, additionality
Speaker 1: of renewables. These are really at the forefront of the
Speaker 1: policymakers and developers in Europe and in the States. It's
Speaker 1: a really important question. I think if I had to
Speaker 1: put my corporate strategy had on that would probably be
Speaker 1: number one. And the number two is just the trickiest
Speaker 1: part of the hydrogen ecosystem right now is the mid stream.
Speaker 1: So thinking about transport and storage. It's famously the lightest gas,
Speaker 1: the smallest gas, and it's really tricky to just put
Speaker 1: it in a pipeline or put it on a ship
Speaker 1: and get it to where it needs to go. Historically,
Speaker 1: hydrogen is almost always produced at the point of use,
Speaker 1: so they have a big hydrogen production facility right next
Speaker 1: to the refinery or ammonia facility that's going to be
Speaker 1: used in And that's because this mid stream aspect is
Speaker 1: so tricky. And when you start to think about the
Speaker 1: variable production of hydrogen from solar wind, so you're only
Speaker 1: producing it when the sun is shining or the wind
Speaker 1: is blowing, and you're feeding that into a system like
Speaker 1: a refinery ammonia facility that has high uptime requirements. To
Speaker 1: the storage aspect gets really challenging. The transportation aspect of
Speaker 1: it gets really challenging if you want to put the
Speaker 1: renewables in one place and the electoralizer or the hydrogen
Speaker 1: demand source and another. So I think when we get
Speaker 1: to thinking about the ten year forecast and what's going
Speaker 1: to be reality over the next decade when this stuff
Speaker 1: really scales, it's really going to be a question of
Speaker 1: what are the smartest ways to move this stuff and
Speaker 1: what are the smartest places to use it considering the
Speaker 1: challenges around the mid stream. This is why initially we
Speaker 1: as a team looking at this industry are seeing hydrogen
Speaker 1: production and demand being very closely located together. So we're
Speaker 1: thinking about big hydrogen hubs where hydrogen is produced on
Speaker 1: site and delivered to an industrial cluster right next door,
Speaker 1: and where you overcome a lot of these issues around
Speaker 1: storage and transport, which needs to be figured out at
Speaker 1: one point as well, and on the other hand, also
Speaker 1: take a lot of time to develop. It takes like
Speaker 1: three to seven to ten years to develop a pipe,
Speaker 1: a new pipeline for hydrogen. So while that is being developed,
Speaker 1: we see a lot of these hydrogen production and demand
Speaker 1: being co located because it's incredibly difficult to contain, is
Speaker 1: it not. Not only is it very light, but it
Speaker 1: can escape from a lot of different spaces quite easily.
Speaker 1: So the physical limitations and where we can store it
Speaker 1: and for how long are part of the restriction. Let's
Speaker 1: not sound too many alarms here. The hydrogen has been
Speaker 1: moved around to pipelines for decades. It's heavily understood, it's
Speaker 1: heavily utilized, so there's no like technological hurdles to getting
Speaker 1: to the point where we can figure out the mid stream.
Speaker 1: I think from a global trade perspective, you hear a
Speaker 1: lot of folks saying they're gonna ship hydrogen from Australia
Speaker 1: to Europe, or Canada to Europe, or ship to Japan
Speaker 1: from South America and those there's a lot of head
Speaker 1: scratching to be down there. If you're shipping hydrogen to
Speaker 1: be used as hydrogen and any of those methods, it
Speaker 1: just adds so much cost. You have to liquefy it,
Speaker 1: you have to compress it and ship a very small
Speaker 1: amount of it, or you can turn it into something
Speaker 1: like ammonia, which you know works if you're going to
Speaker 1: use it as ammonia in the final destination. But if
Speaker 1: you have to re crack it back into hydrogen, the
Speaker 1: economics just really poor. So it's not so much a
Speaker 1: technological issue as is as it is an economic issue.
Speaker 1: But yeah, it's still one that we definitely need to
Speaker 1: figure out. And I guess the less thing I'll say
Speaker 1: not to dampen the party too much, but hydrogen itself
Speaker 1: is a gas with warming potential, and it doesn't make
Speaker 1: that big of a difference today. But if we come
Speaker 1: to this world in where we are using a lot
Speaker 1: of hydrogen, we will need to come up with strict
Speaker 1: control measures for leakage because we don't want to trade
Speaker 1: one greenhouse gas for another. And yeah, it'll it'll definitely
Speaker 1: be a consideration moving forward and seeing some parallels here
Speaker 1: actually with what you've just said regarding how we really
Speaker 1: think about natural gas, and in many respects at one
Speaker 1: point in time that it was lauded as this much
Speaker 1: less carbon intensive energy source that provided tremendous flexible capacity
Speaker 1: for wind and solar when they weren't able to produce.
Speaker 1: But there's a lot of discussion now about actually phasing
Speaker 1: out natural gas use because of the emissions in the
Speaker 1: longer term. Do you think that hydrogen will have a
Speaker 1: similar trajectory or because of the places that it occupies
Speaker 1: in our energy and consumption space that where there really
Speaker 1: isn't a viable alternative, that it won't There's a lot
Speaker 1: of talk about comparing hydrogen to natural gas today. Fundamentally,
Speaker 1: what we're trying to say within our market outlooks and
Speaker 1: what we're seeing as well, is that hydroen will occupy
Speaker 1: some of the spaces where natural gas is used today,
Speaker 1: for example an industry, but it would also not go
Speaker 1: into certain sectors where we don't think it makes sense
Speaker 1: to use hydrogen. We have better technologies, like, for example,
Speaker 1: for home heating. In that sense, the hydrant industry will
Speaker 1: be smaller than the natural gas industry and you won't
Speaker 1: need to use all that equipment. Fundamentally, at this point
Speaker 1: in the industries that we're talking about, we're hydrogen is crucial.
Speaker 1: We don't really have an alternative to using de carbonized hydrogen.
Speaker 1: There might be some innovation coming along the way, and
Speaker 1: we're seeing that, for example and steel already where maybe
Speaker 1: hydrone will be used and it's probably the most mature
Speaker 1: technology to use to the carbonized steel production. But we're
Speaker 1: also seeing new applications and new innovation and steel where
Speaker 1: you don't need hydrogen as if heed stock anymore at all.
Speaker 1: These are less mature and could come up. So there's
Speaker 1: still some open question marks about it, but generally speaking,
Speaker 1: we tend to focus on the sectors where we don't
Speaker 1: have an alternative to using keen hydrogen today. Dana, I
Speaker 1: think I'm gonna come and respond to your initial question
Speaker 1: with a very firm no. I feel like it would
Speaker 1: be very incorrect and quite controversial to let's say our
Speaker 1: view is that we think there's hydrogen and natural gas
Speaker 1: will have a similar trajectory. I think fundamentally they're they're
Speaker 1: different things. There's a lot of parallels. You could see
Speaker 1: the same sort of concern about upstream leakage that you
Speaker 1: see in natural gas. Hydrogen is obviously used or could
Speaker 1: be used in a lot of places where natural gas
Speaker 1: is used today. But the development of hydrogen is for
Speaker 1: a fundamentally different pursuit, and it's carbon free at the
Speaker 1: point of view, So I think there are two very
Speaker 1: different things. The overarching reason why our team exists NS
Speaker 1: and why folks are seriously thinking about hydrogen is the
Speaker 1: truth remains, if we want to get to net zero
Speaker 1: as quickly as possible, we are going to need energy
Speaker 1: molecules to do some things. We are going to need
Speaker 1: energy molecules to do nearly as much as they do today.
Speaker 1: But net zero by twenty fifty looks almost impossible just
Speaker 1: using electrons. So high drogen will undertake some of the
Speaker 1: roles that natural gas did, probably won't have as large
Speaker 1: of an energy footprint as natural gas house today, that's
Speaker 1: not what we're expecting for it to be, but it
Speaker 1: will be pretty critical energy molecule, that is, carbon tree
Speaker 1: that can help get us the last way there in
Speaker 1: terms of net zero in a few of these really
Speaker 1: difficult sectors. So, Matt, you already gave me an idea
Speaker 1: for a future podcast. So thank you so much for that,
Speaker 1: because I'm always on the search for what the next
Speaker 1: switched On is going to be. And for today, Addie, Matt,
Speaker 1: thank you so much for joining and explaining what we're
Speaker 1: thinking about when we think about the electoralizer market and
Speaker 1: where hydrogen is going to go in the future. Thanks
Speaker 1: for having us, Dana. Thanks Dana. Look forward to come
Speaker 1: back and talk more hydrogen soon. Today's episode of switched
Speaker 1: On was edited by Rex Warner of gray Stoke Media.
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