1 00:00:00,320 --> 00:00:03,240 Speaker 1: This is Dana Perkins and you're listening to Switched on 2 00:00:03,520 --> 00:00:06,880 Speaker 1: the podcast brought to you by BNF, and today we're 3 00:00:06,920 --> 00:00:10,400 Speaker 1: taking a closer look at levelized cost of electricity. 4 00:00:10,680 --> 00:00:10,840 Speaker 2: Now. 5 00:00:10,880 --> 00:00:14,720 Speaker 1: Typically, clean energy lcoez have been defined by falling costs, 6 00:00:14,760 --> 00:00:17,759 Speaker 1: and twenty twenty four was no different. As the cost 7 00:00:17,800 --> 00:00:22,320 Speaker 1: of producing clean power reached record lows, Financial conditions improved 8 00:00:22,360 --> 00:00:25,840 Speaker 1: for clean power projects, and an oversupply of some renewable 9 00:00:25,920 --> 00:00:30,040 Speaker 1: energy equipment nudged this along. Mature technologies such as solar, 10 00:00:30,280 --> 00:00:33,560 Speaker 1: wind and energy storage led the way as prices fell, 11 00:00:33,680 --> 00:00:37,080 Speaker 1: and BNF scenarios show that there is potential for some 12 00:00:37,159 --> 00:00:40,360 Speaker 1: of these technologies to fall a further twenty to nearly 13 00:00:40,520 --> 00:00:44,199 Speaker 1: fifty percent by twenty thirty five. On today's show, we 14 00:00:44,240 --> 00:00:47,680 Speaker 1: talk about which clean power technology led the way and 15 00:00:47,920 --> 00:00:51,479 Speaker 1: why hydrogen was such an outlier. Today I'm joined by 16 00:00:51,560 --> 00:00:55,680 Speaker 1: amar Vezdev, a senior associate from BNF's Energy Economics team, 17 00:00:55,880 --> 00:00:59,279 Speaker 1: and BNF's head of Hydrogen Research, Martin Tangler, and they 18 00:00:59,320 --> 00:01:02,840 Speaker 1: share the find from the flagship report Levelized cost of 19 00:01:02,840 --> 00:01:07,280 Speaker 1: Electricity Update twenty twenty five record lows. BNF clients can 20 00:01:07,319 --> 00:01:10,080 Speaker 1: find it at BNF go on the Bloomberg Terminal or 21 00:01:10,120 --> 00:01:13,120 Speaker 1: at BNF dot com. Now let's get to talking about 22 00:01:13,240 --> 00:01:25,520 Speaker 1: l coees. Amar, thank you very much for joining today, 23 00:01:25,600 --> 00:01:27,800 Speaker 1: Thanks for having me, Dana and Martin, great having you 24 00:01:27,840 --> 00:01:30,520 Speaker 1: here too, Thanks Dana. So at BNIF, we have a 25 00:01:30,560 --> 00:01:33,520 Speaker 1: few reports that we consider to be our flagship reports. 26 00:01:33,560 --> 00:01:36,240 Speaker 1: These are things that cut across a number of different 27 00:01:36,280 --> 00:01:39,080 Speaker 1: themes and teams here at BNF, and one of them 28 00:01:39,240 --> 00:01:42,520 Speaker 1: is our levelized cost of Electricity, which I anticipate we'll 29 00:01:42,520 --> 00:01:44,880 Speaker 1: refer to as l cooees from here on out. And 30 00:01:44,920 --> 00:01:47,280 Speaker 1: it's a long standing report from the point that I 31 00:01:47,319 --> 00:01:50,360 Speaker 1: got in this industry where you had so much policy 32 00:01:50,400 --> 00:01:53,760 Speaker 1: intervention in order to essentially tip the scales on some 33 00:01:53,920 --> 00:01:57,160 Speaker 1: clean energy sources, which we no longer see in many 34 00:01:57,200 --> 00:01:59,960 Speaker 1: parts of the world as the levelized cost of life 35 00:02:00,000 --> 00:02:02,960 Speaker 1: tricity has improved for many of these technologies, as they 36 00:02:02,960 --> 00:02:06,560 Speaker 1: are more economically competitive in most parts of the world. 37 00:02:07,000 --> 00:02:09,600 Speaker 1: What I really want to understand is now that we're 38 00:02:09,639 --> 00:02:12,720 Speaker 1: at that place, now that we're not forecasting where the 39 00:02:12,840 --> 00:02:15,080 Speaker 1: break even place is going to be for many of 40 00:02:15,120 --> 00:02:17,680 Speaker 1: these technologies, why are we still looking at this so 41 00:02:17,760 --> 00:02:20,320 Speaker 1: intensely and why are l cos? Why is it a 42 00:02:20,320 --> 00:02:21,560 Speaker 1: flagship report for US. 43 00:02:21,760 --> 00:02:25,280 Speaker 3: Yeah, good question, Dana. The LSU analysis is a company 44 00:02:25,320 --> 00:02:28,079 Speaker 3: wide effort to track the cost of power projects. It's 45 00:02:28,120 --> 00:02:31,440 Speaker 3: one of our longest standing publications. It started with just 46 00:02:31,480 --> 00:02:34,399 Speaker 3: a small handful of technologies and now in its sixteenth year, 47 00:02:34,560 --> 00:02:38,600 Speaker 3: we're looking at around twenty nine technologies across fifty four markets. 48 00:02:38,680 --> 00:02:41,200 Speaker 3: So it really pulls together a lot of the analysis 49 00:02:41,320 --> 00:02:43,840 Speaker 3: and a lot of the expertise across the company to 50 00:02:44,160 --> 00:02:47,160 Speaker 3: understand a bunch of different cost items that contribute to 51 00:02:47,280 --> 00:02:49,520 Speaker 3: overall project costs. So you can think of the LCUE 52 00:02:49,600 --> 00:02:53,160 Speaker 3: in away as a summary of how financing terms have changed, 53 00:02:53,160 --> 00:02:57,240 Speaker 3: how capex opics have evolved over over time, and if 54 00:02:57,280 --> 00:03:00,680 Speaker 3: we could also just take a step back understand what 55 00:03:00,720 --> 00:03:02,880 Speaker 3: an LCUE is. I think it's important to do that 56 00:03:03,000 --> 00:03:05,280 Speaker 3: just because over the last few years we've noticed a 57 00:03:05,480 --> 00:03:09,040 Speaker 3: concerted shift that are away from outright climate change denial 58 00:03:09,120 --> 00:03:11,720 Speaker 3: to denying the solutions, and I think the LCUs A 59 00:03:11,760 --> 00:03:14,560 Speaker 3: concept has taken a few strays there. So what is 60 00:03:14,600 --> 00:03:18,320 Speaker 3: an LCUE. It's the long term inflation indexed off take 61 00:03:18,360 --> 00:03:21,240 Speaker 3: price that a project developer needs to recoup all of 62 00:03:21,280 --> 00:03:24,000 Speaker 3: the project costs, pay the taxes and hit the HERD 63 00:03:24,040 --> 00:03:26,080 Speaker 3: or IRR, which is the internal rate of return. So 64 00:03:26,120 --> 00:03:28,280 Speaker 3: that means it's a useful metric to summarize how individual 65 00:03:28,320 --> 00:03:31,519 Speaker 3: costs have changed over time for a typical project in 66 00:03:31,560 --> 00:03:34,160 Speaker 3: a given market, and it can also inform the economic 67 00:03:34,200 --> 00:03:37,840 Speaker 3: competitiveness of power generating technologies in a given market, So 68 00:03:37,880 --> 00:03:40,440 Speaker 3: it sends an investment signal for which assets are worth 69 00:03:40,440 --> 00:03:43,640 Speaker 3: building to keep the lights on. As well as that. Internally, 70 00:03:43,880 --> 00:03:47,560 Speaker 3: we take the individual cost components and we run them 71 00:03:47,600 --> 00:03:50,640 Speaker 3: through our power models for our power market outlooks for 72 00:03:50,760 --> 00:03:53,240 Speaker 3: our new energy outlook to provide a view and how 73 00:03:53,280 --> 00:03:55,840 Speaker 3: power markets may evolve out to twenty fifty. 74 00:03:56,040 --> 00:03:57,840 Speaker 1: Well, I think the one, you know, one of the 75 00:03:58,160 --> 00:04:01,160 Speaker 1: technologies which has been in this report for all sixteen 76 00:04:01,240 --> 00:04:04,760 Speaker 1: years and probably does the best job of illustrating the 77 00:04:04,800 --> 00:04:07,720 Speaker 1: fact that it has been typified by cost of clients 78 00:04:07,760 --> 00:04:09,520 Speaker 1: from many of these, although we will come to that 79 00:04:09,520 --> 00:04:12,880 Speaker 1: there are exceptions, has been solar. So can you talk 80 00:04:12,920 --> 00:04:15,600 Speaker 1: a little bit about where solar is now? And our 81 00:04:15,680 --> 00:04:18,320 Speaker 1: price is going to continue to fall because it feels 82 00:04:18,400 --> 00:04:20,240 Speaker 1: like they have been falling forever. 83 00:04:20,680 --> 00:04:24,280 Speaker 3: Yeah, we've seen some really remarkable cost reductions since we've 84 00:04:24,279 --> 00:04:28,120 Speaker 3: been tracking the price of solar modules. Last year, solar 85 00:04:28,160 --> 00:04:32,400 Speaker 3: manufacturers of selling the average module for around ten cents 86 00:04:32,440 --> 00:04:35,000 Speaker 3: per what and so that's close to or below the 87 00:04:35,000 --> 00:04:38,880 Speaker 3: cost of production we estimate, and so when we adjust 88 00:04:38,880 --> 00:04:42,839 Speaker 3: for inflation, that's a ninety six percent reduction and price 89 00:04:42,880 --> 00:04:46,240 Speaker 3: since twenty ten, so really dramatic drop. And that's the 90 00:04:46,240 --> 00:04:50,080 Speaker 3: result of technology innovation, economies of scale, stiff price competition, 91 00:04:50,360 --> 00:04:55,320 Speaker 3: manufacturing experience, and more recently, structural overcapacity. And what we 92 00:04:55,360 --> 00:04:58,080 Speaker 3: see is if we focus on that over capacity angle, 93 00:04:58,200 --> 00:05:02,360 Speaker 3: there's a significant amount of of solar module manufacturing capabilities 94 00:05:02,400 --> 00:05:05,440 Speaker 3: around the world, mostly concentrated in China, and so the 95 00:05:05,760 --> 00:05:09,680 Speaker 3: capacity is about double of what was installed last year 96 00:05:09,880 --> 00:05:13,400 Speaker 3: in terror WAT terms, so around one point one terrawats 97 00:05:13,600 --> 00:05:17,839 Speaker 3: of manufacturing capacity and around six hundred gigawats of capacity 98 00:05:17,920 --> 00:05:21,640 Speaker 3: installed last year. And our Soda team forecasts out twenty 99 00:05:21,680 --> 00:05:25,360 Speaker 3: thirty five annual editions of solar and so even there 100 00:05:25,400 --> 00:05:27,880 Speaker 3: by twenty thirty five we only hit around nine hundred 101 00:05:27,920 --> 00:05:31,440 Speaker 3: gigawats or so, so the extent of the overcapacity is significant, 102 00:05:31,480 --> 00:05:33,280 Speaker 3: and so what that means is over the next few 103 00:05:33,360 --> 00:05:35,960 Speaker 3: years at least anyway, this is a structural issue so 104 00:05:36,120 --> 00:05:39,239 Speaker 3: it means that prices should stay around where they are now. 105 00:05:39,320 --> 00:05:41,719 Speaker 3: They could go lower, but I think they'll stay around 106 00:05:41,720 --> 00:05:42,200 Speaker 3: where they are. 107 00:05:42,400 --> 00:05:45,760 Speaker 1: The other technology that is a really core part of 108 00:05:45,800 --> 00:05:49,080 Speaker 1: the clean energy system is wind. Now we know that 109 00:05:49,120 --> 00:05:52,560 Speaker 1: prices to fall and dramatically for onshore wind, but offshore 110 00:05:52,600 --> 00:05:56,520 Speaker 1: wind was once considered extremely expensive and even floating wind 111 00:05:56,640 --> 00:05:58,480 Speaker 1: was like a pie in the sky. Now we're starting 112 00:05:58,520 --> 00:06:00,440 Speaker 1: to see some projects that are really coming to life, 113 00:06:00,480 --> 00:06:03,680 Speaker 1: but let's focus on offshore wind, which has historically been 114 00:06:04,000 --> 00:06:06,400 Speaker 1: quite expensive. Where are we now. 115 00:06:06,360 --> 00:06:10,160 Speaker 3: It still is expensive. But the good news is that 116 00:06:10,520 --> 00:06:13,440 Speaker 3: when we look at the lceeour global benchmark, which is 117 00:06:13,640 --> 00:06:17,200 Speaker 3: a capacity waste average of our market level LCUE estimates, 118 00:06:17,360 --> 00:06:20,360 Speaker 3: we expect COSTER to decline by around nine percent from 119 00:06:20,360 --> 00:06:23,000 Speaker 3: twenty twenty four through to the twenty twenty five and 120 00:06:23,040 --> 00:06:26,000 Speaker 3: then out to twenty thirty five. So ten years ahead 121 00:06:26,279 --> 00:06:29,160 Speaker 3: we estimate around a nine percent reduction. And so part 122 00:06:29,240 --> 00:06:32,360 Speaker 3: of the reason there is because the sector has had 123 00:06:32,600 --> 00:06:35,480 Speaker 3: notoriously a bad few years you could see, and so 124 00:06:35,960 --> 00:06:38,919 Speaker 3: we think that there's still potential for cost recovery until 125 00:06:38,920 --> 00:06:40,760 Speaker 3: the end of this decade, and so that will drive 126 00:06:40,800 --> 00:06:42,480 Speaker 3: down the cost from quite a high point where they 127 00:06:42,480 --> 00:06:46,520 Speaker 3: are today, and there are some regional differences between say China, 128 00:06:46,560 --> 00:06:49,479 Speaker 3: where turbine prices are super low, and the Americas and 129 00:06:49,640 --> 00:06:51,640 Speaker 3: Europe where prices are much higher. 130 00:06:51,839 --> 00:06:56,080 Speaker 1: So sitting at the confluence of multiple different industries that 131 00:06:56,120 --> 00:06:58,120 Speaker 1: have had skin in the game to see battery pack 132 00:06:58,200 --> 00:07:03,160 Speaker 1: prices fall as consumer electronx vehicles and then stationary storage, 133 00:07:03,279 --> 00:07:05,960 Speaker 1: and the stationary storage part of it is really important 134 00:07:06,000 --> 00:07:09,640 Speaker 1: for the energy system because it helps balance our electricity supply. 135 00:07:09,960 --> 00:07:12,559 Speaker 1: So how about battery pack prices, because there are another 136 00:07:12,600 --> 00:07:15,160 Speaker 1: one of those stories where you've seen these really dramatic 137 00:07:15,480 --> 00:07:17,200 Speaker 1: cost of clients because we're going to start off with 138 00:07:17,240 --> 00:07:18,680 Speaker 1: the good and then we're going to take you to 139 00:07:18,760 --> 00:07:21,040 Speaker 1: some of the areas of friction. So battery packs leave 140 00:07:21,120 --> 00:07:21,680 Speaker 1: us on a high. 141 00:07:22,000 --> 00:07:25,920 Speaker 3: Yeah, I think it's important to look at the EV 142 00:07:26,320 --> 00:07:30,320 Speaker 3: sector first, just because that is equivalent to five to 143 00:07:30,400 --> 00:07:34,160 Speaker 3: six times the demand for lithiumine battery packs compared to 144 00:07:34,520 --> 00:07:36,960 Speaker 3: the stationary storage segment, which is which is what we're 145 00:07:36,960 --> 00:07:40,200 Speaker 3: looking at here today. And so as EV sales didn't 146 00:07:40,240 --> 00:07:44,000 Speaker 3: grow as to the extent that was initially anticipated last year, 147 00:07:44,160 --> 00:07:46,920 Speaker 3: that meant that pack prices fell and so when we 148 00:07:47,080 --> 00:07:50,960 Speaker 3: translate that into LCUE terms, we saw around one hundred 149 00:07:51,000 --> 00:07:53,600 Speaker 3: and four dollars per megal hour, and we expect this 150 00:07:53,680 --> 00:07:56,000 Speaker 3: year that our global benchmark will fall below the one 151 00:07:56,080 --> 00:07:58,600 Speaker 3: hundreds to around ninety six dollars per megal hour. 152 00:07:58,880 --> 00:08:01,680 Speaker 1: So renewables aren't the only thing that can see cost 153 00:08:01,680 --> 00:08:04,200 Speaker 1: to clients. So let's talk about some of the more 154 00:08:04,280 --> 00:08:07,320 Speaker 1: emitting parts of the energy value chain, kind of medium 155 00:08:07,360 --> 00:08:10,320 Speaker 1: and then to high high being call medium being gas. 156 00:08:10,640 --> 00:08:14,160 Speaker 1: We since we first started running this report, the US 157 00:08:14,280 --> 00:08:17,520 Speaker 1: went from being an energy importer to an energy exporter, 158 00:08:17,720 --> 00:08:21,200 Speaker 1: largely due to L ANDNG so liquefied natural gas. How 159 00:08:21,240 --> 00:08:25,280 Speaker 1: do gas and then coal compare and are they experiencing 160 00:08:25,320 --> 00:08:28,480 Speaker 1: cost to clients? Have things gotten more efficient, cheaper better 161 00:08:28,560 --> 00:08:29,480 Speaker 1: on that side as well? 162 00:08:29,680 --> 00:08:32,079 Speaker 3: Yeah, So I think there's two parts to this. I 163 00:08:32,120 --> 00:08:35,600 Speaker 3: think one is, yes, there are always technological improvements for 164 00:08:35,720 --> 00:08:38,160 Speaker 3: coal and gas. They're much slower. For gas turbines, there 165 00:08:38,200 --> 00:08:40,240 Speaker 3: are a lot slower. You do get efficiency gains, but 166 00:08:40,600 --> 00:08:43,640 Speaker 3: slower than you would for renewables. But then on the 167 00:08:43,679 --> 00:08:47,480 Speaker 3: flip side, in some markets you have higher financing costs 168 00:08:47,760 --> 00:08:52,080 Speaker 3: and those are increasing because of higher perceived risk from investors. 169 00:08:52,240 --> 00:08:54,600 Speaker 3: The risk of stranded assets in the face of climate 170 00:08:54,640 --> 00:08:57,040 Speaker 3: goals push up the cost of capital. If we focus 171 00:08:57,080 --> 00:08:59,560 Speaker 3: on the US, that's a really good example because this 172 00:08:59,600 --> 00:09:01,600 Speaker 3: is one of the markets where it's like you said, 173 00:09:01,640 --> 00:09:04,240 Speaker 3: in exporter and so fuel prices are really cheap, and 174 00:09:04,280 --> 00:09:07,240 Speaker 3: fuel prices are really important to the LCUE, and so 175 00:09:07,400 --> 00:09:11,520 Speaker 3: the US benefits from the cheapest combined cycle gas turbine 176 00:09:11,679 --> 00:09:14,800 Speaker 3: LCU across the world for at least for the countries 177 00:09:14,800 --> 00:09:16,840 Speaker 3: that we track. So yeah, fuel price is a very 178 00:09:16,880 --> 00:09:20,480 Speaker 3: important component here. A few years ago, our long term 179 00:09:20,559 --> 00:09:23,400 Speaker 3: view on prices was a little bit higher following Russia's 180 00:09:23,400 --> 00:09:26,480 Speaker 3: invasion of Ukraine, but that now has price of called 181 00:09:26,480 --> 00:09:28,640 Speaker 3: our long term views a bit lowers. That's also helped 182 00:09:28,640 --> 00:09:32,400 Speaker 3: bring down the few the lcue's from twenty twenty two highs. 183 00:09:32,640 --> 00:09:36,880 Speaker 1: So, as I alluded to, not everything has experienced cost declines, 184 00:09:37,000 --> 00:09:40,080 Speaker 1: and one technology has certainly been buzzy over the last 185 00:09:40,160 --> 00:09:42,360 Speaker 1: couple of years. And Martin, this is where you come 186 00:09:42,400 --> 00:09:46,040 Speaker 1: in what is happening with hydrogen Because in l COEZ 187 00:09:46,160 --> 00:09:50,800 Speaker 1: they are typically typified by cost declines and this last 188 00:09:50,840 --> 00:09:53,360 Speaker 1: year hydrogen was an outlier in a pretty big way. 189 00:09:53,440 --> 00:09:56,200 Speaker 1: So where is hydrogen on l COEZ And why are 190 00:09:56,240 --> 00:09:57,360 Speaker 1: plant costs rising? 191 00:09:57,720 --> 00:10:02,760 Speaker 2: Yeah, so hydrogen costs or hybrid fired gas power plant 192 00:10:02,960 --> 00:10:07,559 Speaker 2: levelized costs have gone up quite significantly since the last publication. 193 00:10:08,000 --> 00:10:11,880 Speaker 2: Now there's one caveat here. This is green hydrogen fired, 194 00:10:12,000 --> 00:10:15,240 Speaker 2: which means the costs of green hydrogen that we model 195 00:10:15,320 --> 00:10:17,760 Speaker 2: have gone up. Now, why have the cost of green hydrogen, 196 00:10:17,760 --> 00:10:21,040 Speaker 2: which is hydrogen made from renewable electricity, which itself has 197 00:10:21,120 --> 00:10:26,760 Speaker 2: declined in costs as we just discussed, Why have those increased? 198 00:10:26,800 --> 00:10:30,200 Speaker 2: It's because the cost of electrolyzers, so that's the machines 199 00:10:30,240 --> 00:10:33,480 Speaker 2: that you use to split water into hydrogen oxygen, have 200 00:10:33,559 --> 00:10:38,200 Speaker 2: gone up in our latest surveys. Now, why did the 201 00:10:38,280 --> 00:10:42,480 Speaker 2: costs of electrolyzers go up so significantly? Part of it 202 00:10:42,520 --> 00:10:44,680 Speaker 2: has to do with the fact that there was inflation 203 00:10:44,840 --> 00:10:48,120 Speaker 2: and costs just went up across the board. But most 204 00:10:48,160 --> 00:10:50,480 Speaker 2: of this increase has to do with the fact that 205 00:10:50,640 --> 00:10:54,120 Speaker 2: when we were sending out surveys to companies just how 206 00:10:54,160 --> 00:10:57,360 Speaker 2: we gather these costs. We're sending out surveys to companies. 207 00:10:57,480 --> 00:11:01,600 Speaker 2: Until say twenty twenty two, people weren't really building any 208 00:11:01,640 --> 00:11:04,800 Speaker 2: big electoralizer projects, and so all the costs we were 209 00:11:04,840 --> 00:11:08,559 Speaker 2: getting were quite theoretical, and now people started building these 210 00:11:08,559 --> 00:11:12,000 Speaker 2: big projects, and these projects started running over in costs 211 00:11:12,080 --> 00:11:16,760 Speaker 2: quite significantly. So an example being the famous neon project 212 00:11:16,760 --> 00:11:20,360 Speaker 2: in Saudi Arabia, which is currently the biggest electoralizer project 213 00:11:20,440 --> 00:11:24,720 Speaker 2: under construction, ran over from an expected five billion dollars 214 00:11:24,760 --> 00:11:28,120 Speaker 2: to over eight billion dollars eight point four billion dollars 215 00:11:28,160 --> 00:11:30,680 Speaker 2: I believe in cost. And that's not the only project 216 00:11:30,679 --> 00:11:32,640 Speaker 2: where this happened. And that has to do with the 217 00:11:32,640 --> 00:11:35,559 Speaker 2: fact that people realize we're not just building the electoralizer, 218 00:11:35,640 --> 00:11:38,680 Speaker 2: we have to buy all this other equipment, all these things. 219 00:11:38,720 --> 00:11:42,000 Speaker 2: We were not anticipating that we need to invest into it, 220 00:11:42,080 --> 00:11:44,480 Speaker 2: we need to consider now. And that's led to an 221 00:11:44,520 --> 00:11:48,559 Speaker 2: increase in the price of electrolyzers and the cost of electoralizers. 222 00:11:48,600 --> 00:11:50,880 Speaker 2: In turn the cost of green hydrogen. So if you 223 00:11:50,960 --> 00:11:54,720 Speaker 2: then fire a gas plant with hydrogen with that hydrogen visa, 224 00:11:54,720 --> 00:11:56,960 Speaker 2: that hydrogen is going to be more expensive. That electricity 225 00:11:57,000 --> 00:11:59,120 Speaker 2: from that hygroen is also going to be more expensive. 226 00:11:59,160 --> 00:12:01,760 Speaker 2: So long starch, that's what happened. I'd add one final 227 00:12:01,840 --> 00:12:05,199 Speaker 2: point there, which means there's other ways to make hydrogen 228 00:12:05,440 --> 00:12:08,120 Speaker 2: clean hydrogen, not gray from fossil fuels. You can make 229 00:12:08,240 --> 00:12:11,199 Speaker 2: hydrogen from fossil fuels and capture the carbon that you 230 00:12:11,320 --> 00:12:14,319 Speaker 2: release as a result. It's called blue hydrogen, and that 231 00:12:14,400 --> 00:12:17,720 Speaker 2: would be cheaper to use in power than green hydrogen, 232 00:12:17,760 --> 00:12:21,320 Speaker 2: certainly at the moment, but probably not cheaper than just 233 00:12:21,520 --> 00:12:23,839 Speaker 2: using good old carbon capture and storage on a gas 234 00:12:23,880 --> 00:12:24,400 Speaker 2: fired part. 235 00:12:25,120 --> 00:12:28,360 Speaker 1: Give me a number martin these hydrogen fired plant costs. 236 00:12:28,400 --> 00:12:29,800 Speaker 1: How much did it go up by? 237 00:12:30,200 --> 00:12:34,800 Speaker 2: So overall the levelized cost of a hydrogen fired power 238 00:12:34,840 --> 00:12:38,239 Speaker 2: plant went top sixty four percent in this new publication. 239 00:12:38,640 --> 00:12:41,400 Speaker 1: Okay, so then let's talk about that blue hydrogen. And 240 00:12:41,640 --> 00:12:46,040 Speaker 1: I think this actually fits really well into this geopolitical 241 00:12:46,120 --> 00:12:48,800 Speaker 1: landscape that everybody is talking about at the moment, which 242 00:12:48,840 --> 00:12:51,400 Speaker 1: has to do with the United States and whether or 243 00:12:51,440 --> 00:12:54,400 Speaker 1: not the Inflation Reduction Act will continue in its current form. 244 00:12:54,440 --> 00:12:56,560 Speaker 1: I think we know within a degree of certainty that 245 00:12:56,600 --> 00:12:59,000 Speaker 1: it will not continue in its current form. What the 246 00:12:59,040 --> 00:13:03,080 Speaker 1: future looks like is another conversation. So with the US 247 00:13:03,200 --> 00:13:05,960 Speaker 1: exporting natural gas so invariably having a lot of this 248 00:13:06,200 --> 00:13:10,640 Speaker 1: LNG available to them, and hydrogen green hydrogen specifically being 249 00:13:10,760 --> 00:13:13,600 Speaker 1: a part of the Inflation Reduction Act, and one of 250 00:13:13,640 --> 00:13:17,040 Speaker 1: the parts of the clean energy economy that really benefited 251 00:13:17,080 --> 00:13:20,600 Speaker 1: from it. What opportunity do you see presented for blue 252 00:13:20,679 --> 00:13:23,360 Speaker 1: hydrogen in the US, And you know, are all of 253 00:13:23,400 --> 00:13:26,440 Speaker 1: the forces kind of aligning to see this industry take off? 254 00:13:26,559 --> 00:13:30,280 Speaker 1: How do you see the hydrogen story unfolding? And really 255 00:13:30,320 --> 00:13:33,719 Speaker 1: the underlying question, which is a few steps removed, is 256 00:13:33,840 --> 00:13:37,000 Speaker 1: do we expect to see this lcoe for hydrogen, specifically 257 00:13:37,000 --> 00:13:39,520 Speaker 1: on blue to come down in the future and are 258 00:13:39,559 --> 00:13:44,080 Speaker 1: we expecting that curve to essentially have these dramatic declines 259 00:13:44,120 --> 00:13:46,200 Speaker 1: that we've seen in other industries over time. 260 00:13:46,520 --> 00:13:49,640 Speaker 2: So blue hydrogen, so that's the hydrogen made from fossil 261 00:13:49,640 --> 00:13:51,880 Speaker 2: fuels the conventional way, the way we make it today 262 00:13:51,880 --> 00:13:54,559 Speaker 2: from natural gas, and then the carbon that's released, the 263 00:13:54,640 --> 00:13:58,120 Speaker 2: CO two that's released being captured at maybe sixty to 264 00:13:58,200 --> 00:14:01,800 Speaker 2: ninety percent or so of that CO two can be captured. Now, 265 00:14:02,080 --> 00:14:04,960 Speaker 2: you were asking me about the US data, which I 266 00:14:05,000 --> 00:14:07,120 Speaker 2: think is the right market to be asking about when 267 00:14:07,120 --> 00:14:09,920 Speaker 2: it comes to blue because Europe, which is where we 268 00:14:09,960 --> 00:14:13,560 Speaker 2: are all sitting right now, has a very strong bias 269 00:14:14,080 --> 00:14:18,119 Speaker 2: towards green. So European Union wants to be using green hydrogen. 270 00:14:18,200 --> 00:14:21,600 Speaker 2: It's legislated at target for the use of green hydrogen, 271 00:14:21,680 --> 00:14:24,160 Speaker 2: and there are some discussions about potentially changing that, but 272 00:14:24,240 --> 00:14:26,760 Speaker 2: that has not happened at this moment and will probably 273 00:14:26,800 --> 00:14:29,320 Speaker 2: not happen in the next couple of months for sure. 274 00:14:29,400 --> 00:14:33,200 Speaker 2: So that leaves really one place where this blue hydrogen 275 00:14:33,280 --> 00:14:36,040 Speaker 2: is a big focus, which is the US. Now, why 276 00:14:36,040 --> 00:14:39,160 Speaker 2: would anybody this is the question, why would anybody want 277 00:14:39,200 --> 00:14:41,920 Speaker 2: to use blue hydrogen in the first place? In the 278 00:14:42,040 --> 00:14:45,720 Speaker 2: US people use gray hydrogen today. Now, what's hydrogen used 279 00:14:45,800 --> 00:14:48,120 Speaker 2: for in the first place. It's not for power generation? 280 00:14:48,160 --> 00:14:50,160 Speaker 2: Why would you want to burn the hydrogen? It's very 281 00:14:50,200 --> 00:14:52,080 Speaker 2: expensive to make. You might as well burn the gas 282 00:14:52,120 --> 00:14:53,920 Speaker 2: from which you make it without making the hygien in 283 00:14:53,920 --> 00:14:56,080 Speaker 2: the first place, to save money. So hydrogen is used 284 00:14:56,080 --> 00:14:58,920 Speaker 2: for fertilizers, for production of ammonia, which is then used 285 00:14:58,960 --> 00:15:02,640 Speaker 2: to make fertilizers, also used for oliver fining. Unless you 286 00:15:02,800 --> 00:15:05,880 Speaker 2: have a user out there that's willing to pay for 287 00:15:05,960 --> 00:15:09,080 Speaker 2: this additional cost of capturing the carbon and getting that 288 00:15:09,160 --> 00:15:11,400 Speaker 2: blue hydrogen, which you don't right now in the US 289 00:15:11,400 --> 00:15:14,240 Speaker 2: there's no such incentive, then domestic use of blue hygien 290 00:15:14,320 --> 00:15:17,280 Speaker 2: is never going to happen, which is exactly what we're seeing. 291 00:15:17,560 --> 00:15:21,480 Speaker 2: Not really many companies interested in using blue hydrogen domestically. 292 00:15:21,520 --> 00:15:24,120 Speaker 2: There are, of course, some exceptions, but unbalance, that's the story. 293 00:15:24,280 --> 00:15:26,680 Speaker 2: So the question for the US is who is going 294 00:15:26,720 --> 00:15:29,400 Speaker 2: to buy this blue hygien outside of the US. And 295 00:15:29,440 --> 00:15:32,080 Speaker 2: that's where we get to places like Japan and Korea, 296 00:15:32,240 --> 00:15:34,800 Speaker 2: and that's where we tie this back to this question 297 00:15:34,880 --> 00:15:39,480 Speaker 2: of l COOE levelized costs of electricity, because Japan, Korea, 298 00:15:39,600 --> 00:15:44,880 Speaker 2: these East Asian countries, they want to generate electricity using 299 00:15:45,200 --> 00:15:50,640 Speaker 2: ammonia co fired with coal in coal power plants. This ammonia, 300 00:15:50,680 --> 00:15:54,720 Speaker 2: which is NH three chemically, so that's nitrogen and three hydrogens, 301 00:15:54,960 --> 00:15:58,480 Speaker 2: is made using hydrogen, could be made using blue hydrogen. 302 00:15:58,480 --> 00:16:00,640 Speaker 2: If you burn it, you reduce the emission. But as 303 00:16:00,640 --> 00:16:03,280 Speaker 2: we've established, that is a very expensive thing to do, 304 00:16:03,440 --> 00:16:05,920 Speaker 2: even before you converted to ammonia, and now you've got 305 00:16:05,960 --> 00:16:08,120 Speaker 2: this additional step of converting it to ammonia. So the 306 00:16:08,200 --> 00:16:11,560 Speaker 2: question is when will the Japanese and the Koreans, as 307 00:16:11,600 --> 00:16:14,640 Speaker 2: we keep saying in pretty much all of our publications, 308 00:16:14,680 --> 00:16:17,920 Speaker 2: when will they realize that this is economic madness and 309 00:16:18,360 --> 00:16:20,680 Speaker 2: stop doing it. And in Korea, the signs are that 310 00:16:20,680 --> 00:16:23,560 Speaker 2: that's actually already happening. First auction they had on our 311 00:16:23,680 --> 00:16:27,560 Speaker 2: generation there was a disaster and bing F subscribers can 312 00:16:27,600 --> 00:16:29,640 Speaker 2: take a look at that report that we published at 313 00:16:29,640 --> 00:16:31,800 Speaker 2: the end of last year that reacted to this, to 314 00:16:31,840 --> 00:16:34,360 Speaker 2: the results of this auction in Japan. The auctions will 315 00:16:34,360 --> 00:16:36,240 Speaker 2: start happening this year, and we'll need to see what 316 00:16:36,360 --> 00:16:38,480 Speaker 2: kind of prices we'll end up seeing, but it's surely 317 00:16:38,520 --> 00:16:41,040 Speaker 2: going to be very, very expensive, more expensive than what 318 00:16:41,080 --> 00:16:44,560 Speaker 2: we're showing for hydrogen. So that's the question for the 319 00:16:44,640 --> 00:16:47,560 Speaker 2: US exporterers. Who's going to buy this blue hydrogen and 320 00:16:47,600 --> 00:16:52,040 Speaker 2: without any domestic incentives and with the economics being relatively 321 00:16:52,120 --> 00:16:55,120 Speaker 2: poor or without the incentives for using clean hydrogen in 322 00:16:55,160 --> 00:16:58,080 Speaker 2: the first place. In much of the world, you may 323 00:16:58,400 --> 00:17:01,760 Speaker 2: have task credits you does for blue, but it could 324 00:17:01,840 --> 00:17:02,680 Speaker 2: still be a hard sell. 325 00:17:02,920 --> 00:17:07,320 Speaker 1: So as a fundamental premis, a country needs to ultimately 326 00:17:07,359 --> 00:17:10,639 Speaker 1: care about carbon emissions for hard to abate in order 327 00:17:10,680 --> 00:17:13,160 Speaker 1: for this to have a place, because the costs are 328 00:17:13,520 --> 00:17:16,560 Speaker 1: extremely high when comparatively on an l COE basis and 329 00:17:16,600 --> 00:17:18,720 Speaker 1: will continue to be because energy is made from energy. 330 00:17:18,760 --> 00:17:22,919 Speaker 1: In that circumstance, with the exception of fertilizer, can you 331 00:17:23,000 --> 00:17:26,040 Speaker 1: just point out really quickly whether or not that future 332 00:17:26,119 --> 00:17:29,240 Speaker 1: still sits on the ammonia side, or is there enough 333 00:17:29,240 --> 00:17:32,520 Speaker 1: competition from other sources a fertilizer that it is going 334 00:17:32,600 --> 00:17:35,360 Speaker 1: to continue to have a difficult road when it comes 335 00:17:35,400 --> 00:17:36,680 Speaker 1: to competition even there. 336 00:17:36,920 --> 00:17:40,240 Speaker 2: Yeah, So if you want to decarbonize fertilizers, now there's 337 00:17:40,240 --> 00:17:44,119 Speaker 2: so many different kinds of fertilizers because plants need different chemicals. 338 00:17:44,160 --> 00:17:49,040 Speaker 2: So famously they need NP and K, so that's nitrogen, 339 00:17:49,080 --> 00:17:53,119 Speaker 2: phosphorus and potassium. The fertilizers that you make using a 340 00:17:53,240 --> 00:17:56,640 Speaker 2: hydrogen and ammonia are the N fertilizers as a nitrogen 341 00:17:56,680 --> 00:17:59,119 Speaker 2: based fertilizer, So the goal here actually is not to 342 00:17:59,160 --> 00:18:01,320 Speaker 2: feed the plant with hydrogen. It is to feed it 343 00:18:01,359 --> 00:18:03,320 Speaker 2: with nitrogen, and the hydrogen is the carrier of that 344 00:18:03,440 --> 00:18:06,560 Speaker 2: nitrogen and you cannot really get away from that. So 345 00:18:06,640 --> 00:18:09,960 Speaker 2: if you want people to eat, then you will need 346 00:18:10,000 --> 00:18:16,280 Speaker 2: to continue making fertilizers. And today those N fertilizers, nitrogen 347 00:18:16,320 --> 00:18:21,639 Speaker 2: based fertilizers are made from gray ammonia, so from ammonia 348 00:18:21,720 --> 00:18:25,800 Speaker 2: made with natural gas, and you could reduce the emissions 349 00:18:25,840 --> 00:18:29,359 Speaker 2: of that ammonia and the production of those fertilizers therefore 350 00:18:29,480 --> 00:18:34,240 Speaker 2: by swapping the source of hydrogen from gray to blue 351 00:18:34,359 --> 00:18:37,520 Speaker 2: or to green. Now, the important point to note is 352 00:18:37,560 --> 00:18:39,840 Speaker 2: that even if you do that, you're actually only reducing 353 00:18:39,880 --> 00:18:44,040 Speaker 2: your emissions from agriculture by a relatively small ten twenty 354 00:18:44,119 --> 00:18:47,320 Speaker 2: thirty percent, And most of the emissions happen after the 355 00:18:47,359 --> 00:18:49,880 Speaker 2: fertilizer has been applied to the field, and then you've 356 00:18:49,920 --> 00:18:53,400 Speaker 2: got plenty of emissions of nitrous oxide from there, which 357 00:18:53,400 --> 00:18:55,840 Speaker 2: is a very very strong greenhouse gas. So agriculture the 358 00:18:55,960 --> 00:18:58,320 Speaker 2: organization is going to be very very difficult. But if 359 00:18:58,320 --> 00:19:01,360 Speaker 2: you're going to do it, one part of the answer 360 00:19:01,680 --> 00:19:03,440 Speaker 2: needs to be clean hydrogen. 361 00:19:03,640 --> 00:19:05,239 Speaker 1: So I'm going to ask you a chicken in an 362 00:19:05,280 --> 00:19:08,919 Speaker 1: egg question. So, harkening back to another flagship report we 363 00:19:09,000 --> 00:19:11,360 Speaker 1: have that also was a podcast, so check it out, 364 00:19:11,480 --> 00:19:14,840 Speaker 1: Energy Transition Investment Trends, we also saw in that that 365 00:19:14,880 --> 00:19:17,480 Speaker 1: there was a real decline in the amount of investment 366 00:19:17,560 --> 00:19:20,720 Speaker 1: in hydrogen. So something that was very buzzy is now 367 00:19:20,760 --> 00:19:23,879 Speaker 1: looking like that investment community is starting to cool on 368 00:19:23,920 --> 00:19:26,840 Speaker 1: the opportunity there. And the question is is it due 369 00:19:26,920 --> 00:19:29,560 Speaker 1: to the poor l coees or is it the other 370 00:19:29,600 --> 00:19:33,800 Speaker 1: way around. Are the lcoes more impacted by the decline 371 00:19:33,800 --> 00:19:36,680 Speaker 1: and investment. Is it chicken or is it egg et 372 00:19:36,920 --> 00:19:38,840 Speaker 1: t versus l COOE. 373 00:19:39,000 --> 00:19:41,600 Speaker 2: So I think data what you're saying is not LCOE, 374 00:19:41,680 --> 00:19:43,920 Speaker 2: which is a levelized cost of electricity. About what you 375 00:19:44,080 --> 00:19:48,080 Speaker 2: mean is LCOH levelized cost of hydrogen, because it's that 376 00:19:48,359 --> 00:19:50,800 Speaker 2: hydrogen cost that matters, rather than the cost of the 377 00:19:50,840 --> 00:19:53,520 Speaker 2: electricity made from that hydrogen, which is which which is 378 00:19:53,520 --> 00:19:57,159 Speaker 2: a relatively niche use of the hydrogen. But the investment 379 00:19:57,320 --> 00:20:00,840 Speaker 2: in hydrogen that we track has followen to about twenty 380 00:20:00,840 --> 00:20:04,159 Speaker 2: four billion dollars in twenty twenty four from about forty 381 00:20:04,200 --> 00:20:08,400 Speaker 2: seven billion dollars in twenty twenty three, So that's literally 382 00:20:08,480 --> 00:20:11,320 Speaker 2: having in just a year. And in the end, it 383 00:20:11,359 --> 00:20:15,080 Speaker 2: comes down to costs being high and therefore demand being low, 384 00:20:15,320 --> 00:20:19,399 Speaker 2: and government incentives not being sufficient either bridge the gap 385 00:20:19,480 --> 00:20:22,560 Speaker 2: between the high cost that it costs to make this 386 00:20:22,840 --> 00:20:25,480 Speaker 2: green hydroen and the cost needed at which somebody would 387 00:20:25,560 --> 00:20:29,040 Speaker 2: actually be willing to use it, or some harder incentives, 388 00:20:29,040 --> 00:20:32,440 Speaker 2: some sticks like quotas, which we are starting to see 389 00:20:32,480 --> 00:20:35,040 Speaker 2: emerge in places like Europe, but they're not coming into 390 00:20:35,080 --> 00:20:37,600 Speaker 2: effect until twenty thirty. So why would you be investing 391 00:20:37,640 --> 00:20:39,879 Speaker 2: now if you've got another five years to go. So 392 00:20:39,920 --> 00:20:42,880 Speaker 2: that's the problem with hygien It's too expensive. There's therefore 393 00:20:42,880 --> 00:20:45,359 Speaker 2: not enough demand, and the demand is not being incentivized 394 00:20:45,359 --> 00:20:49,560 Speaker 2: sufficiently by governments, which in some cases it probably even 395 00:20:49,600 --> 00:20:51,879 Speaker 2: shouldn't be. So I'm not saying it should be incentivized. 396 00:20:51,920 --> 00:20:54,080 Speaker 2: I'm just saying it's not being incentivized, and therefore we're 397 00:20:54,080 --> 00:20:55,280 Speaker 2: seeing a hydrogen falling. 398 00:20:55,760 --> 00:20:58,360 Speaker 1: So let's soom weigh out and let's go to other 399 00:20:58,440 --> 00:21:01,080 Speaker 1: parts of the world. There's one in Poticular where there 400 00:21:01,080 --> 00:21:03,639 Speaker 1: have certainly been a number of government incentives when it 401 00:21:03,640 --> 00:21:06,920 Speaker 1: comes to renewables, and we can talk about hydrogen as well. 402 00:21:07,000 --> 00:21:09,240 Speaker 1: So we've talked about the US, let's talk about l 403 00:21:09,320 --> 00:21:13,919 Speaker 1: coees in China. Are they an outlier too or are 404 00:21:13,920 --> 00:21:17,679 Speaker 1: the coast dramatically cheaper? Because China is a manufacturer for 405 00:21:17,880 --> 00:21:20,120 Speaker 1: many parts of the world for some of these technologies, 406 00:21:20,200 --> 00:21:23,160 Speaker 1: it is essentially setting the standard all over the world. 407 00:21:23,520 --> 00:21:26,399 Speaker 3: Yeah, China is really one of the big stories here, 408 00:21:26,880 --> 00:21:29,639 Speaker 3: and so the country the market is really reaping the 409 00:21:29,680 --> 00:21:33,560 Speaker 3: rewards of its clean tech manufacturing capabilities. It's dominance there 410 00:21:33,600 --> 00:21:36,440 Speaker 3: as well as its access to coal. So we estimated 411 00:21:36,440 --> 00:21:39,600 Speaker 3: that the market can produce a megal hour of electricity 412 00:21:39,840 --> 00:21:43,119 Speaker 3: from those technologies at the cost that's around eleven to 413 00:21:43,160 --> 00:21:45,480 Speaker 3: sixty four percent lower than the rest of the world, 414 00:21:45,640 --> 00:21:49,360 Speaker 3: so really quite a quite large divergence from the rest 415 00:21:49,359 --> 00:21:52,120 Speaker 3: of the world. If we look, for example, there are 416 00:21:52,119 --> 00:21:55,760 Speaker 3: some notable examples here. So first we have standalone storage projects, 417 00:21:55,800 --> 00:21:58,879 Speaker 3: so we estimated an LCE of around seventy three dollars 418 00:21:58,880 --> 00:22:01,880 Speaker 3: per megwalt hour project in China, and the next cheapest 419 00:22:01,920 --> 00:22:05,280 Speaker 3: market is Australia at one hundred and thirty one dollars 420 00:22:05,320 --> 00:22:08,080 Speaker 3: per meg what hour, so that's around eighty percent more. 421 00:22:08,160 --> 00:22:11,680 Speaker 3: And then if we look outside of China, on average 422 00:22:11,720 --> 00:22:13,919 Speaker 3: costs are double. And again if we look at offshore 423 00:22:13,960 --> 00:22:16,520 Speaker 3: wind so their costs around fifty nine dollars per meg 424 00:22:16,560 --> 00:22:19,360 Speaker 3: what hour. We know that the sector has really struggled 425 00:22:19,359 --> 00:22:21,640 Speaker 3: over the last few years outside of the China, and 426 00:22:21,760 --> 00:22:24,760 Speaker 3: so the next closest market in terms of the LCUE 427 00:22:24,920 --> 00:22:27,959 Speaker 3: is Denmark and there we estimate an LCUE of around 428 00:22:28,200 --> 00:22:30,480 Speaker 3: ninety eight dollars per meg what hour, so around two 429 00:22:30,480 --> 00:22:32,760 Speaker 3: thirds more. And then on average and off your wind 430 00:22:32,800 --> 00:22:35,920 Speaker 3: farm outside of China, the cost there are triple those 431 00:22:35,960 --> 00:22:39,680 Speaker 3: found inside the market, there are a few pockets where 432 00:22:39,880 --> 00:22:43,119 Speaker 3: China is not the cheapest. So when it comes to 433 00:22:43,680 --> 00:22:47,040 Speaker 3: solar and it comes to coal, India is in fact 434 00:22:47,080 --> 00:22:52,119 Speaker 3: the cheapest. So they have strong domestic module manufacturing capabilities, 435 00:22:52,280 --> 00:22:56,360 Speaker 3: and also, of course the country has slightly better solar yields, 436 00:22:56,520 --> 00:22:59,399 Speaker 3: has access to low cost labor, and then on the 437 00:22:59,400 --> 00:23:02,440 Speaker 3: coal front, has access to cheaper coal prices. 438 00:23:02,640 --> 00:23:05,840 Speaker 2: I would actually add on to what Amar was saying. 439 00:23:06,080 --> 00:23:10,200 Speaker 2: China has very cheap renewables. It also has very cheap electrolyzers, 440 00:23:10,280 --> 00:23:13,000 Speaker 2: so that's as I said earlier, the machines that make 441 00:23:13,280 --> 00:23:17,840 Speaker 2: hydrogen by splitting water using electricity, which in turn means 442 00:23:17,920 --> 00:23:21,760 Speaker 2: that our levelized cost of hydrogen analysis shows China is 443 00:23:21,800 --> 00:23:24,919 Speaker 2: the cheapest place to make green hydrogen from renewables in 444 00:23:24,960 --> 00:23:29,040 Speaker 2: the world today, which does give it opportunities to potentially 445 00:23:29,160 --> 00:23:32,639 Speaker 2: export that hydrogen, most likely in the form of ammonia, 446 00:23:32,680 --> 00:23:36,360 Speaker 2: because that's easier to export by ship than hydrogen itself 447 00:23:36,640 --> 00:23:40,119 Speaker 2: into parts of the world where that's needed, and most 448 00:23:40,200 --> 00:23:43,120 Speaker 2: likely that's going to be Europe where I've talked about 449 00:23:43,119 --> 00:23:46,560 Speaker 2: those quotas coming in in twenty thirty and we have 450 00:23:46,720 --> 00:23:50,199 Speaker 2: seen Chinese companies and I've seen actually quite a couple 451 00:23:50,320 --> 00:23:53,159 Speaker 2: trying to get certified in order to be able to 452 00:23:53,240 --> 00:23:57,520 Speaker 2: export this ammonia and this hydrogen out of China into 453 00:23:57,600 --> 00:24:00,880 Speaker 2: the EU so that it can meet the quote does 454 00:24:00,920 --> 00:24:04,760 Speaker 2: that the EU has created, which means China could become 455 00:24:05,119 --> 00:24:09,800 Speaker 2: a important supplier of green hydrogen green p ammonia to 456 00:24:10,359 --> 00:24:13,639 Speaker 2: Europe if Europe does not put on any kind of 457 00:24:13,680 --> 00:24:17,320 Speaker 2: trade barriers on that hydroend ammonia, which so far it 458 00:24:17,359 --> 00:24:19,399 Speaker 2: hasn't done that. But no, the kind of world we 459 00:24:19,440 --> 00:24:21,160 Speaker 2: live in, you can never be quite sure what will 460 00:24:21,160 --> 00:24:22,200 Speaker 2: happen in five years. 461 00:24:22,600 --> 00:24:25,080 Speaker 3: Yeah, And I think that speaks to a wider point 462 00:24:25,119 --> 00:24:27,840 Speaker 3: as well, going back to the LCUVS that yes, China 463 00:24:27,880 --> 00:24:32,080 Speaker 3: is reaping the rewards of low cost manufacturing within the country, 464 00:24:32,119 --> 00:24:34,600 Speaker 3: but it is also benefiting other countries as well, like 465 00:24:34,600 --> 00:24:37,240 Speaker 3: we've seen with soda and if you see with wind 466 00:24:37,240 --> 00:24:40,600 Speaker 3: where manufacturing is regionalized, that's where you see higher costs 467 00:24:40,640 --> 00:24:41,640 Speaker 3: outside of the country. 468 00:24:41,840 --> 00:24:44,359 Speaker 1: You know, tariffs are a really big buzzword, and I 469 00:24:44,359 --> 00:24:46,560 Speaker 1: would argue that we don't know what's coming in the 470 00:24:46,600 --> 00:24:49,480 Speaker 1: next couple of months as opposed to the next five years. 471 00:24:49,600 --> 00:24:53,399 Speaker 1: If we're really thinking about it, but that will certainly 472 00:24:53,440 --> 00:24:55,600 Speaker 1: have an impact on what next year is l coos 473 00:24:55,680 --> 00:24:57,840 Speaker 1: look like depending upon the region, So we may have 474 00:24:57,880 --> 00:25:01,080 Speaker 1: a very different region by regions to tell if we're 475 00:25:01,080 --> 00:25:03,920 Speaker 1: sitting in this room having the same conversation in a 476 00:25:04,040 --> 00:25:08,120 Speaker 1: year's time, Well, let's pivot to another technology that has 477 00:25:08,160 --> 00:25:10,720 Speaker 1: been popping up again and again, but actually one that 478 00:25:10,800 --> 00:25:13,000 Speaker 1: has been a part of the energy mix for a 479 00:25:13,080 --> 00:25:16,520 Speaker 1: very long time, So that's nuclear. At our recent summit 480 00:25:16,640 --> 00:25:19,440 Speaker 1: in San Francisco, so in February, we had a lot 481 00:25:19,480 --> 00:25:24,040 Speaker 1: of people together talking about servers, so data centers specifically 482 00:25:24,119 --> 00:25:27,200 Speaker 1: so data centers and increased energy demand due to a 483 00:25:27,280 --> 00:25:31,120 Speaker 1: number of factors, but certainly AI is playing into this 484 00:25:31,240 --> 00:25:35,080 Speaker 1: need for more data centers, and in that conversation some 485 00:25:35,119 --> 00:25:38,760 Speaker 1: of these big tech companies, we're discussing how really adding 486 00:25:38,840 --> 00:25:42,479 Speaker 1: capacity is extremely important, and yes, there will be more 487 00:25:42,480 --> 00:25:46,080 Speaker 1: renewable energy capacity, but nuclear and then even some of 488 00:25:46,119 --> 00:25:51,800 Speaker 1: the smaller location specific technologies like geothermal are starting to 489 00:25:51,800 --> 00:25:54,920 Speaker 1: be discussed in a more concrete way. And the underlying 490 00:25:55,000 --> 00:25:58,359 Speaker 1: question on this one is nuclear doesn't have great LCS, 491 00:25:58,440 --> 00:26:01,159 Speaker 1: and we can go into that, but does it even 492 00:26:01,320 --> 00:26:05,320 Speaker 1: matter if energy demand is going up? Pretty quickly, and 493 00:26:05,640 --> 00:26:09,280 Speaker 1: this is your opportunity to essentially defend l COE s 494 00:26:09,320 --> 00:26:11,959 Speaker 1: and why this exercise is or is not important to 495 00:26:11,960 --> 00:26:12,760 Speaker 1: do in the future. 496 00:26:13,040 --> 00:26:14,479 Speaker 3: So I think with a nuclear we can go down 497 00:26:14,520 --> 00:26:16,919 Speaker 3: two routes. We can go down the LCUE route, and 498 00:26:16,960 --> 00:26:19,600 Speaker 3: we can also go down the route of what is 499 00:26:19,760 --> 00:26:23,600 Speaker 3: practical and pragmatic, so on the on the route with 500 00:26:23,680 --> 00:26:27,520 Speaker 3: the latter. So the last few nuclear projects across Europe 501 00:26:27,520 --> 00:26:31,159 Speaker 3: across the US have experienced both costs over run, so 502 00:26:31,200 --> 00:26:33,760 Speaker 3: that speaks to LCUE, but they've also experienced project delays. 503 00:26:33,880 --> 00:26:38,880 Speaker 3: And so if you have demand grown rapidly from data centers, 504 00:26:39,080 --> 00:26:41,919 Speaker 3: meeting that demand, it's no good if your power plant 505 00:26:41,960 --> 00:26:44,600 Speaker 3: is going to be built in ten, fourteen, seventeen years 506 00:26:44,600 --> 00:26:46,600 Speaker 3: from now, that demand really needs to be met in 507 00:26:46,640 --> 00:26:49,520 Speaker 3: the next few years. So that's one reason outside of 508 00:26:49,640 --> 00:26:52,800 Speaker 3: LUs why nuclear might not hold so much promise. And 509 00:26:52,840 --> 00:26:55,359 Speaker 3: then if we speak in terms of in LCUE terms, 510 00:26:55,560 --> 00:26:59,080 Speaker 3: if we talk through the economics, we estimate in the 511 00:26:59,160 --> 00:27:02,360 Speaker 3: US a new nuclear rector would cost four hundred and 512 00:27:02,400 --> 00:27:05,600 Speaker 3: forty five dollars per megal hour. We often get questions 513 00:27:05,600 --> 00:27:07,520 Speaker 3: around this is one of the highest estimates that we've 514 00:27:07,560 --> 00:27:10,280 Speaker 3: seen what's going on here, and we're quite confident in 515 00:27:10,320 --> 00:27:14,120 Speaker 3: our numbers. We're using real project data here, and we 516 00:27:14,520 --> 00:27:19,600 Speaker 3: looked at a study from MIT from the Advanced Nuclear Program, 517 00:27:19,680 --> 00:27:24,120 Speaker 3: and that report outlined a number of cost reductions and 518 00:27:24,640 --> 00:27:27,960 Speaker 3: improvements to construction that would also reduce the lead times. 519 00:27:28,000 --> 00:27:30,480 Speaker 3: So when we factored those in, and we also factored 520 00:27:30,520 --> 00:27:34,600 Speaker 3: in citing nuclear on retiring coal plants, so it could 521 00:27:34,640 --> 00:27:37,680 Speaker 3: benefit from the existing infrastructure that was available. So we're 522 00:27:37,720 --> 00:27:40,919 Speaker 3: talking grid connections here. As an example, we saw that 523 00:27:41,119 --> 00:27:43,720 Speaker 3: the LCUE came down to around two hundred and thirty 524 00:27:43,760 --> 00:27:47,000 Speaker 3: dollars per megal hour, and that is still triple that 525 00:27:47,200 --> 00:27:50,480 Speaker 3: of a combined cycle gas turbine plant, and it's around 526 00:27:50,480 --> 00:27:53,480 Speaker 3: fifty to eighty percent more than a solar or wind 527 00:27:53,520 --> 00:27:56,600 Speaker 3: farm with storage located on site. So really on an 528 00:27:56,680 --> 00:28:00,760 Speaker 3: LCUE basis, on a cost economic basis, maybe doesn't make 529 00:28:00,800 --> 00:28:01,399 Speaker 3: so much sense. 530 00:28:01,760 --> 00:28:05,399 Speaker 1: So, Amar, you just very tactfully discussed the nuclear issue, 531 00:28:05,400 --> 00:28:09,240 Speaker 1: but you didn't get to my defense of l coees. 532 00:28:09,600 --> 00:28:12,800 Speaker 1: So Martin, Amar, tell me why do they still have 533 00:28:13,000 --> 00:28:16,159 Speaker 1: a place in our conversation and our consideration as we 534 00:28:16,200 --> 00:28:17,439 Speaker 1: think about the energy future. 535 00:28:18,240 --> 00:28:21,480 Speaker 2: Well, I did make a post the other day on LinkedIn, 536 00:28:21,720 --> 00:28:24,879 Speaker 2: which gathered some quite a lot of responses when it 537 00:28:24,920 --> 00:28:30,480 Speaker 2: comes to hydrogen and l COOE, which is lots of 538 00:28:30,480 --> 00:28:32,840 Speaker 2: people in like I was saying earlier in Asia, I 539 00:28:32,960 --> 00:28:36,480 Speaker 2: want to talk about burning ammonia in co fired power plants. 540 00:28:36,640 --> 00:28:41,600 Speaker 2: But what Amar's report LCOE report has found that even 541 00:28:41,760 --> 00:28:47,440 Speaker 2: in places like Japan, we've actually reached what the l 542 00:28:47,520 --> 00:28:50,600 Speaker 2: COOE team, what a MARS team calls tipping point two, 543 00:28:50,840 --> 00:28:54,040 Speaker 2: which is one tipping point after tipping point one. What 544 00:28:54,120 --> 00:28:56,320 Speaker 2: does tipping point two mean? And what does tipping point 545 00:28:56,320 --> 00:28:58,960 Speaker 2: one mean? So tipping point one means what the l 546 00:28:59,040 --> 00:29:03,760 Speaker 2: COE of a technology, say solar, gets below the LCOE 547 00:29:03,800 --> 00:29:06,680 Speaker 2: of a fossil technology like coal, which has happened a 548 00:29:06,680 --> 00:29:10,040 Speaker 2: while ago. But tipping point two means it's actually cheaper 549 00:29:10,440 --> 00:29:13,440 Speaker 2: to build a new solar plant, new wind plant then 550 00:29:13,520 --> 00:29:17,280 Speaker 2: to continue running an existing coal plant or gas plant. 551 00:29:17,400 --> 00:29:20,640 Speaker 2: And that's where, according to the research that AMAR has published, 552 00:29:20,720 --> 00:29:24,040 Speaker 2: we got in Japan in twenty twenty four. So why 553 00:29:24,080 --> 00:29:27,760 Speaker 2: would Japan want to continue running its coal plants and 554 00:29:28,360 --> 00:29:31,960 Speaker 2: make them even more expensive by adding ammonia into them 555 00:29:32,240 --> 00:29:35,200 Speaker 2: instead of just building renewables which have reached this tipping 556 00:29:35,240 --> 00:29:37,640 Speaker 2: point too, and are cheaper to build than to continue 557 00:29:37,680 --> 00:29:39,680 Speaker 2: running those existing coal plants. So to me, that was 558 00:29:39,680 --> 00:29:42,840 Speaker 2: a really really interesting finding from Amar's report. And I 559 00:29:42,920 --> 00:29:46,360 Speaker 2: know there's lots of caveats there. The question around is 560 00:29:46,400 --> 00:29:49,360 Speaker 2: the electricity from the solar firmed up with batteries, is 561 00:29:49,400 --> 00:29:51,680 Speaker 2: that firm enough? Is that really comparable to the ammonia 562 00:29:51,840 --> 00:29:54,320 Speaker 2: with coal. There's lots of lots of good arguments why 563 00:29:54,600 --> 00:29:57,200 Speaker 2: we're still not there fully, but clearly this is showing 564 00:29:57,200 --> 00:29:59,360 Speaker 2: a trend, and it's showing that we're getting to a 565 00:29:59,400 --> 00:30:02,480 Speaker 2: world where building new solo new wind with batteries is 566 00:30:02,520 --> 00:30:05,400 Speaker 2: going to be cheaper than running existing fossil assets, and 567 00:30:05,400 --> 00:30:08,120 Speaker 2: making those assets even more expensive by adding ammonia or 568 00:30:08,240 --> 00:30:10,800 Speaker 2: hydrogen is just economic suicide. 569 00:30:11,280 --> 00:30:14,720 Speaker 3: Yeah, I think, just to kind of bring up those caveats, 570 00:30:14,880 --> 00:30:18,200 Speaker 3: you know, we do think about this very carefully, and 571 00:30:18,240 --> 00:30:22,320 Speaker 3: we understand there's a lot of nuance. The lcuiesometric does 572 00:30:22,360 --> 00:30:25,080 Speaker 3: miss as a metric that does summarize a bunch of 573 00:30:25,320 --> 00:30:27,840 Speaker 3: cost items a bunch of makes a bunch of assumptions. Then, 574 00:30:28,320 --> 00:30:30,720 Speaker 3: and so as I was saying before, this is why 575 00:30:30,800 --> 00:30:33,479 Speaker 3: we take those individual cost components and we plug them 576 00:30:33,520 --> 00:30:36,200 Speaker 3: into our power models to look at what this looks 577 00:30:36,200 --> 00:30:38,560 Speaker 3: like on an hourly basis to meet demand for every 578 00:30:38,560 --> 00:30:41,360 Speaker 3: hour of the year out twenty fifty. And so if 579 00:30:41,440 --> 00:30:43,960 Speaker 3: we take our new Energy Outlook, which is another one 580 00:30:43,960 --> 00:30:46,560 Speaker 3: of our flagship reports that I have the chance to 581 00:30:46,600 --> 00:30:50,040 Speaker 3: work on, when we look at what an economics led 582 00:30:50,200 --> 00:30:53,840 Speaker 3: transition looks like for the power sector, we see by 583 00:30:54,320 --> 00:30:57,600 Speaker 3: twenty fifty renewables meet as much as seventy percent of 584 00:30:58,200 --> 00:31:01,480 Speaker 3: all demand, and wind and so alone commander of fifty 585 00:31:01,560 --> 00:31:03,520 Speaker 3: nine percent share. So that makes them kind of the 586 00:31:03,520 --> 00:31:06,960 Speaker 3: true work courses of the transition to cleaner electricity supply 587 00:31:07,120 --> 00:31:08,680 Speaker 3: under our economics lit scenario. 588 00:31:09,000 --> 00:31:11,040 Speaker 1: You certainly gave me a lot to think about. A 589 00:31:11,040 --> 00:31:14,520 Speaker 1: lot of great data points here and really interesting themes. 590 00:31:14,560 --> 00:31:16,680 Speaker 1: For a report that's been running for sixteen years. To 591 00:31:16,720 --> 00:31:21,400 Speaker 1: have so many really thought provoking original findings this year, 592 00:31:21,440 --> 00:31:24,160 Speaker 1: I think is really great. Somar Martin, thank you very 593 00:31:24,240 --> 00:31:25,280 Speaker 1: much for joining today. 594 00:31:25,440 --> 00:31:33,440 Speaker 3: Thanks for having me, Dana, Thanks data. 595 00:31:36,000 --> 00:31:39,120 Speaker 1: Today's episode of Switched On was produced by Cam Gray 596 00:31:39,360 --> 00:31:43,000 Speaker 1: with production assistants from Kamala Shelling. Bloomberg NIF is a 597 00:31:43,040 --> 00:31:46,200 Speaker 1: service provided by Bloomberg Finance LP and its affiliates. This 598 00:31:46,280 --> 00:31:48,959 Speaker 1: recording does not constitute, nor should it be construed, as 599 00:31:49,000 --> 00:31:52,720 Speaker 1: investment ad vice, investment recommendations, or a recommendation as to 600 00:31:52,800 --> 00:31:55,640 Speaker 1: an investment or other strategy. Bloomberg ANNIAF should not be 601 00:31:55,680 --> 00:31:59,480 Speaker 1: considered as information sufficient upon which to base an investment decision. 602 00:31:59,520 --> 00:32:02,360 Speaker 1: Neither m Burg Finance LP nor any of its affiliates 603 00:32:02,360 --> 00:32:05,680 Speaker 1: makes any representation or warranty as to the accuracy or 604 00:32:05,720 --> 00:32:08,720 Speaker 1: completeness of the information contained in this recording, and any 605 00:32:08,760 --> 00:32:12,040 Speaker 1: liability as a result of this recording is expressly disclaimed.