WEBVTT - Hydrogen: Bucking the Low-Cost Clean Power Trend 0:00:00.320 --> 0:00:03.240 This is Dana Perkins and you're listening to Switched on 0:00:03.520 --> 0:00:06.880 the podcast brought to you by BNF, and today we're 0:00:06.920 --> 0:00:10.400 taking a closer look at levelized cost of electricity. 0:00:10.680 --> 0:00:10.840 Now. 0:00:10.880 --> 0:00:14.720 Typically, clean energy lcoez have been defined by falling costs, 0:00:14.760 --> 0:00:17.759 and twenty twenty four was no different. As the cost 0:00:17.800 --> 0:00:22.320 of producing clean power reached record lows, Financial conditions improved 0:00:22.360 --> 0:00:25.840 for clean power projects, and an oversupply of some renewable 0:00:25.920 --> 0:00:30.040 energy equipment nudged this along. Mature technologies such as solar, 0:00:30.280 --> 0:00:33.560 wind and energy storage led the way as prices fell, 0:00:33.680 --> 0:00:37.080 and BNF scenarios show that there is potential for some 0:00:37.159 --> 0:00:40.360 of these technologies to fall a further twenty to nearly 0:00:40.520 --> 0:00:44.199 fifty percent by twenty thirty five. On today's show, we 0:00:44.240 --> 0:00:47.680 talk about which clean power technology led the way and 0:00:47.920 --> 0:00:51.479 why hydrogen was such an outlier. Today I'm joined by 0:00:51.560 --> 0:00:55.680 amar Vezdev, a senior associate from BNF's Energy Economics team, 0:00:55.880 --> 0:00:59.279 and BNF's head of Hydrogen Research, Martin Tangler, and they 0:00:59.320 --> 0:01:02.840 share the find from the flagship report Levelized cost of 0:01:02.840 --> 0:01:07.280 Electricity Update twenty twenty five record lows. BNF clients can 0:01:07.319 --> 0:01:10.080 find it at BNF go on the Bloomberg Terminal or 0:01:10.120 --> 0:01:13.120 at BNF dot com. Now let's get to talking about 0:01:13.240 --> 0:01:25.520 l coees. Amar, thank you very much for joining today, 0:01:25.600 --> 0:01:27.800 Thanks for having me, Dana and Martin, great having you 0:01:27.840 --> 0:01:30.520 here too, Thanks Dana. So at BNIF, we have a 0:01:30.560 --> 0:01:33.520 few reports that we consider to be our flagship reports. 0:01:33.560 --> 0:01:36.240 These are things that cut across a number of different 0:01:36.280 --> 0:01:39.080 themes and teams here at BNF, and one of them 0:01:39.240 --> 0:01:42.520 is our levelized cost of Electricity, which I anticipate we'll 0:01:42.520 --> 0:01:44.880 refer to as l cooees from here on out. And 0:01:44.920 --> 0:01:47.280 it's a long standing report from the point that I 0:01:47.319 --> 0:01:50.360 got in this industry where you had so much policy 0:01:50.400 --> 0:01:53.760 intervention in order to essentially tip the scales on some 0:01:53.920 --> 0:01:57.160 clean energy sources, which we no longer see in many 0:01:57.200 --> 0:01:59.960 parts of the world as the levelized cost of life 0:02:00.000 --> 0:02:02.960 tricity has improved for many of these technologies, as they 0:02:02.960 --> 0:02:06.560 are more economically competitive in most parts of the world. 0:02:07.000 --> 0:02:09.600 What I really want to understand is now that we're 0:02:09.639 --> 0:02:12.720 at that place, now that we're not forecasting where the 0:02:12.840 --> 0:02:15.080 break even place is going to be for many of 0:02:15.120 --> 0:02:17.680 these technologies, why are we still looking at this so 0:02:17.760 --> 0:02:20.320 intensely and why are l cos? Why is it a 0:02:20.320 --> 0:02:21.560 flagship report for US. 0:02:21.760 --> 0:02:25.280 Yeah, good question, Dana. The LSU analysis is a company 0:02:25.320 --> 0:02:28.079 wide effort to track the cost of power projects. It's 0:02:28.120 --> 0:02:31.440 one of our longest standing publications. It started with just 0:02:31.480 --> 0:02:34.399 a small handful of technologies and now in its sixteenth year, 0:02:34.560 --> 0:02:38.600 we're looking at around twenty nine technologies across fifty four markets. 0:02:38.680 --> 0:02:41.200 So it really pulls together a lot of the analysis 0:02:41.320 --> 0:02:43.840 and a lot of the expertise across the company to 0:02:44.160 --> 0:02:47.160 understand a bunch of different cost items that contribute to 0:02:47.280 --> 0:02:49.520 overall project costs. So you can think of the LCUE 0:02:49.600 --> 0:02:53.160 in away as a summary of how financing terms have changed, 0:02:53.160 --> 0:02:57.240 how capex opics have evolved over over time, and if 0:02:57.280 --> 0:03:00.680 we could also just take a step back understand what 0:03:00.720 --> 0:03:02.880 an LCUE is. I think it's important to do that 0:03:03.000 --> 0:03:05.280 just because over the last few years we've noticed a 0:03:05.480 --> 0:03:09.040 concerted shift that are away from outright climate change denial 0:03:09.120 --> 0:03:11.720 to denying the solutions, and I think the LCUs A 0:03:11.760 --> 0:03:14.560 concept has taken a few strays there. So what is 0:03:14.600 --> 0:03:18.320 an LCUE. It's the long term inflation indexed off take 0:03:18.360 --> 0:03:21.240 price that a project developer needs to recoup all of 0:03:21.280 --> 0:03:24.000 the project costs, pay the taxes and hit the HERD 0:03:24.040 --> 0:03:26.080 or IRR, which is the internal rate of return. So 0:03:26.120 --> 0:03:28.280 that means it's a useful metric to summarize how individual 0:03:28.320 --> 0:03:31.519 costs have changed over time for a typical project in 0:03:31.560 --> 0:03:34.160 a given market, and it can also inform the economic 0:03:34.200 --> 0:03:37.840 competitiveness of power generating technologies in a given market, So 0:03:37.880 --> 0:03:40.440 it sends an investment signal for which assets are worth 0:03:40.440 --> 0:03:43.640 building to keep the lights on. As well as that. Internally, 0:03:43.880 --> 0:03:47.560 we take the individual cost components and we run them 0:03:47.600 --> 0:03:50.640 through our power models for our power market outlooks for 0:03:50.760 --> 0:03:53.240 our new energy outlook to provide a view and how 0:03:53.280 --> 0:03:55.840 power markets may evolve out to twenty fifty. 0:03:56.040 --> 0:03:57.840 Well, I think the one, you know, one of the 0:03:58.160 --> 0:04:01.160 technologies which has been in this report for all sixteen 0:04:01.240 --> 0:04:04.760 years and probably does the best job of illustrating the 0:04:04.800 --> 0:04:07.720 fact that it has been typified by cost of clients 0:04:07.760 --> 0:04:09.520 from many of these, although we will come to that 0:04:09.520 --> 0:04:12.880 there are exceptions, has been solar. So can you talk 0:04:12.920 --> 0:04:15.600 a little bit about where solar is now? And our 0:04:15.680 --> 0:04:18.320 price is going to continue to fall because it feels 0:04:18.400 --> 0:04:20.240 like they have been falling forever. 0:04:20.680 --> 0:04:24.280 Yeah, we've seen some really remarkable cost reductions since we've 0:04:24.279 --> 0:04:28.120 been tracking the price of solar modules. Last year, solar 0:04:28.160 --> 0:04:32.400 manufacturers of selling the average module for around ten cents 0:04:32.440 --> 0:04:35.000 per what and so that's close to or below the 0:04:35.000 --> 0:04:38.880 cost of production we estimate, and so when we adjust 0:04:38.880 --> 0:04:42.839 for inflation, that's a ninety six percent reduction and price 0:04:42.880 --> 0:04:46.240 since twenty ten, so really dramatic drop. And that's the 0:04:46.240 --> 0:04:50.080 result of technology innovation, economies of scale, stiff price competition, 0:04:50.360 --> 0:04:55.320 manufacturing experience, and more recently, structural overcapacity. And what we 0:04:55.360 --> 0:04:58.080 see is if we focus on that over capacity angle, 0:04:58.200 --> 0:05:02.360 there's a significant amount of of solar module manufacturing capabilities 0:05:02.400 --> 0:05:05.440 around the world, mostly concentrated in China, and so the 0:05:05.760 --> 0:05:09.680 capacity is about double of what was installed last year 0:05:09.880 --> 0:05:13.400 in terror WAT terms, so around one point one terrawats 0:05:13.600 --> 0:05:17.839 of manufacturing capacity and around six hundred gigawats of capacity 0:05:17.920 --> 0:05:21.640 installed last year. And our Soda team forecasts out twenty 0:05:21.680 --> 0:05:25.360 thirty five annual editions of solar and so even there 0:05:25.400 --> 0:05:27.880 by twenty thirty five we only hit around nine hundred 0:05:27.920 --> 0:05:31.440 gigawats or so, so the extent of the overcapacity is significant, 0:05:31.480 --> 0:05:33.280 and so what that means is over the next few 0:05:33.360 --> 0:05:35.960 years at least anyway, this is a structural issue so 0:05:36.120 --> 0:05:39.239 it means that prices should stay around where they are now. 0:05:39.320 --> 0:05:41.719 They could go lower, but I think they'll stay around 0:05:41.720 --> 0:05:42.200 where they are. 0:05:42.400 --> 0:05:45.760 The other technology that is a really core part of 0:05:45.800 --> 0:05:49.080 the clean energy system is wind. Now we know that 0:05:49.120 --> 0:05:52.560 prices to fall and dramatically for onshore wind, but offshore 0:05:52.600 --> 0:05:56.520 wind was once considered extremely expensive and even floating wind 0:05:56.640 --> 0:05:58.480 was like a pie in the sky. Now we're starting 0:05:58.520 --> 0:06:00.440 to see some projects that are really coming to life, 0:06:00.480 --> 0:06:03.680 but let's focus on offshore wind, which has historically been 0:06:04.000 --> 0:06:06.400 quite expensive. Where are we now. 0:06:06.360 --> 0:06:10.160 It still is expensive. But the good news is that 0:06:10.520 --> 0:06:13.440 when we look at the lceeour global benchmark, which is 0:06:13.640 --> 0:06:17.200 a capacity waste average of our market level LCUE estimates, 0:06:17.360 --> 0:06:20.360 we expect COSTER to decline by around nine percent from 0:06:20.360 --> 0:06:23.000 twenty twenty four through to the twenty twenty five and 0:06:23.040 --> 0:06:26.000 then out to twenty thirty five. So ten years ahead 0:06:26.279 --> 0:06:29.160 we estimate around a nine percent reduction. And so part 0:06:29.240 --> 0:06:32.360 of the reason there is because the sector has had 0:06:32.600 --> 0:06:35.480 notoriously a bad few years you could see, and so 0:06:35.960 --> 0:06:38.919 we think that there's still potential for cost recovery until 0:06:38.920 --> 0:06:40.760 the end of this decade, and so that will drive 0:06:40.800 --> 0:06:42.480 down the cost from quite a high point where they 0:06:42.480 --> 0:06:46.520 are today, and there are some regional differences between say China, 0:06:46.560 --> 0:06:49.479 where turbine prices are super low, and the Americas and 0:06:49.640 --> 0:06:51.640 Europe where prices are much higher. 0:06:51.839 --> 0:06:56.080 So sitting at the confluence of multiple different industries that 0:06:56.120 --> 0:06:58.120 have had skin in the game to see battery pack 0:06:58.200 --> 0:07:03.160 prices fall as consumer electronx vehicles and then stationary storage, 0:07:03.279 --> 0:07:05.960 and the stationary storage part of it is really important 0:07:06.000 --> 0:07:09.640 for the energy system because it helps balance our electricity supply. 0:07:09.960 --> 0:07:12.559 So how about battery pack prices, because there are another 0:07:12.600 --> 0:07:15.160 one of those stories where you've seen these really dramatic 0:07:15.480 --> 0:07:17.200 cost of clients because we're going to start off with 0:07:17.240 --> 0:07:18.680 the good and then we're going to take you to 0:07:18.760 --> 0:07:21.040 some of the areas of friction. So battery packs leave 0:07:21.120 --> 0:07:21.680 us on a high. 0:07:22.000 --> 0:07:25.920 Yeah, I think it's important to look at the EV 0:07:26.320 --> 0:07:30.320 sector first, just because that is equivalent to five to 0:07:30.400 --> 0:07:34.160 six times the demand for lithiumine battery packs compared to 0:07:34.520 --> 0:07:36.960 the stationary storage segment, which is which is what we're 0:07:36.960 --> 0:07:40.200 looking at here today. And so as EV sales didn't 0:07:40.240 --> 0:07:44.000 grow as to the extent that was initially anticipated last year, 0:07:44.160 --> 0:07:46.920 that meant that pack prices fell and so when we 0:07:47.080 --> 0:07:50.960 translate that into LCUE terms, we saw around one hundred 0:07:51.000 --> 0:07:53.600 and four dollars per megal hour, and we expect this 0:07:53.680 --> 0:07:56.000 year that our global benchmark will fall below the one 0:07:56.080 --> 0:07:58.600 hundreds to around ninety six dollars per megal hour. 0:07:58.880 --> 0:08:01.680 So renewables aren't the only thing that can see cost 0:08:01.680 --> 0:08:04.200 to clients. So let's talk about some of the more 0:08:04.280 --> 0:08:07.320 emitting parts of the energy value chain, kind of medium 0:08:07.360 --> 0:08:10.320 and then to high high being call medium being gas. 0:08:10.640 --> 0:08:14.160 We since we first started running this report, the US 0:08:14.280 --> 0:08:17.520 went from being an energy importer to an energy exporter, 0:08:17.720 --> 0:08:21.200 largely due to L ANDNG so liquefied natural gas. How 0:08:21.240 --> 0:08:25.280 do gas and then coal compare and are they experiencing 0:08:25.320 --> 0:08:28.480 cost to clients? Have things gotten more efficient, cheaper better 0:08:28.560 --> 0:08:29.480 on that side as well? 0:08:29.680 --> 0:08:32.079 Yeah, So I think there's two parts to this. I 0:08:32.120 --> 0:08:35.600 think one is, yes, there are always technological improvements for 0:08:35.720 --> 0:08:38.160 coal and gas. They're much slower. For gas turbines, there 0:08:38.200 --> 0:08:40.240 are a lot slower. You do get efficiency gains, but 0:08:40.600 --> 0:08:43.640 slower than you would for renewables. But then on the 0:08:43.679 --> 0:08:47.480 flip side, in some markets you have higher financing costs 0:08:47.760 --> 0:08:52.080 and those are increasing because of higher perceived risk from investors. 0:08:52.240 --> 0:08:54.600 The risk of stranded assets in the face of climate 0:08:54.640 --> 0:08:57.040 goals push up the cost of capital. If we focus 0:08:57.080 --> 0:08:59.560 on the US, that's a really good example because this 0:08:59.600 --> 0:09:01.600 is one of the markets where it's like you said, 0:09:01.640 --> 0:09:04.240 in exporter and so fuel prices are really cheap, and 0:09:04.280 --> 0:09:07.240 fuel prices are really important to the LCUE, and so 0:09:07.400 --> 0:09:11.520 the US benefits from the cheapest combined cycle gas turbine 0:09:11.679 --> 0:09:14.800 LCU across the world for at least for the countries 0:09:14.800 --> 0:09:16.840 that we track. So yeah, fuel price is a very 0:09:16.880 --> 0:09:20.480 important component here. A few years ago, our long term 0:09:20.559 --> 0:09:23.400 view on prices was a little bit higher following Russia's 0:09:23.400 --> 0:09:26.480 invasion of Ukraine, but that now has price of called 0:09:26.480 --> 0:09:28.640 our long term views a bit lowers. That's also helped 0:09:28.640 --> 0:09:32.400 bring down the few the lcue's from twenty twenty two highs. 0:09:32.640 --> 0:09:36.880 So, as I alluded to, not everything has experienced cost declines, 0:09:37.000 --> 0:09:40.080 and one technology has certainly been buzzy over the last 0:09:40.160 --> 0:09:42.360 couple of years. And Martin, this is where you come 0:09:42.400 --> 0:09:46.040 in what is happening with hydrogen Because in l COEZ 0:09:46.160 --> 0:09:50.800 they are typically typified by cost declines and this last 0:09:50.840 --> 0:09:53.360 year hydrogen was an outlier in a pretty big way. 0:09:53.440 --> 0:09:56.200 So where is hydrogen on l COEZ And why are 0:09:56.240 --> 0:09:57.360 plant costs rising? 0:09:57.720 --> 0:10:02.760 Yeah, so hydrogen costs or hybrid fired gas power plant 0:10:02.960 --> 0:10:07.559 levelized costs have gone up quite significantly since the last publication. 0:10:08.000 --> 0:10:11.880 Now there's one caveat here. This is green hydrogen fired, 0:10:12.000 --> 0:10:15.240 which means the costs of green hydrogen that we model 0:10:15.320 --> 0:10:17.760 have gone up. Now, why have the cost of green hydrogen, 0:10:17.760 --> 0:10:21.040 which is hydrogen made from renewable electricity, which itself has 0:10:21.120 --> 0:10:26.760 declined in costs as we just discussed, Why have those increased? 0:10:26.800 --> 0:10:30.200 It's because the cost of electrolyzers, so that's the machines 0:10:30.240 --> 0:10:33.480 that you use to split water into hydrogen oxygen, have 0:10:33.559 --> 0:10:38.200 gone up in our latest surveys. Now, why did the 0:10:38.280 --> 0:10:42.480 costs of electrolyzers go up so significantly? Part of it 0:10:42.520 --> 0:10:44.680 has to do with the fact that there was inflation 0:10:44.840 --> 0:10:48.120 and costs just went up across the board. But most 0:10:48.160 --> 0:10:50.480 of this increase has to do with the fact that 0:10:50.640 --> 0:10:54.120 when we were sending out surveys to companies just how 0:10:54.160 --> 0:10:57.360 we gather these costs. We're sending out surveys to companies. 0:10:57.480 --> 0:11:01.600 Until say twenty twenty two, people weren't really building any 0:11:01.640 --> 0:11:04.800 big electoralizer projects, and so all the costs we were 0:11:04.840 --> 0:11:08.559 getting were quite theoretical, and now people started building these 0:11:08.559 --> 0:11:12.000 big projects, and these projects started running over in costs 0:11:12.080 --> 0:11:16.760 quite significantly. So an example being the famous neon project 0:11:16.760 --> 0:11:20.360 in Saudi Arabia, which is currently the biggest electoralizer project 0:11:20.440 --> 0:11:24.720 under construction, ran over from an expected five billion dollars 0:11:24.760 --> 0:11:28.120 to over eight billion dollars eight point four billion dollars 0:11:28.160 --> 0:11:30.680 I believe in cost. And that's not the only project 0:11:30.679 --> 0:11:32.640 where this happened. And that has to do with the 0:11:32.640 --> 0:11:35.559 fact that people realize we're not just building the electoralizer, 0:11:35.640 --> 0:11:38.680 we have to buy all this other equipment, all these things. 0:11:38.720 --> 0:11:42.000 We were not anticipating that we need to invest into it, 0:11:42.080 --> 0:11:44.480 we need to consider now. And that's led to an 0:11:44.520 --> 0:11:48.559 increase in the price of electrolyzers and the cost of electoralizers. 0:11:48.600 --> 0:11:50.880 In turn the cost of green hydrogen. So if you 0:11:50.960 --> 0:11:54.720 then fire a gas plant with hydrogen with that hydrogen visa, 0:11:54.720 --> 0:11:56.960 that hydrogen is going to be more expensive. That electricity 0:11:57.000 --> 0:11:59.120 from that hygroen is also going to be more expensive. 0:11:59.160 --> 0:12:01.760 So long starch, that's what happened. I'd add one final 0:12:01.840 --> 0:12:05.199 point there, which means there's other ways to make hydrogen 0:12:05.440 --> 0:12:08.120 clean hydrogen, not gray from fossil fuels. You can make 0:12:08.240 --> 0:12:11.199 hydrogen from fossil fuels and capture the carbon that you 0:12:11.320 --> 0:12:14.319 release as a result. It's called blue hydrogen, and that 0:12:14.400 --> 0:12:17.720 would be cheaper to use in power than green hydrogen, 0:12:17.760 --> 0:12:21.320 certainly at the moment, but probably not cheaper than just 0:12:21.520 --> 0:12:23.839 using good old carbon capture and storage on a gas 0:12:23.880 --> 0:12:24.400 fired part. 0:12:25.120 --> 0:12:28.360 Give me a number martin these hydrogen fired plant costs. 0:12:28.400 --> 0:12:29.800 How much did it go up by? 0:12:30.200 --> 0:12:34.800 So overall the levelized cost of a hydrogen fired power 0:12:34.840 --> 0:12:38.239 plant went top sixty four percent in this new publication. 0:12:38.640 --> 0:12:41.400 Okay, so then let's talk about that blue hydrogen. And 0:12:41.640 --> 0:12:46.040 I think this actually fits really well into this geopolitical 0:12:46.120 --> 0:12:48.800 landscape that everybody is talking about at the moment, which 0:12:48.840 --> 0:12:51.400 has to do with the United States and whether or 0:12:51.440 --> 0:12:54.400 not the Inflation Reduction Act will continue in its current form. 0:12:54.440 --> 0:12:56.560 I think we know within a degree of certainty that 0:12:56.600 --> 0:12:59.000 it will not continue in its current form. What the 0:12:59.040 --> 0:13:03.080 future looks like is another conversation. So with the US 0:13:03.200 --> 0:13:05.960 exporting natural gas so invariably having a lot of this 0:13:06.200 --> 0:13:10.640 LNG available to them, and hydrogen green hydrogen specifically being 0:13:10.760 --> 0:13:13.600 a part of the Inflation Reduction Act, and one of 0:13:13.640 --> 0:13:17.040 the parts of the clean energy economy that really benefited 0:13:17.080 --> 0:13:20.600 from it. What opportunity do you see presented for blue 0:13:20.679 --> 0:13:23.360 hydrogen in the US, And you know, are all of 0:13:23.400 --> 0:13:26.440 the forces kind of aligning to see this industry take off? 0:13:26.559 --> 0:13:30.280 How do you see the hydrogen story unfolding? And really 0:13:30.320 --> 0:13:33.719 the underlying question, which is a few steps removed, is 0:13:33.840 --> 0:13:37.000 do we expect to see this lcoe for hydrogen, specifically 0:13:37.000 --> 0:13:39.520 on blue to come down in the future and are 0:13:39.559 --> 0:13:44.080 we expecting that curve to essentially have these dramatic declines 0:13:44.120 --> 0:13:46.200 that we've seen in other industries over time. 0:13:46.520 --> 0:13:49.640 So blue hydrogen, so that's the hydrogen made from fossil 0:13:49.640 --> 0:13:51.880 fuels the conventional way, the way we make it today 0:13:51.880 --> 0:13:54.559 from natural gas, and then the carbon that's released, the 0:13:54.640 --> 0:13:58.120 CO two that's released being captured at maybe sixty to 0:13:58.200 --> 0:14:01.800 ninety percent or so of that CO two can be captured. Now, 0:14:02.080 --> 0:14:04.960 you were asking me about the US data, which I 0:14:05.000 --> 0:14:07.120 think is the right market to be asking about when 0:14:07.120 --> 0:14:09.920 it comes to blue because Europe, which is where we 0:14:09.960 --> 0:14:13.560 are all sitting right now, has a very strong bias 0:14:14.080 --> 0:14:18.119 towards green. So European Union wants to be using green hydrogen. 0:14:18.200 --> 0:14:21.600 It's legislated at target for the use of green hydrogen, 0:14:21.680 --> 0:14:24.160 and there are some discussions about potentially changing that, but 0:14:24.240 --> 0:14:26.760 that has not happened at this moment and will probably 0:14:26.800 --> 0:14:29.320 not happen in the next couple of months for sure. 0:14:29.400 --> 0:14:33.200 So that leaves really one place where this blue hydrogen 0:14:33.280 --> 0:14:36.040 is a big focus, which is the US. Now, why 0:14:36.040 --> 0:14:39.160 would anybody this is the question, why would anybody want 0:14:39.200 --> 0:14:41.920 to use blue hydrogen in the first place? In the 0:14:42.040 --> 0:14:45.720 US people use gray hydrogen today. Now, what's hydrogen used 0:14:45.800 --> 0:14:48.120 for in the first place. It's not for power generation? 0:14:48.160 --> 0:14:50.160 Why would you want to burn the hydrogen? It's very 0:14:50.200 --> 0:14:52.080 expensive to make. You might as well burn the gas 0:14:52.120 --> 0:14:53.920 from which you make it without making the hygien in 0:14:53.920 --> 0:14:56.080 the first place, to save money. So hydrogen is used 0:14:56.080 --> 0:14:58.920 for fertilizers, for production of ammonia, which is then used 0:14:58.960 --> 0:15:02.640 to make fertilizers, also used for oliver fining. Unless you 0:15:02.800 --> 0:15:05.880 have a user out there that's willing to pay for 0:15:05.960 --> 0:15:09.080 this additional cost of capturing the carbon and getting that 0:15:09.160 --> 0:15:11.400 blue hydrogen, which you don't right now in the US 0:15:11.400 --> 0:15:14.240 there's no such incentive, then domestic use of blue hygien 0:15:14.320 --> 0:15:17.280 is never going to happen, which is exactly what we're seeing. 0:15:17.560 --> 0:15:21.480 Not really many companies interested in using blue hydrogen domestically. 0:15:21.520 --> 0:15:24.120 There are, of course, some exceptions, but unbalance, that's the story. 0:15:24.280 --> 0:15:26.680 So the question for the US is who is going 0:15:26.720 --> 0:15:29.400 to buy this blue hygien outside of the US. And 0:15:29.440 --> 0:15:32.080 that's where we get to places like Japan and Korea, 0:15:32.240 --> 0:15:34.800 and that's where we tie this back to this question 0:15:34.880 --> 0:15:39.480 of l COOE levelized costs of electricity, because Japan, Korea, 0:15:39.600 --> 0:15:44.880 these East Asian countries, they want to generate electricity using 0:15:45.200 --> 0:15:50.640 ammonia co fired with coal in coal power plants. This ammonia, 0:15:50.680 --> 0:15:54.720 which is NH three chemically, so that's nitrogen and three hydrogens, 0:15:54.960 --> 0:15:58.480 is made using hydrogen, could be made using blue hydrogen. 0:15:58.480 --> 0:16:00.640 If you burn it, you reduce the emission. But as 0:16:00.640 --> 0:16:03.280 we've established, that is a very expensive thing to do, 0:16:03.440 --> 0:16:05.920 even before you converted to ammonia, and now you've got 0:16:05.960 --> 0:16:08.120 this additional step of converting it to ammonia. So the 0:16:08.200 --> 0:16:11.560 question is when will the Japanese and the Koreans, as 0:16:11.600 --> 0:16:14.640 we keep saying in pretty much all of our publications, 0:16:14.680 --> 0:16:17.920 when will they realize that this is economic madness and 0:16:18.360 --> 0:16:20.680 stop doing it. And in Korea, the signs are that 0:16:20.680 --> 0:16:23.560 that's actually already happening. First auction they had on our 0:16:23.680 --> 0:16:27.560 generation there was a disaster and bing F subscribers can 0:16:27.600 --> 0:16:29.640 take a look at that report that we published at 0:16:29.640 --> 0:16:31.800 the end of last year that reacted to this, to 0:16:31.840 --> 0:16:34.360 the results of this auction in Japan. The auctions will 0:16:34.360 --> 0:16:36.240 start happening this year, and we'll need to see what 0:16:36.360 --> 0:16:38.480 kind of prices we'll end up seeing, but it's surely 0:16:38.520 --> 0:16:41.040 going to be very, very expensive, more expensive than what 0:16:41.080 --> 0:16:44.560 we're showing for hydrogen. So that's the question for the 0:16:44.640 --> 0:16:47.560 US exporterers. Who's going to buy this blue hydrogen and 0:16:47.600 --> 0:16:52.040 without any domestic incentives and with the economics being relatively 0:16:52.120 --> 0:16:55.120 poor or without the incentives for using clean hydrogen in 0:16:55.160 --> 0:16:58.080 the first place. In much of the world, you may 0:16:58.400 --> 0:17:01.760 have task credits you does for blue, but it could 0:17:01.840 --> 0:17:02.680 still be a hard sell. 0:17:02.920 --> 0:17:07.320 So as a fundamental premis, a country needs to ultimately 0:17:07.359 --> 0:17:10.639 care about carbon emissions for hard to abate in order 0:17:10.680 --> 0:17:13.160 for this to have a place, because the costs are 0:17:13.520 --> 0:17:16.560 extremely high when comparatively on an l COE basis and 0:17:16.600 --> 0:17:18.720 will continue to be because energy is made from energy. 0:17:18.760 --> 0:17:22.919 In that circumstance, with the exception of fertilizer, can you 0:17:23.000 --> 0:17:26.040 just point out really quickly whether or not that future 0:17:26.119 --> 0:17:29.240 still sits on the ammonia side, or is there enough 0:17:29.240 --> 0:17:32.520 competition from other sources a fertilizer that it is going 0:17:32.600 --> 0:17:35.360 to continue to have a difficult road when it comes 0:17:35.400 --> 0:17:36.680 to competition even there. 0:17:36.920 --> 0:17:40.240 Yeah, So if you want to decarbonize fertilizers, now there's 0:17:40.240 --> 0:17:44.119 so many different kinds of fertilizers because plants need different chemicals. 0:17:44.160 --> 0:17:49.040 So famously they need NP and K, so that's nitrogen, 0:17:49.080 --> 0:17:53.119 phosphorus and potassium. The fertilizers that you make using a 0:17:53.240 --> 0:17:56.640 hydrogen and ammonia are the N fertilizers as a nitrogen 0:17:56.680 --> 0:17:59.119 based fertilizer, So the goal here actually is not to 0:17:59.160 --> 0:18:01.320 feed the plant with hydrogen. It is to feed it 0:18:01.359 --> 0:18:03.320 with nitrogen, and the hydrogen is the carrier of that 0:18:03.440 --> 0:18:06.560 nitrogen and you cannot really get away from that. So 0:18:06.640 --> 0:18:09.960 if you want people to eat, then you will need 0:18:10.000 --> 0:18:16.280 to continue making fertilizers. And today those N fertilizers, nitrogen 0:18:16.320 --> 0:18:21.639 based fertilizers are made from gray ammonia, so from ammonia 0:18:21.720 --> 0:18:25.800 made with natural gas, and you could reduce the emissions 0:18:25.840 --> 0:18:29.359 of that ammonia and the production of those fertilizers therefore 0:18:29.480 --> 0:18:34.240 by swapping the source of hydrogen from gray to blue 0:18:34.359 --> 0:18:37.520 or to green. Now, the important point to note is 0:18:37.560 --> 0:18:39.840 that even if you do that, you're actually only reducing 0:18:39.880 --> 0:18:44.040 your emissions from agriculture by a relatively small ten twenty 0:18:44.119 --> 0:18:47.320 thirty percent, And most of the emissions happen after the 0:18:47.359 --> 0:18:49.880 fertilizer has been applied to the field, and then you've 0:18:49.920 --> 0:18:53.400 got plenty of emissions of nitrous oxide from there, which 0:18:53.400 --> 0:18:55.840 is a very very strong greenhouse gas. So agriculture the 0:18:55.960 --> 0:18:58.320 organization is going to be very very difficult. But if 0:18:58.320 --> 0:19:01.360 you're going to do it, one part of the answer 0:19:01.680 --> 0:19:03.440 needs to be clean hydrogen. 0:19:03.640 --> 0:19:05.239 So I'm going to ask you a chicken in an 0:19:05.280 --> 0:19:08.919 egg question. So, harkening back to another flagship report we 0:19:09.000 --> 0:19:11.360 have that also was a podcast, so check it out, 0:19:11.480 --> 0:19:14.840 Energy Transition Investment Trends, we also saw in that that 0:19:14.880 --> 0:19:17.480 there was a real decline in the amount of investment 0:19:17.560 --> 0:19:20.720 in hydrogen. So something that was very buzzy is now 0:19:20.760 --> 0:19:23.879 looking like that investment community is starting to cool on 0:19:23.920 --> 0:19:26.840 the opportunity there. And the question is is it due 0:19:26.920 --> 0:19:29.560 to the poor l coees or is it the other 0:19:29.600 --> 0:19:33.800 way around. Are the lcoes more impacted by the decline 0:19:33.800 --> 0:19:36.680 and investment. Is it chicken or is it egg et 0:19:36.920 --> 0:19:38.840 t versus l COOE. 0:19:39.000 --> 0:19:41.600 So I think data what you're saying is not LCOE, 0:19:41.680 --> 0:19:43.920 which is a levelized cost of electricity. About what you 0:19:44.080 --> 0:19:48.080 mean is LCOH levelized cost of hydrogen, because it's that 0:19:48.359 --> 0:19:50.800 hydrogen cost that matters, rather than the cost of the 0:19:50.840 --> 0:19:53.520 electricity made from that hydrogen, which is which which is 0:19:53.520 --> 0:19:57.159 a relatively niche use of the hydrogen. But the investment 0:19:57.320 --> 0:20:00.840 in hydrogen that we track has followen to about twenty 0:20:00.840 --> 0:20:04.159 four billion dollars in twenty twenty four from about forty 0:20:04.200 --> 0:20:08.400 seven billion dollars in twenty twenty three, So that's literally 0:20:08.480 --> 0:20:11.320 having in just a year. And in the end, it 0:20:11.359 --> 0:20:15.080 comes down to costs being high and therefore demand being low, 0:20:15.320 --> 0:20:19.399 and government incentives not being sufficient either bridge the gap 0:20:19.480 --> 0:20:22.560 between the high cost that it costs to make this 0:20:22.840 --> 0:20:25.480 green hydroen and the cost needed at which somebody would 0:20:25.560 --> 0:20:29.040 actually be willing to use it, or some harder incentives, 0:20:29.040 --> 0:20:32.440 some sticks like quotas, which we are starting to see 0:20:32.480 --> 0:20:35.040 emerge in places like Europe, but they're not coming into 0:20:35.080 --> 0:20:37.600 effect until twenty thirty. So why would you be investing 0:20:37.640 --> 0:20:39.879 now if you've got another five years to go. So 0:20:39.920 --> 0:20:42.880 that's the problem with hygien It's too expensive. There's therefore 0:20:42.880 --> 0:20:45.359 not enough demand, and the demand is not being incentivized 0:20:45.359 --> 0:20:49.560 sufficiently by governments, which in some cases it probably even 0:20:49.600 --> 0:20:51.879 shouldn't be. So I'm not saying it should be incentivized. 0:20:51.920 --> 0:20:54.080 I'm just saying it's not being incentivized, and therefore we're 0:20:54.080 --> 0:20:55.280 seeing a hydrogen falling. 0:20:55.760 --> 0:20:58.360 So let's soom weigh out and let's go to other 0:20:58.440 --> 0:21:01.080 parts of the world. There's one in Poticular where there 0:21:01.080 --> 0:21:03.639 have certainly been a number of government incentives when it 0:21:03.640 --> 0:21:06.920