THP-E126: What Does The Hydrogen Landscape Look Like To The Chairman of Market and Investment Strategy for J.P. Morgan Asset Management? My Thoughts On His Report [Part 1]

June 30, 2022 • Paul Rodden • Season: 2022 • Episode: 126

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Welcome to The Hydrogen Podcast!

In episode 126, JP Morgan releases their 2022 annual energy paper. And a good chunk of it discusses hydrogen. I’ll go over the author’s talking points on today’s hydrogen podcast.

Thank you for listening and I hope you enjoy the podcast. Please feel free to email me at with any questions. Also, if you wouldn’t mind subscribing to my podcast using your preferred platform… I would greatly appreciate it.

Paul Rodden



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JP Morgan releases their 2022 annual energy paper. And a good chunk of it discusses hydrogen. I’ll go over the author’s talking points on today’s hydrogen podcast.

So the big questions in the energy industry today are, how is hydrogen the primary driving force behind the evolution of energy? Where is capital being deployed for hydrogen projects globally? And where are the best investment opportunities for early adopters who recognize the importance of hydrogen? I will address the critical issues and give you the information you need to deploy capital. Those are the questions that will unlock the potential of hydrogen. And this podcast will give you the answers. My name is Paul Rodden, and welcome to the hydrogen podcast.

So today, I thought I would go through the 2022 annual energy paper put out by JP Morgan by Michael Cembalest. Now originally, this was part of a podcast series that Mike was doing on energy. And in it he had a specific podcast dedicated toward hydrogen and his thoughts on the market. That podcast was included in this paper, and I would like to go over a lot of the points that he made in it. He may be missing some information and some of the places where he is quite accurate. Now the podcast was titled The elephants in the room part 4 hydrogen, and included the tagline hydrogen use cases may be much narrower than advertised. And the timeline is a very long one. He starts off by saying there’s a lot of excitement about hydrogen, hydrogen linked equities quadrupled from 2019 to 2021, before falling 35 to 40% From peak levels. Enormous hydrogen research reports are now commonplace extolling the long awaited arrival of the hydrogen economy. Hydrogen is also mentioned as a critical option for Europe to reduce reliance on imported Russian energy. He says to be clear, the hydrogen economy is in its infancy other than legacy hydrogen uses completely reliant on hydrocarbons. 90 million metric tons of hydrogen are used each year to produce ammonia for fertilizer and an oil refining to reduce the sulfur content of diesel fuel.

A very small amount is also used in steel production as an iron ore reducing agent alongside carbon monoxide. In other words, he says almost no hydrogen is used in power transport, home heating, shipping, rail, aviation, or other widely use cases. And practically all hydrogen is created via Steam reformation of hydrocarbons with less than 1% created via electrolysis using renewable energy. Hydrogen is not a native energy source, it’s an energy carrier, roughly 2% of global primary energy is converted into hydrogen each year, a level roughly unchanged since the year 2000. He says he got into a discussion with some bullish hydrogen energy analysts recently. And it led to a longer conversation about hydrogen use cases. The first point that he brings up is that in the US 25,000 upstream midstream and downstream natural gas fueled compressors account for two to 3% of the US natural gas consumption. Midstream energy companies are now considering hydrogen to power them. Instead, GE has designed hydrogen fueled compression turbines with more than 100 and operation. Now his argument to this is that by using today’s gray hydrogen produced via Steam methane reformation, by using hydrocarbons to power these compressors, they would increase co2 emissions compared to using natural gas directly due to the 30% losses involved in the conversion of natural gas to hydrogen. And that’s true. But I think the problem that he’s looking at here is assuming that any new hydrogen projects launching right now would be a gray establishment.

And I cannot see any gray hydrogen plants breaking ground ever. If any of these companies want to use hydrogen, then they are going to use a low to negative carbon technology to get as many government incentives as possible. His next point is on pipeline blending. And his first talking point in this is in reference to gray hydrogen being put into these pipelines. And again, I think that’s going to be a mute point going forward, because gray hydrogen projects just aren’t going to be taking off at all and the hydrogen revolution that we’re going to be seeing in the next 10 20 or 30 years. But he does bring up embrittlement and that is a real issue. That yes, there are projects going on around the world right now, where they’re testing five to 10% hydrogen in these pipelines to see how the pipelines themselves react. Now so far, and he mentions this, there haven’t been any issues, but these tests haven’t lasted long enough to see if embrittlement occurs. And if it does, at what percentage. Now his other point in this is the cost of hydrogen, and how much that cost could be displaced onto the user of a distribution network If hydrogen is blended into that natural gas line. Now, there was a German study showing that it could be up to 33% of an increase in cost for a blended hydrogen natural gas distribution line.

Well, obviously, that cost is going to vary depending on how the hydrogen is sourced, because there’s a rather extreme difference in hydrogen production costs between the different technologies. But even with that being said, we’ve already noticed a 200 to 300% increase in our own natural gas costs here in the United States. So while hydrogen blending could increase home heating costs, it could also bring a stabilizing factor into the price volatility of home heating. The next point he tackles is blue hydrogen, and the commercial demand for co2. And the first point that he makes here is very valid, stating that just .1% of global co2 emissions are currently being sequestered underground.

He says Europe is forging ahead with 76 carbon capture and sequestration projects, mostly dedicated to EOR, or enhanced oil recovery. Even so Europe sequestration potential from these projects, and 2030 is 50 million metric tons per year of co2, which is roughly 1% of its annual emissions. And really, what I would say is that the argument for carbon capture right now really needs to revolve around just how much co2 The Earth needs to sustain itself. And I realize that is an immense question, but one that I think really needs to be established and answered before we can talk about how much co2 needs to be captured not just in the hydrogen industry, but as a global effort. But to bring that back to his talking points. He goes on to quote that the Cornell study estimated the greenhouse gas emissions impact of blue hydrogen is more than 20% higher than the greenhouse gas impact of just burning natural gas or coal directly. Now, I’ve covered this talk before, and it has been discredited by several of their contemporaries, who said that the estimates in that study are far too extreme. But even with that being said, there is a reality of co2 emissions from Blue hydrogen.

And so that is a factor that you have to take into consideration for that technology. But also, while talking about co2, let’s not overlook the fact that the other element in a hydrocarbon besides hydrogen is carbon, which has its own emerging market in the way of graphene. And I have mentioned it several times that there is a carbon economy that includes carbon black, graphene, and carbon nanotubes, all three of which can be a byproduct from the hydrogen economy when using some sort of hydrocarbon based material as your feedstock. And lastly, today, I’m going to cover his talking points on green hydrogen and the associated costs. His first point addresses that Goldman Sachs projects steep declines in the electrolysis costs that are similar to those achieved during a prior learning curves on wind, solar and batteries. And he says that yes, they expect green hydrogen costs to decline to $2 per kilogram.

By the end of the decade assuming high electrolyzer utilization rates, low renewable energy costs, and further declines and electrolyzer costs. That compares to a current price of one to $2 per kilogram for gray hydrogen, assuming natural gas prices of two and a half to $10 per MMBtu. He says that we’ll see actual adoption rates will tell us more than projections. And that’s true. But that’s all we really have to go off of our projections. Because as Michael pointed out, the hydrogen industry is still in its infancy. But what we know for sure right now is that big oil has put billions and billions and billions of dollars into researching electrolysis, and that there is a long history to show that specific dedicated investments in specific technologies will reduce costs, and the same is true for the electrolyzer market. But all of this being said, from his position, I understand his skepticism of the hydrogen market and that from where he sits, trying to estimate something 10 to 20 years down the line is a little too risky. But with that being said, he does fall into one of the big fallacies I see from this viewpoint, and that strictly focusing in on the colors blue and green, when there are other technologies pushing that envelope of driving down costs. Now I’ve reached my time for today. So the next podcast will incorporate Michaels talking points on the end use scenarios for hydrogen.

But until then, if you have a second, I would really appreciate it. If you can leave a good review on whatever platform it is that you listen to Apple podcasts, Spotify, Google, whatever it is, that would be a tremendous help to the show. And as always, if you ever have any feedback, you’re welcome to email me directly at And as always, take care. Stay safe. I’ll talk to you later.

Hey, this is Paul. I hope you liked this podcast. If you did and want to hear more. I’d appreciate it if you would either subscribe to this channel on YouTube, or connect with your favorite platform through my website at Thanks for listening. I very much appreciate it. Have a great day.