July 04, 2022 • Paul Rodden • Season: 2022 • Episode: 127
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In episode 127, Let's take a look at the second half of the 2022 annual energy paper from JP Morgan and their look on hydrogen. All this on today's hydrogen podcast.
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Let's take a look at the second half of the 2022 annual energy paper from JP Morgan and their look on hydrogen. All this 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's 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 last week, we covered the first half of the 2022 annual energy paper from JP Morgan, written by Michael Cembalest. And we focused on the first half of the hydrogen portion of that paper. Now in the first half of that paper, the author covered really the economics of some of the different technologies going on right now. And hydrogen, and the differences economically between blue hydrogen, green hydrogen, and how those two compare it with the current state of hydrogen, that being gray. But about halfway through the article, he changes from economics and technology to end use scenarios for hydrogen. The first one he's talking about is long haul shipping using hydrogen or ammonia as fuel. Now, one thing the author and I are in complete lockstep agreement with is that lithium ion batteries are nonsensical for shipping, he quotes that using state of the art electric batteries with 300 Watt hours per kilogram of energy density, an electric version of the Maersk Triple E class container ship would have to dedicate 40% of its cargo capacity to batteries. And that's a non starter, and he thinks that he could see a nuclear option happen before batteries.
So what does he think about hydrogen as that potential solution? Well, I'm going to read his quote here, and I'm going to talk about it but you make some very good points. While hydrogen he says has high energy density by weight, it has low energy density by volume, the size of hydrogen storage tanks on ships might need to be very large and if ships use liquefied hydrogen instead, the refrigeration costs could be prohibitively high. He says a consortium of shipping companies recently highlighted critical development issues that still need to be resolved. Those being safety considerations for cryogenic liquid hydrogen leakage and detonation risks and the need for new bunkering infrastructure. He says a 2021 analysis and Energy Environmental Sciences highlights the challenge. There is no hydrogen storage solution that combines high energy density, low energy input, easily available resources is non toxic and is easy to handle and store. And here's the thing, he's not wrong on this liquefied hydrogen is hard to one make and two to store. But that being said it hasn't stopped some companies from doing it, the technology is still in its infancy. And a lot more development is still scheduled to go into how best to transport hydrogen or utilize hydrogen in the best possible way as transportation fuel.
So the next thing he talks about in his paper is the potential for ammonia. Now I've talked about several opportunities going on right now in a near future development for green ammonia transportation. And what the author states is this he says, ammonia may be a promising hydrogen carrier given its high hydrogen content, which is 17.6% its existing distribution network, its ability to be liquefied at higher temperatures, which is minus 33 degrees Celsius versus negative 253 degrees Celsius for pure hydrogen, it's higher volumetric energy density versus other alternatives and relatively low energy losses when transported over long distances. He says the hydrogen and ammonia could then be released through catalytic decomposition, or the ammonia could be consumed directly through a fuel cell designed for it. However, he says all of these conversions carry energy penalties when used in transport, the round trip efficiency of liquid ammonia produced from Green hydrogen may just be 11 to 19%. He thinks that a timeline for that kind of adoption would be long. Now a couple of things to highlight from this statement.
Ammonia is a very good hydrogen carrier. And it has been for a very long time, which is why there is a good amount of ammonia infrastructure not just in the US, but worldwide. Now, that being said, to convert the hydrogen into ammonia and then back again to hydrogen, you are going to be introducing some energy losses there. But in his quote, he is focused in on green hydrogen, and I believe that if we change the focus from green to low carbon intensity hydrogen, those energy losses for round trip would be much much lower. Now after this the authored does go into some alternative storage solutions for hydrogen. But to me right now, those really aren't worth talking about at an economic level, there's still far too much r&d that needs to be run through to see if these potential storage solutions are just as or more economically viable than ammonia. The next offtaker opportunity he talks about is steel production and on steel production. He says there are a lot of pilot projects in Sweden, the UAE and elsewhere using green hydrogen as a reducing agent. Iron ore can be transformed into sponge iron and then converted to steel as an electric arc furnace using a lot of energy and only a small amount of carbon possibly pulverized coal. Some estimates show decarbonisation potential of 70%. But he says look at the timeline.
McKinsey estimates that cash competitiveness with Nordic hydrogen based steel production sometime between 2030 and 2040. And that's assuming existing plants are simply written off before their useful lives are exhausted. The Nordics also represent just .5% of global production, the elephant in the room being China which produces more than 50% of the world's steel, and whose steel plants are younger than European counterparts. So in this, there are some good numbers to really look at the first being an estimated decarbonisation potential of 70%. Now steel production is one of the primary focuses for the hydrogen industry as an off taker, and for this very reason, but he states in here that we're looking at cost competitiveness between 2030 and 2040. Well, that's not necessarily a negative because that is the timeframe that everyone estimates that the hydrogen transition will really start to take effect. And so to say that we'll have cost parity in that decade is spot on to what we've been saying for some time, that that 2030 to 2040 timeframe, is really going to be that sweet spot for the hydrogen shift globally.
Now, he does mention in the statement, the elephant in the room, and that being China, and he's dead on with that. Now, publicly, China is saying that they're transitioning to a lot of hydrogen sources. And really, I just don't know how much of that I can believe. But if China legitimately does make that switch, that does make for a massive impact globally on carbon reduction, his next talking point is ground transportation, in this case trucking. He says think about the two major alternatives to internal combustion engines for vehicles, the first being electric, an electric motor powered by a battery fueled via electricity source from renewable energy. The other option is hydrogen, or an electric motor powered by a fuel cell whose energy is sourced from hydrogen produced via electricity source from renewable energy. In other words, this debate is about cost supply chain and operational differences between EV batteries and hydrogen fuel cells.
He says he doesn't think fuel cells are compelling for a passenger vehicle given fuel tank space constraints, which make their range similar to EVs, and much higher energy conversion losses than EV batteries. However, he says sustained EV production bottlenecks due to lithium supply chain problems are real risks to monitor. For fuel cells, Platinum supply chains are much more important. He continues by saying using hydrogen for long haul trucking makes a bit more sense, since compressed hydrogen allows for longer range and faster refueling, and there's fewer space constraints. For example, Freightliner is pinning II Cascadia class eight evey truck was at 2000 pounds, and it has a range of 250 miles and mileage of point five miles per kilowatt hour. Now in comparison, Hyzon's pending class eight hydrogen fuel cell truck has the same weight, but with a longer range 375 to 500 miles on 50 to 70 kilograms of hydrogen. And he also says that it might cost less as well. Now after this, the author does make comparisons between Hyzon and Nikola, and I get that that at first glance, the comparison can be easily made.
But these two companies are not the same. I know several people that have business dealings with Hyzon and they speak very highly of both the company and Craig Knight, their CEO. Now if you want to hold off on any speculation until actual sales get released, that's fair. But to compare the two companies between Nicola and Hyzon I think is a bit overly critical. The next talking point he dives into is backup power. And I'm really surprised at his take on this. He says there are commercial backup storage applications or hydrogen might make sense. One example is the need for wireless companies to provide more redundancy and power to remote cell tower networks. As the 4g to 5g transition occurs. They currently have to rely on diesel generators since most towers are not close to natural gas pipelines. hydrogen storage tanks could be protected for safety purposes in these remote locations. But even here the cost per kilowatt hour could be roughly two times the cost of power. from existing digital generators, you know, I've covered in the past the swap from diesel generator backup to fuel cell generator backup, and it just makes for a much more cleaner backup system, especially when you have to look at maintenance costs, diesel generators break down, and you have to replace parts, especially the difficulty diesel generators can run into when trying to fire up in very cold temperatures.
And the last industry he talks about is aviation. I was again surprised by his take on this, but this time, I'm surprised he's so negative on the concept of using hydrogen for aviation. He says big picture, the volumetric density of unpressurized hydrogen is 9000 times less than jet fuel, its specific energy by weight is three times higher than jet fuel. And as a result, a plane powered by unpressurized hydrogen would need 3000 times more fuel storage space to match the cargo capacity and distance potential of large aircraft. He says his borders on absurd, even if compressed hydrogen reduced the storage ratio by a factor of 200. He says to come back to him in 25 years, and let's take a look at where it stands. And in this case, I don't think he could be more off base with this viewpoint. Now, if you've listened to this show, I'm sure you've seen the podcast where we interview the CEO from Hypoint. And so I can tell you firsthand, using hydrogen as a fuel source instead of lithium batteries makes vast amounts of sense. And the argument for doing so is even much more compelling than the trucking argument.
And so as I'm going through his points here, I have a hard time understanding how he's really presenting this argument from the viewpoint of unpressurized hydrogen, and comparing that to jet fuel. Now there is an argument to be made that in the hydrogen industry, it is possible to create synthetic fuels, such as Jet A, and that Jet A is better than traditional jet fuel, in that it's lighter, more energy dense and burns cleaner. But if we're strictly talking about hydrogen and aviation, and you don't want to bring in battery technology as its competitor, and instead want to compare hydrogen to jet fuel, then I think you also need to bring into the discussion whether you're talking about igniting the hydrogen as you would in a traditional turbine engine, or are we talking about using it in fuel cells similar to the Hypoint situation. And that's an important distinction when talking about aviation potential of hydrogen. Now, I'm sure many of the listeners right now will fall into different categories or camps, as they hear these statements from the author where the support is claims or deny his claims.
And while I think it's easy to hear some of the words that he's using, and some of the statements that he's using, and think that he's overly critical or negative towards the hydrogen space, I don't really hear it that way. I have conversations on a regular basis, with people involved in finance and economics around energy. And more often than not, their enthusiasm is directly related to what they want their turnaround time to be for their investment. And so those investors looking for a short term turnaround, have a very skeptical view on hydrogen core as those with more time to invest in hydrogen and aren't so concerned about a quick turnaround are much more optimistic. And that's really where I see this author's viewpoint. Case in point, we're reading an annual energy review, meaning that this is a very short term outlook. And so if you narrow your scope or your field of view, to just one year, the hydrogen economy doesn't look as good as if you look at it over the next 20 years. And so those of us who are optimistic on hydrogen, that's how we view the space, we see this as a long term transition over the next 20 years. So when you talk to us about something that's happening from the 2030s, to the 2040s, we don't really see that as a big deal.
All right. That's it for me, everyone. 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 podcast, Spotify, Google, whatever it is, that would be a tremendous help to the show. And as always, if you have any feedback, you're welcome to email me directly at email@example.com. 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 www.thehydrogenpodcast.com. Thanks for listening. I very much appreciate it. Have a great day.