Paul Rodden • Season: 2024 • Episode: 306
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Welcome to The Hydrogen Podcast!
In episode 306, Ernst and Young is liking the electrolyzer market in a big way. And Getech has three new partners to go exploring for geologic hydrogen. I’ll go over this news and give my thoughts on today’s hydrogen podcast.
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Paul Rodden
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Transcript:
Ernst and Young is liking the electrolyzer market in a big way. And Getech has three new partners to go exploring for geologic hydrogen. I’ll go over this news and give my thoughts 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.
And an opinion piece and mining weekly com Quintin Hobbs writes moving from hype to reality, how green hydrogens role in the energy transition is evolving. Quinton writes it is now clear that green hydrogen will play a pivotal role in the global energy transition, especially in hard to decarbonize heavy industry sectors that include chemical manufacturing, steelmaking, cement, and transport. Even though broad adoption is not likely in the short term, there is consensus among different energy experts that there will be exponential growth in green hydrogen demand. Much has been spoken about the need for large scale renewable energy production to drive this, but another increasingly important factor is significant demand for electrolyzers. electrolyzers are devices that use electricity to split water or other components into their constituent elements through electrolysis.
Electrolysis technology is rapidly developing through a combination of technological advancements scale and funding to meet forecast demand and capacity. However, there are concerns about the limited availability of these critical minerals used in electrolyzer manufacturing to match demand. These materials include platinum, palladium, iridium, nickel and rare materials. Adding further complexity to this are increasingly geopolitical tensions and resource nationalism. This could exacerbate supply and concentration risk, potentially increasing electrolyzer cost and dampening deployment. Despite a range of applications for green hydrogen. A lack of significant industrial demand to date is also impacting the timing of demand for electrolyzers. Government industry stakeholders and educational institutions therefore need to collaborate to bridge existing skills gaps in the sector and help increase awareness of its importance. Developments in the green hydrogen manufacturing process being the price competitiveness of green hydrogen will be reaching parity with alternatives such as natural gas sooner than previously expected.
There are three drivers behind this decreasing renewable energy costs decreasing electrolyzer capital expenditure or capex costs and increasing carbon taxes. Renewable costs have further decreased with additional reductions expected to take place over the coming several years, albeit at a slower pace. The future costs of green hydrogen production will influence the speed of the hydrogen economy and major aspects of decarbonizing energy systems from China to the US. These electrolyzer costs are critical for producing more green hydrogen. We expect a rise in electrolyzer production capacity, disruptive technology innovation and an increase in average module sizes to drive and about 50% Drop in electrolyzer capex between 2023 and 2050. There are five factors set to drive hydrogen electrolyzer market growth. Green hydrogen demand will rise rapidly in the coming years.
Ernst and Young predicts that demand will rise at about 10.3% compound annual growth rate over the 2020 30 period. Furthermore, government funding from the European Union and other countries has offered impetus for a rapid acceleration in electrolyzer production capacity, rapid acceleration anticipated in electrolyzer production capacity. Despite manufacturers building out more production capacities in Europe, the US China and India manufacturers do have concerns that oversupply will see a relatively low share of projects reaching final investment decisions. Unit Cost of alkaline and proton exchange membrane electrolyzers are falling. This is fueled by a rise in production capacity and technology innovations. Rising stack efficiency and larger module sizes are driving down costs.
Stack components comprise up to 50% of overall electrolyzer system cost. With technology advancements stack sizes increasing, resulting in improved efficiency, which could reduce costs. actual deployment is slower than announced projects. This is due to the huge costs and risks involved. This means that developers are building electrolyzer capacity in a phased approach. Ernst and Young’s extensive analysis reveals three key actions for electrolyzer original equipment manufacturers or OEMs, hydrogen producers and investors. All this is underpinned by contracting, deploying and standardization efforts.
Overall, there is still a positive market outlook when it comes to green hydrogen and electrolyzer production. This is built on expansionary policies and government support globally that will help Drive and electrolyzer cost decrease of about 50% over the state of 2023 to 2050 period. This means green hydrogen stakeholders must proactively take strategic decisions today. to prepare for the future electrolyzer market trends. Electrolyzer OEMs should engage in long term supply contracts and partnerships, along with customer contracts to ensure a steady supply and Orderbook. Moreover, OEMs can look to move away from bespoke products to produce standardized units to reap benefits of economies of scale. For their part, hydrogen producers need to secure long term contracts with electrolyzer OEMs.
Rather than waiting for a price breakthrough. This will help safeguard against any supply shocks as the green hydrogen market is expected to grow. Producers can also look to collaborate with other hydrogen producers to increase knowledge diffusion, boost operational synergies, and drive market awareness and adoption. This to reduce production costs further and for investors. The lower capex outlook will enhance the appeal of the hydrogen sector. Ernst and Young expects alkaline and pem technologies to remain dominant in the market with an approximate 90% combined market share until 2050. Investors should therefore continue to focus on these two technologies to benefit from returns. It is now clear that the industry is moving from hype to reality. We are seeing concrete developments that will fuel demand and lead to project feasibility. These developments are not linear and we expect to see much more volatility and price developments as projects continue on the path toward bankability.
There will be winners and losers. Okay, so a very well thought out piece from Quinton Hobbs and Ernst and Young and I happen to agree with his general outlook electrolytic hydrogen has a huge future ahead of it. But the chicken and egg question still remains in order for the market. To experience economies of scale for electrolyzer manufacturers, large orders and long term supply contracts need to be instilled for both material supply as well as the demand side clients. And it’s also possible that we’ll only see these massive multibillion dollar green hydrogen projects go through development as those have the best economic return so far. The key to that sentence is so far, the last podcast I talked about digital twin technology, that tech along with other material advancements will continue to boost project economics for green hydrogen development. But the timeframe for that to be fully fleshed out remains a mystery. And as Quinton mentioned in his opinion piece, technological developments in the electrolyzer space are developing at a more rapid pace than previously expected.
And I fully believe that trend will continue. But the question of who will buy these units? Where will they set up projects and who will off take the hydrogen or derivatives at an elevated price point still remains. And if those questions don’t get resolved, we could see a massive oversupply of electrolyzers. Now, if that were to happen, could we then see a reduction of costs just to offload the units? Well, if that happens, it would result in project development furthering the hydrogen market and creating more demand for electrolyzers. Of course, that’s only one potential scenario. Global demand is building and if the developments in Oman, Saudi Arabia, Australia, and all throughout Africa are any indication, market growth is a certainty with Europe and Japan, importing as much hydrogen as they can get their hands on. Next, in a press release on April 15.
Getech a world leading locator of subsurface resources is pleased to announce three separate contract wins related to the exploration of natural hydrogen. Also known as geologic or white hydrogen, the first is a strategic joint venture exploration agreement with a new customer partner while two additional contracts have been secured with existing exploration clients. All three contracts are aimed at locating natural hydrogen resources for commercial development and demonstrate that the company is at the forefront of this exciting new subsurface energy transition opportunity. Combined, the three transactions are expected to generate 390,000 pounds of revenue over the next three years with additional potential upside.
The joint exploration agreement is with a major European headquartered global industrial and energy company and aims to locate and develop economic natural hydrogen accumulations. In addition to earning fees for its exploration services. Under the terms of the contract agreement, Getech will also earn 5% equity interest in any licenses obtained within a designated area and will be carried through the exploration phase including field sampling, exploration, drilling and well testing. Over the course of the multi year program.
Getech will apply its proprietary and industry leading natural hydrogen location solution. This begins with understanding and modeling the geologic conditions known to produce natural hydrogen. Getech is uniquely placed to do this using it six elusive global in geological and geophysical dataset, which it has compiled over 30 years and used successfully for decades and other natural resource sectors. Getech will then deploy proprietary machine learning algorithms to find it digital signature matches and its data to predict the location of new natural hydrogen accumulations.
Once natural hydrogen source rocks have been identified, Getech will use extensive experience gained from the oil and gas industry to predict the migration and trapping of hydrogen through the earth to identify subsurface reservoirs where hydrogen may have accumulated. This will be followed by verifying or ground truthing these results in the field. The new customer partner will then take the lead in subsequent exploration, drilling and development activities. The two additional contracts are with existing exploration clients to screen for natural hydrogen and hydrogen storage projects in Eastern Europe and the US the projects will again use GeTech’s globe geoscience platform geophysical data and AI technology to locate areas with a geologic conditions to produce natural hydrogen.
Okay, so a big win for Getech and their subsurface technology. This sort of news is exactly what I’ve been expecting to hear from Legacy oil and gas technology providers leveraging their extensive knowledge in subsurface modeling to identify potential reservoirs. This is huge news. Now, this release did not divulge who the three partners are, and I for one will be excited to learn who they are. And if the results are anything close to what I’ve heard from ARPA E, private investment is going to ramp up drastically, putting Getech and other geologic hydrogen developers in the driver’s seat of geologic hydrogen.
All right, that’s it for me, everyone. If you have a second, I would really appreciate it. If you could leave a good review on whatever platform it is that you listen to Apple podcasts, Spotify, Google, YouTube, 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 info@thehydrogenpodcast.com.
So until next time, keep your eyes up and honor one another. 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.
