December 23, 2021 • Paul Rodden • Season: 2021 • Episode: 75
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In episode 075, A huge report on the energy transition has been released. I’ll go over an article covering the report, and then dive into the report itself. All of this on today’s hydrogen podcast.
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A huge report on the energy transition has been released. I’ll go over an article covering the report, and then dive into the report itself. All of 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 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.
An article from recharge news.com Lee Collins writes more than 80% of energy companies are investing in hydrogen or considering entering the market. Collins writes that a survey of 170 energy industry decision makers, including those in oil and gas power and renewables and investment firms, has found that 81% are investing in hydrogen planning to enter the market or considering doing so. According to US UK law firm Womble bond, Dickinson’s 2022 Energy Transition Outlook Survey Report, 31% of respondents said they were already actively operating, investing in or researching blue or green hydrogen 29%. Were considering entering into the market in the next one to five years, with 21% Plenty to move into the sector in the coming year. Only 19% said they were neither active nor considering hydrogen investments.
A total of 67% of respondents said that hydrogen represented the most appealing growth opportunities in the energy space slightly behind battery storage but ahead of energy efficiency, and electrification. Correspondents were asked to consider which of the following three statements best summarize their position on hydrogen, nearly 30% selected green hydrogen is worth the weight. About half chose blue hydrogen is simply a bridge to a long term shift to green hydrogen, and a fifth agreed with blue hydrogen technology is here to stay. The survey also found that contributors thought the biggest challenges for hydrogen market were the supply and storage of hydrogen, the absence of infrastructure and the public safety concerns.
Overall, there were less worried about the complexity of distributing hydrogen or the cost curve uncertainty, indicating that they thought that the existing hydrocarbon and liquefied natural gas infrastructure provided a quote technical basis for hydrogen distribution, and that they were confident that green and or blue hydrogen would soon be cost competitive. That’s according to the report. However, drilling down further into the statistics, the Transatlantic law firm found that while only 41% of energy company executives felt that the hydrogen distribution was too complex 74% of investors did. Similarly 56% of investors were worried about the cost curve uncertainties compared with only 21% of energy executives.
And why the disparity the report asks, it may be that investors lack enthusiasm for this emerging technology is due at least in part two, the depth of pure play companies and or investment mechanisms exclusively focused on the resource. Companies are actively pursuing hydrogen development are often oil majors or other diversified companies. Solar and onshore wind, on the other hand, are replete with pure play investments and tightly focused funds. The online survey questioned 170 respondents from 170 companies including C suite executives, business or operations managers, and in house legal counsel, a combined group referred to as quote energy executives in the report with 29% classified as investors. The majority of respondents were based in the US 84%, with remaining contributors coming from Canada, UK, Saudi Arabia, France, and Belgium. Now Cohen’s does a great job of highlighting some of the main points of this report.
But I think it’s also important to take a bit of a deeper dive into this report. Also, this is the executive summary from the report. It says transitioning the global economy out of its current reliance on hydrocarbons involves a massive, complex and nuanced undertaking. Hydrocarbons represent 80% of current global energy consumption, and the market for them exceeds $6 trillion a year. Even in 2021. The use of hydrocarbons continues to expand faster than the rate at which renewable energy can be deployed. primary drivers of this energy transition are societal expectations, and resolve rather than technological innovation or changing demographics. That has been the case with comparable market upheavals, but expectations and resolve or mercurial forces. In addition, no single technology or group of technologies has yet to emerge.
To fill the gap that hydrocarbons may eventually leave. The technological path that the industry will take remains uncertain. In the face of these complexities and uncertainties, identifiable insights and perspectives can be gleaned from across the energy industry. To capture these insights and perspectives. The Global Energy Team at WBD has surveyed a carefully selected group of 170 energy sector decision makers, including C suite executives, investors and in house legal counsel. All these leaders represent a broad spectrum of energy sub sectors including oil and gas powered renewables, and mining and minerals. They have a unique vantage point concerning the transition, and a need to understand what it means for their businesses. The data gathered in this effort paint a fascinating snapshot of where the transition stands today. The first point, energy leaders are willingly embracing the transition. Approximately three out of four energy industry leaders say that their organizations and or investment portfolios are very well to moderately prepared to achieve carbon dioxide and methane reduction goals by 2030.
The second point, the energy industry sees the Biden administration’s more aggressive carbon policies as a plus solid majorities of the energy industry leaders see the Biden administration’s energy policies as favorable to their businesses and business opportunities. This indicates that they value federal guidelines and initiatives supportive as the definitive strategies for investment in the transition and for the achievement of net zero goals. Third, generally, the sector has adopted a forward looking and optimistic perspective on the energy transition. Taken as a whole. The data show that the energy industry leaders are avoiding the bunker mentality of those that resists change until it becomes unavoidable. Energy Industry leaders see no inherent conflict between climate goals and the long term success of their businesses. Four there is skepticism about the US achieving its national climate goals.
Almost half of those surveyed believe that the Biden administration’s announced goal of decarbonizing the power sector by 2035 will not be met an additional 20% were unsure. Number five new fuels are the new focus. Eight intent executives and investors are investing in planning for or considering hydrogen and biofuel and biomass as future energy sources. electric vehicle charging energy efficiency and geothermal also emerged as strong areas of industry focus going forward. Number six, carbon capture is not seen as a leading technology. Only about one in five industry executives who say they were prepared at some level to reduce more than 50% of their methane and carbon emissions by 2030. Said carbon capture and sequestration was how they expected to get there. This is consistent with the expense and complexity of the technology, as well as a number of high profile projects that have failed in the past. And lastly, number seven, energy executives and investors are early in the process of embracing ESG policies.
Leaders in the energy sector, while further along than many other sectors remain in the early stage of implementation. There’s intense scrutiny in the sector more than any other and a major obstacle in the United States remains a lack of any consistent standards. However, within the next few years, most major companies will have programs in place and expect to be in a position to show progress towards ESG goals. And some further highlights on hydrogen, the report states to meet climate goals the electric industry must replace natural gas as a primary fuel to meet load growth while retiring coal fired and nuclear power plants. Today the industry depends heavily on natural gas for new generation, hydrogen and increasingly its analog ammonia are emerging as the principal green fuels that could replace natural gas.
The UK is experimenting with hydrogen for residential and commercial space heating and cooking. Hydrogen clearly checks multiple boxes as far as industry executives are concerned. And it’s 67% score as an r&d investment opportunity reflects that fact. And to expand even further on that hydrogen, biomass and geothermal are industry r&d focuses the technological path for producing and developing hydrogen at a reasonable cost and without carbon emissions is unclear, as is the path for converting existing pipeline and storage infrastructure from natural gas and LNG to hydrogen. So it is not surprising that the industry executives most often identified hydrogen as a technology for which r&d is most important with biofuels and biomass and geothermal as the only other fuels receiving more than 25%.
The survey drills down on the key challenges to hydrogen as seen by investors and executives, active in or considering operations investment in hydrogen executives most often listed technology issues regarding supply and storage, absence of infrastructure, and public safety concerns as principal challenges. But they’re less concerned about the complexity of distribution indicating that the existing natural gas and LNG infrastructure provides a technological basis for hydrogen distribution. Few executives listed cost curve uncertainty as an issue, indicating confidence that the cost of hydrogen can be brought down to a point where it becomes an economically practical fuel source. Investors see markedly more challenges for hydrogen than executives.
74% of investors believe hydrogen distribution is too complex, yet fewer than half of the executives surveyed feel that way. Similarly, the percentage of investors who worry about cost curve uncertainty is more than double the percentage among executives so By the disparity, and maybe the investors lack of enthusiasm for this emerging technology is due at least in part to the dearth of pure play companies of size and or investment mechanisms exclusively focused on the resource. companies actively pursuing hydrogen development are often oil majors, or other diversified companies. Solar and onshore wind, on the other hand, are replete with pure play investments and tightly focused funds. Investors and energy executives are however very much aligned with the value of green hydrogen, or hydrogen generated purely from renewable resources such as electrolysis of water, about half of those who reported hydrogen as a current area of activity, see blue hydrogen as a bridge to green.
Blue, by contrast is generated from natural gas, the carbon dioxide byproduct is captured and stored. nearly 30% of each group says green hydrogen is quote worth the weight. This conviction is further reinforced by the fact that the current cost of green hydrogen is at least twice out of blue, suggesting that a belief that this gap can be narrowed over time. Okay, so just some highlights on this report. And it’s very interesting to see the different viewpoints had by energy executives, attorneys, and investors. And I’m really beginning to see a bit of a paradigm shift in the energy executives view of hydrogen. And I really believe that that mindset is changing for oil and gas, that these legacy oil and gas companies can fully participate in the energy transition, without any sweeping changes to their infrastructure.
Alright, that’s it for me, everyone. If you have any questions, comments or concerns about today’s episode, come and visit me at the hydrogen podcast.com. Or you can always email me at info at the hydrogen podcast.com. I would really love to hear from you. And as always, take care. Stay safe. I’ll talk to you later.
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