Exploring the hydrogen opportunity

foreign [Music] take you behind the scenes and talk to the people powering the energy sector this week I'm joined by Alex Haynes and John Carpenter where we're going to be talking all about hydrogen what's the biggest topic going to be in 2023 and will it disrupt the energy landscape so sit back grab a cup of tea coffee and enjoy this conversation Alex John thank you so much for joining me here today and today we're going to be talking a bit about hydrogen awesome great to be here thanks very much thanks Darren yeah thanks for joining us so I'm going to start with the big question first so it's been a lot about we've talked about colors in that but I feel like that's over now so what do you think is going to be the biggest Topic in hydrogen in 2023 I think I I can start by saying getting some projects actually into delivery um it's almost been a bit of a kind of phony War for the last couple of years there's been lots of talk lots of mousse um lots of bits of kind of engineering and concept work we've been doing a lot of kind of concept pre-feed feed engineering but the projects haven't actually got into that delivery phase so I think the uh the topic of conversation this year will be very much how do we get these projects really moving get them through FID stop putting some concrete and steel in the ground and then the challenges that all of that will start to uncover when we start building these things out for the first time yeah I completely agree I have to we have to start building these things it's too much talk it's the fuel of the future there was a John and I always laugh there was a joke a cop 27 in Egypt where where someone said said to the uh I'm sorry I couldn't hear your question but I know the answer is hydrogen and and I think that sums up the last couple of years quite a lot there's so many blog posts and and mous and discussions but no one's actually producing anything yet and we need if we're going to get to Net Zero and hydrogen is one of those energy vectors that we think is useful then somebody's gonna have to start producing it in a low carbon or zero carbon way and actually have people use it and yeah and hopefully we're on the Forefront of that in some of our projects here in the UK and globally so what do you think is going to make what's going to turn the tide What's It Gonna people say right we've done the talk and what is going to make them tip the balance now to actually get into delivery so I'll I'll talk about the so there's there's one bit which is really helpful and then I think Alex will pick up the Baton on on some of the kind of financing side so governments have a really key role to play in the energy transition in general so the technologies that we're looking at are new we haven't done this before and particularly we haven't done this at the scale that we need to do it we need to change the whole kind of energy infrastructure of the planet in about 30 years to have any chance of getting us to Net Zero so governments have got a really important role to play in kind of catalyzing that so you know particularly developed Western kind of governments putting down uh funding putting down incentive mechanisms or taxes kind of disincentives uh to get this thing moving so in the UK in Europe in America at the moment um you know we're seeing schemes come into play the the inflation reduction react in in the states the new green deal that just came out a couple of days ago in in Europe and that will start to put funding into these projects make these projects kind of Economic and provide that kind of underpinning so that they can actually start to get this away so I think that that's one one really big thing we need to see to get this going and once once you start getting some volume into the market and there's more kind of understanding thinking of how it works then there'll be more comfort and then other projects that maybe don't have that in some other markets and will hopefully be able to get away as well but then the other problem is is you know what do you pay for this stuff yeah that that um so the government regulation helps right because that can often with Grant on subsidies that can often help set that price but we're seeing small smaller projects maybe not the big export projects also struggling in understanding what the long-term off-take price should be yeah so if you're setting up a project here in the UK and you want an off take for 15 or 20 years what price do you pay for that hydrogen in 2035 what what's the market rate and because it's a new energy Vector it's not it's not easy to estimate we've had clients who've gone out to two different um Professional Services that will estimate the price and come up with two different answers so how can you then negotiate your your long-term agreement with your off taker if there is an agreement on what that value is and there's so many unknowns on on the actual cost of gas the cost of energy whether there's a premium for it being green or if it's a different color or what what level of carbon it's got in it depending on taxes so it's proven very challenging where we're seeing these projects go quickly is when it's displacing an internal fuel source so where you're using fossil fuels there's a and you want to displace that directly with with green hydrogen or low carbon nitrogen um then then you can make that decision if it's a relatively small scale as a business depending on your ESG goals your shareholder value maybe your first mover in the market as a premium because you're selling a green product as opposed to a gray product and and I think that's where we'll see those first movies go quickly where they can control that long-term pricing internally what do you think are the main challenges associated with the widespread adoption as hydrogen as an energy source what's competitive Factor what can industry do in what's what's really holding us back hydrogen is not a silver bullet it's one of a number of routes whether you use it for transport and there's lots of debate about that yeah it's it's going to be we're heading towards a fragmented Energy System right so we've been spoiled right we've had this this one one solution fits everything isn't it wonderful and it has been you know a great driver of economic Prosperity however the the back the back story is it's also driven climate change yeah so so how do we keep that energy price down how do we keep it accessible for everyone there's still billions of people on the planet you you don't have access to any kind of energy you know heat and light for the home so they can study the kids can study at night or they can eat their food so how do we how do we I see a future where there's many different routes for low carbon energy and a little bit like um the cell phone Revolution where oh well apart large parts of Africa didn't get phones because the copper lines to go across that small village that Inland piece was wasn't worthy the cost and then suddenly everyone had a cell phone and it was relatively easy to get access to phones that's all got you know three or four of these days right everyone has more than one so yeah I think you can find a this fragmented bespoke and it's it's horses for courses or you you find the energy solution that works so if if you've got access to uh geothermal resource where you can produce energy that way then that might be the cheapest thing for you it might be solo it might be a solar plus a battery it might be solar plus wind and I think and then in some industrial areas it might be ammonia large scalamonia import or or large-scale wind import and I think we've got to get out of this this habit of of looking for the one solution and and actually the great thing is there's so many solutions now and there's more coming all the time that can be almost bespoke to that area that can then be used globally so I think you're going to see a wider range of different energy sources from a more fragmented rather than a a central Hub and spoke model you'll have have this or cellular model uh uh and and frankly I think that's going to give us more resilience uh because you can have multiple backups and multiple forms of energy coming into you actually I think it's a really good part of the mix but it's not the only part yeah and I think we need to be cognizant of that and just going back to you know where's it making the most sense to use hydrogen and what is displacing the hydrogen it's already there there's already a kind of million tons a year of hydrogen used in in refining and petrochemical and kind of hydrogating hydroprocessing uh in fertilizer that's probably the other kind of major use today so if if we can just decarbonize all of that that's probably one one and a half two percent of global emissions straight away and it's it's displacing exactly the same molecule it's just a low carbon version of it um which is just the fundamentally the best thing to do um most of the other applications do need some upgrades whether it's a drivetrain in a truck or a train or a boiler tip in your boiler at home um you know there needs to be some kind of upgrading to to make use of the hydrogen but just I explain what one of the other drivers we're starting to see is also an energy security that resilience that hydrogen can give you as an alternative uh fuel source particularly with everything that's kind of happened in the Ukraine you know we're starting to see clients really waking up and and this is obviously a big driver for Germany for example you know how can they get energy um from another source and hydrogen particularly if you can transport it around as ammonia or methanol and allows you to bring in electrons effectively from places in the world where they've got lots of great renewable results and then transport those electrons in the form of hydrogen or its derivatives uh over to Europe where where they're fundamentally short of energy and you know that's going to be I think a big big driver kind of going forwards not just the decarbonization which is fundamentally required as well but you know energy security is becoming a much bigger driver of this too you think you're seeing this huge build out of wind in Europe certainly in the UK and we've got Scotland and all the rest of it and actually far more wind and energy can be produced probably will be produced because you're going to have to have over capacity for the days that aren't windy right so if it really is a windy day everywhere then the UK Road's going to fall over quite quickly and we'll have excess electrons so and this the same in Europe so so if you can get everything electrified that makes sense to be electrified close by then that's the most efficient way of doing it and you're not you're not paying the energy penalty or changing into a a molecule but then there will be so many days and I forget the numbers of curtailment in the UK alone last year because it was you know billions or trillions worth of billions of pounds where they just shot the energy into the ground right because we couldn't use it in the grid well if you've made that investment and you can quite simply use that excess electricity and straw as hydrogen then that makes a lot of sense and then if you can use that hydrogen locally to where you're making it so you avoid the energy penalty of transportation that also makes a lot of sense so it's going to be iterative process but yeah but you know as John as John said you know economic drivers and breed will will push us forward and where where there's an opportunity oh I've got this asset of these electrons that at the moment I'm doing nothing with what could I use it for and then suddenly you stop to produce hydrogen locally and then it goes to the local bus service or yeah um you know garbage trucks whatever it might be or the taxi firms then you can suddenly make a buck or two on it that makes a lot sense and I think you're going to get as I said before this fragmented approach um where where you get this sort of energy resilience and layering of different um different sources which again is good news he should honestly make it cheaper yeah for all of us you've really moved on on wind and pet facts been part of that for over a decade now so it's it's nice to hear that like you see these two coming together it's not just oh we've missed a book because we've gone electric but these hydrogen actually can almost act as a glue around it to cover all the gaps as well cheapest forms of power anywhere in the world today are some of the solar plants in in Saudi and the UAE that they're talking about our pencil sense but it's kind of 1.3 cents a kilowatt hour um you know that's that's a phenomenally low price um so you know the more of that you can build out that starts to unlock you know really interesting things the challenge of course is the sun's only on during the day and the wind blows when the wind kind of feels like blowing um but this is one of the advantages of hydrogen you can turn you know when you've got too much wind or sun or you know you kind of over build so you can build a bit of um extra capacity you can turn those electrons into hydrogen you can store that for longer periods of time much better than a battery um and then either use that hydrogen I'm saying is the best thing to do with it but if you need to you can turn it back into electrons uh when the wind or the sun when the wind's not blowing or the sun's not shining at the end of the day um so it's going to be a mix I said oil and gas is going to be a part of that future we need to decarbonize that as well so whether that's you know Carbon capture uh kind of on the back of of those facilities and so we can capture some of the emissions um but yeah there's a there's a huge amount of work to do there and you know hydrogen is going to be very much right in the middle of all of that yeah it seems like it's the opportunity is there it's just how do we yeah how do we capitalize on that and um so what's the we've mentioned at all so what's what's the main opportunities at scale uh for hydrogen how how far does it go I know we've said it's a supportive one how far can it go um as an energy source yeah it's a it's a really good question and and get to a degree it kind of it depends on the different applications you see for it um you know when you look at the research you said the energy transition is going to have lots of different solutions it's not just hydrogen or just carbon capture you know there's going to be all of the above plus biofuels plus electrification um so it's kind of where does it play in the mix and and it's back to you know where's where's the hydrogen the kind of most optimal solution so he said displacing gray hydrogen uh in refining petrochemicals kind of fertilizer is the obvious place to start um you know in some of those hard to Abate sectors we can see it as a really good use case and so things like shipping um you know today ships are burning uh fuel oil some of the modern ones are kind of burning LNG but there's fundamentally an emission associated with all of those at one of the use cases for those you know excess electrons we're seeing in in very windy very sunny places so kind of Western Australia Chile Namibia Roman is actually converting that hydrogen into ammonia or methanol and then you know burning that ammonia or methanol uh in in the ships um and then using those ships to move the ammonium methanol around so that that kind of hydrogen those electrons are able to be moved um across the world again shipping is two two and a half percent of global emissions um so that's that's a very material sector and one that you know you need a zero and carbon a zero carbon fuel uh to be able to to mitigate that at some way and certainly ammonium is can be a zero carbon fuel um and if someone was pointing out last week particularly ammonia it's almost infinite in how much we can produce there's you know 79 nitrogen in the air um and there's you know we've got loads and loads of water on our planet fortunately um and there's a lot of sun and wind and geothermal and that we can go after um so you put those the combination of those things together and you've kind of got an unlimited supply of ammonia and again ammonia we can use as a fuel in engines um you can actually burn it in power stations as well to create electricity um so there's lots of other than as ammonia in the fertilizer industry there's lots of other good things you can do with it too it's a bit different to handle but you know there's um you know we understand that it's not like it's completely new new molecule um and those projects to get the economies of scale in those you know we're talking about you know the cheapest solar but yeah those solar fields are kind of one and a half two gigawatts a pop that's a really big um solar field we're talking about thousands of square kilometers for some of these projects you know we're doing gigawatt scale projects in offshore winds now we're seeing multi-gigawatt scale projects coming around Europe and then you know if you want to convert all of those electrons produced into hydrogen you know we're talking about multi-billion you know dollar projects at the end of the day you know these are as big if not bigger um than some of the biggest things we've done in oil and gas but actually with no less complexity um it's just it's a slightly different makeup of the complexity half the project is is Renewables it's producing electrons from the solar in the wind and then half the the other half of the project is turning those electrons into some molecules and then kind of doing something with them whether that's shipping whether that's putting them into some other uh process at the end of the day um so yeah the potential is as a market is huge and certainly a potential Perpetual pack um is is really big as well and something we can see a really good use of all of our skills and experience to kind of play into almost immediately we're saying we're seeing hydrogen as a feedstock into sap as well yeah so sustainable Aviation fuels and again if you can't use dehydrogen locally then if you can combine it with some cot which there is plenty of either biogenic or we're seeing it from cement plants or other emitters they can start you can start to produce these e-fuels so whether it's e-methanol or or or saff so again a bit like replacing the great hydrogen Refinery you can replace it in a new process and and there's a huge demand for sap our hydrogen planes yes I'm sure they can work at some point but there's a lot of debate about that but if you can use that hydrogen and mix it with CO2 and other to create the aviation fuel well we exactly know exactly how to use that because it's a it's a drop in fuel it's a complete replacement you can price it it's much easier and there's huge demand from the airlines as they try to decarbonize everyone's going on holiday in the year or business trips whatever it might be so I think there's a there's value to it there as well and that's why I think that that hydrogen question where is it being used yeah it's going to be it's going to sort of sort itself out because because the because the highest value use for it is where it will go what makes petrified a good fit to drive these initiatives we've been dealing with hydrogen molecules in refineries for well over a decade now we've been separating CO2 from natural gas streams for you know probably three decades or so particularly in the Middle East and so we understand you know both of those molecules um and then as you said in the last kind of 10 15 years um you know we got into the offshore wind space so actually we really understand the electron side and the transmission of electrons and the Transformers and the system design there um so when we looked at it we're like actually we've got you know all of the engineering understanding actually a lot of the technical and project delivery skills are some of the operations and maintenance skills that kind of go with all of that already the other thing that we bring um that I think is being particularly valued by the the customers in this space that is our ability to take a project from its earliest kind of concept phase and kind of a sketch of you know I'd like to make some e-fuels and I've got a bit of CO2 over here and I think I've got some sunshine and some wind and be able to take that full concept into the kind of fun content engineering design and then be able to say well we can we can build it for you as well actually we're thinking about how we build it when we're designing it and actually not just that we can operate it for you and again a lot of these uh developers customers maybe they're coming from a utilities or renewable space or maybe they're a cement business or an NG from waste business and they've never had to run a hydrogen plant or a carbon capture a chemicals Club ultimately at the end of the day and so there's a lot of new challenges with that so do you think that this is that hydrogen has a potential to disrupt the energies the world's energy landscape now this this energy transition is going to disrupt an awful lot of things that maybe we're not quite sure you know we haven't seen that impact yet we don't understand what that impact will be but it's going to be a fascinating time to be around as the globe sort of remakes itself in under under these new this new energy map yeah I mean it's a kind of democratization decentralization of that Energy System we're already seeing some of those traditional energy players you've kind of realized how this is evolving so the Saudis the uaes of the world um you are that place in the world is as an energy exporter today and they've kind of quickly realized well actually we've got a load of sunshine um and in some places a little bit of wind as well so you know we can maintain our position in the world um by leverage they're lucky they've got you know Supply chains resource base uh an understanding of how to do these big energy projects and so they're moving very quickly to try and get their position and ultimately maintain their position in the kind of geopolitical pecking order of the world um by kind of maintaining that that energy export capability but yeah we're seeing countries you know coming up in the world you know the UK who it's you know dropped off really is a kind of hydrocarbon producer you know suddenly with the Saudi Arabia of wind um you know 25 gigawatts in one round in in Scotland um you know there's you know two three four times that potential easily um so you know what are we going to do potentially with all those electrons suddenly we're in a much more interestingly kind of geopolitical position and potentially as an NGA exporter again which you know we've not had that kind of position since you know probably the early mid 70s yeah right so that has an impact on the government's finances right yeah very much like my final question um you mentioned mobile phones earlier on and I think I think might either but I'll do it in two tranches here so it might eat it was a knock knock here 3310 that changed the game um technologically and then for younger listeners uh the iPhone changed the game again just so we can get both I open myself my age by saying Nokia 3310 but so there's that moment in history where technology changes the game is there anything like that on the horizon you see in hydrogen that's going to drastically changed the Market within the next 18 24 months in the 1824 month window I don't think there's anything that's going to be you know completely game changing um really it's going to be understanding you know how do these products become real and then you know the game changer will be actually kind of seeing them come to reality so the firming up with the commercial models the financing models so it goes from you know Bits of Paper to actually you know proper projects steel concrete in the grounds that's actually producing electrons or molecules um and and to agree that that will be game changing um you know people will start to think very differently once they they see this become a reality and they can go and kind of touch it and feel it and then you get kind of comfortable with it so actually it's it's not so difficult to produce or move ammonia around or methanol um you know actually there were suddenly these you know hydrogen fueling stations popping up all over the place um and you know actually I can get a really good range of performance on a hydrogen hdv uh actually maybe I should I should switch my fleet over and I I think that that kind of the realization of this it kind of becoming a reality and will start to change attitudes and ultimately then kind of change behaviors so I think in the short term that's probably the biggest kind of impact I see that you know could become real and suddenly people will really get behind it I think I think again because it's an unlimited resource server and wind yeah and and you look at these different suppliers it's much more competitive and I I truly believe the cost will come down yeah and then you start to look at the cost of energy has been a traditional constraint in growth across the globe in every industry though so imagine if you've got really cheap in some some cases maybe three or close to three electrons nearby you know a substation yeah they've got these things that turn into hydrogen and they're going to sell it to you cheap because otherwise it's just giving away or curtailed so what could you do what what manufacturing what what industry could you build up nearby those those those areas and it may be it might be somewhere near like Liberia or Namibia or or Oman or somewhere where if you think about the petrochemical industry and often in Saudi or places you'll have fairly cheap access to gas locally and then they'll form a petrochemical plant next to it because they can get access to it cheaply and then they start to produce high value products which they can then sell so it might be plastic bottles or fertilizers or Fabrics imagine that now with electrons or hydrogen yeah what industry what growth opportunities we're going to see across the globe in new locations where where their energy is is really cheap and that I don't think that's going to come here you're right I think there's right at the start of this change we can go fast forwards or 20 years 25 years I think fundamentally some areas of economic growth and this democratization of energy in a cheaper way it should have you know huge growth potential for for the human race across across loads of ways and we're doing it we'll be doing it in a low carbon manner or a zero carbon listen to you both speak today it's been I mean it's actually made me quite excited and I think the main word I'm going to take away from is opportunity thank you so much for spending the time with me today thank you sir thanks though thank you for sticking around to the end I really hope you enjoyed the conversation between myself Alex and John today if you want to find out more about our new Energy Services please head over to the websites petrified.com and check out our other episodes that we have available to foreign

2023-05-28 16:32

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