0:10

Hello I'm Michael Liebreich and this

0:12

is cleaning up. In

0:15

September, Twenty Twenty Two, the

0:17

fifth Hydrogen Energy Ministerial in

0:19

Tokyo, organized by the powerful

0:22

Japanese Ministry of Economy, Trade

0:24

and Industry, in cooperation with

0:26

the International Energy Agency, announced

0:28

that by Twenty Thirty, the

0:30

world would produce and use

0:32

ninety million tons of renewable

0:34

and low carbon hydrogen. To

0:37

put that figure in perspective, the

0:39

world current users around one hundred

0:41

million tons of hydrogen to make

0:43

fertilizers and petrochemicals. almost all of

0:46

it made from coal and gas.

0:48

Then. In. September last

0:50

year. Ministers. And delegates

0:53

from twenty three countries that the

0:55

Six Hydrogen Energy Ministerial not

0:57

only reiterated the ninety million tonnes

0:59

target. But. Went further.

1:02

Promising. That the overall market for

1:04

hydrogen would grow to a hundred and

1:06

fifty million tons by twenty thirty. That.

1:09

Would mean replacing forty million

1:11

tons of existing hydrogen supply

1:13

with clean hydrogen. And. Adding

1:15

another fifty million tons of

1:17

new use. All.

1:20

Very exciting! And. It helped

1:22

to ensure that hydrogen was one of the

1:24

hot topics a cop twenty eight and do

1:27

by a few months later. But.

1:30

Someone has to say it. These

1:33

targets are entirely. Utterly

1:35

ludicrously on achievable.

1:39

The. Issue is simple. It's

1:42

money. As I

1:44

wrote for the prevent brochure for

1:46

the upcoming fourth Financial Times Hydrogen

1:48

Summit this June. The. Biggest

1:50

challenge facing low emission hydrogen is

1:52

that it is expensive to produce.

1:55

Expensive to transport. Expensive

1:57

to store. Expensive.

2:00

The distribute and expensive

2:02

to use. The.

2:04

Reality is that whether you're

2:06

switching existing users to clean

2:08

hydrogen or pushing hydrogen interceptors,

2:10

why is not currently use.

2:12

It takes money and lots

2:14

of it. In. This week's

2:17

episode of Cleaning Up will be finding

2:19

out how much. And how

2:21

much more governments would have to spend

2:23

the hydrogen to live up to it's

2:25

hype? This. Audio blog

2:27

is adapted from a piece I wrote

2:30

at the end of last year for

2:32

Bloomberg and Yes entitled Clean Hydrogens Missing

2:34

trillions. In. It's I

2:36

estimated that hitting the Hydrogen Energy

2:39

Ministerial target of ninety million tons

2:41

of clean energy by twenty thirty.

2:43

Would. Require subsidies of at least

2:45

two point three trillion dollars to

2:48

be on the table right now.

2:50

While. The actual figure out the end of last

2:52

year was one tenth of that. As

2:55

we shall see, the figures have changed a

2:57

bit since then. A few more

2:59

tens of billions of subsidies have been

3:02

announced, but he expected costs of Queen

3:04

Hydrogen have also gone up. The.

3:06

Message remains the same.

3:09

The subsidy job remains in

3:11

the multiple trillions of dollars.

3:13

It should not therefore be

3:15

remotely surprising. That. The news

3:18

is full of projects being cancelled

3:20

and delayed. In fact, that will

3:22

be one of the main hydrogen

3:25

stories through to Twenty Thirty and

3:27

beyond. So let's get started. First

3:30

of where did that hydrogen and

3:32

as you ministerial target come from?

3:35

As so often with hydrogen targets,

3:37

it's not at all easy to

3:40

identify where the ninety million some

3:42

Sega originated. It

3:44

seems to have been based on

3:46

a ninety five million Tom Sega

3:48

quoted in Twenty Twenty Two by

3:50

the International Energy Agency as the

3:53

amount required in Twenty Thirty. But.

3:55

The world's to achieve net zero

3:57

by twenty fifty. Inside.

4:00

Like a year before the or

4:02

yeas October Twenty Twenty One Net

4:04

Zero road Map had contained an

4:06

even more inflated Sega. Two.

4:08

Hundred and Twelve million tons of

4:10

hydrogen. Overall, By twenty thirty, that's

4:12

more than double the current global

4:14

market, of which a hundred and

4:17

sixty million needed to be low

4:19

carbon. But. A year after

4:21

the Twenty Twenty Three road map saw

4:23

the I reduce the total cigarettes one

4:25

hundred and fifty million tonnes. And.

4:27

The low carbon sega to seventy

4:30

million tonnes. Whatever.

4:33

The Source: The Hodgson Ministerial target

4:35

of ninety million tons of clean

4:37

hydrogen by twenty thirty, is the

4:39

sort of figure required to sustain

4:41

claims that the world is on

4:43

track to limit warming to wonder

4:45

half degrees over pre industrial levels.

4:48

That's. If you buy into

4:50

the vision of hydrogen delivery, sixteen

4:52

percent or more of emissions reductions.

4:55

Regular. Listeners will know that I

4:57

don't but that's a story for

4:59

a different episode. But.

5:02

All the target subtle, Plausible.

5:04

The. One hundred and Fifty million tons

5:07

of overall demand, and twenty Thirty

5:09

would be a fifty percent increase

5:11

over Twenty Twenty Three One hundred

5:13

million tonnes in seven years. Which.

5:15

Is only a six percent compound annual

5:17

growth rate, so that doesn't raise any

5:19

red flags. But. Then you

5:22

look at the clean hydrogen part.

5:24

You. Would need to retrofit almost

5:26

half of the existing fossil fuel

5:29

based hydrogen production with carbon capture

5:31

and storage. Build. Sixty

5:33

times more clean hydrogen production capacity

5:35

than has been funded to date.

5:38

And be eight Sixty million

5:40

tons of annual demand in

5:42

sectors that do not currently

5:44

use any hydrogen at all.

5:48

So. How are we doing and

5:50

building clean hydrogen capacity? Well.

5:53

As of the end of Twenty

5:55

Twenty Three, that would just seven

5:57

hundred megawatts of operating electrolytes as.

6:00

Producing around one hundred and ten

6:02

thousand tons of green hydrogen annually.

6:05

There. Are still no operating Blue

6:07

Hydrogen plants. Blue. Hydrogen of

6:10

course, being that made from

6:12

natural gas with carbon captured

6:14

and permanently sequestered. Expectations

6:17

have raced far ahead

6:19

of reality. Over

6:21

the past two years, Electrolytes A

6:24

manufacturers have expanded manufacturing capacity from

6:26

Six Point Eight gigawatts to Thirty

6:28

Three Point Seven gigawatts. And by

6:31

the end of twenty, Twenty Four.

6:34

Bloomberg. Any as is expecting

6:36

capacity of no less than

6:38

sixty two point six gigawatts.

6:40

Orders. In Twenty Twenty

6:43

Three, by contrast, struggled to

6:45

hit just two gigawatts. Share.

6:48

Prices of electrolytes a manufacturers have

6:51

plummeted ops and ninety five percent

6:53

from that Twenty twenty one piece

6:55

and industry bellwether plug Power after

6:57

twenty four straight years without Profits

7:00

has warned investors that it may

7:02

not survive to see it's twenty

7:04

fifth birthday without new funding. It's.

7:08

Not that there's a shortage of hydrogen projects

7:10

in the pipeline. At. The end

7:12

of last year Bloomberg any F

7:14

Screen Hydrogen database contains projects that

7:17

could produce over a hundred and

7:19

seventy million tons of hydrogen. Of

7:21

which forty seven million could

7:23

in theory begin production by

7:25

twenty thirty. The Age:

7:28

Twenty Twenty Three Global Hydrogen Review

7:30

reported a slightly lower figure of

7:32

thirty eight million tons that could

7:34

be working by Twenty Thirty. But.

7:37

Whichever dataset you prefer, By.

7:39

The end of Twenty Twenty Three,

7:42

just one point five million tons

7:44

was of projects had reached final

7:46

investment decision or were already producing.

7:49

That's. Less than one percent of

7:51

all announced projects by volume and

7:53

only three percent of those that

7:55

were targeting a twenty thirty start

7:58

date. Blue. The

8:00

Journey F also maintains a database

8:02

of clean hydrogen of take agreements

8:05

the client contracts without which developers

8:07

can't raise finance. It

8:09

turns out there were at the end

8:11

of last year identified have taken for

8:14

just eight million tons of hydrogen per

8:16

year. But. All this. Only

8:18

one million tons were covered

8:20

by binding contracts rather than

8:23

nonbinding letters of intent or

8:25

just press statements. Looking

8:28

at Europe last month consultancy, Pwc

8:30

released a report pointing out that

8:32

the you would need one hundred

8:34

and twenty gigawatts of electrolytes as

8:36

in order to meet it's ten

8:38

million, some target for twenty thirty.

8:41

Although. They reported two hundred

8:43

and five gigawatts of projects that have

8:46

been announced. Only three gigawatts

8:48

had so far reached final investment

8:50

decision or began construction. That's enough

8:52

to hit just two point five

8:54

percent of the use target for

8:57

twenty thirty. So. What

8:59

is the reason for this huge

9:01

gap between the ambitions to clean

9:03

hydrogen and what the market is

9:05

actually delivering? Well. It's

9:08

all about costs. Every

9:11

one of the sixty two national

9:13

hydrogen strategies around the world is

9:16

predicated on one fundamental assumption. That.

9:18

The cost of clean hydrogen

9:21

will fall substantially and quickly.

9:24

But. He used Twenty Twenty Hydrogen

9:26

strategy stated that quote in regions

9:29

where renewable electricity is cheap a

9:31

let's realizes are expected to be

9:33

able to compete with fossil based

9:36

hydrogen In Twenty Thirty. The

9:38

Uss Hydrogen Shop Program launched in

9:41

June. Twenty Twenty One aimed for

9:43

what it called the Three Ones.

9:46

Clean. Hydrogen. Not one dollar

9:48

for one kilo in one

9:50

decade. Japan's updated

9:52

hydrogen strategy released and twenty

9:55

twenty three aimed for domestic

9:57

green hydrogen production at a

9:59

cost. Prevalent to two dollars, twenty

10:01

per kilo. By. Twenty Thirty.

10:05

There. Are however, three important

10:07

reasons why these expectations

10:09

are proving hopelessly optimistic.

10:12

First. While. The relentless logic

10:15

of the experience cause will indeed

10:17

deliver very cheap electrolytes is in

10:19

the end. The. Time it

10:21

takes to get that depends on

10:23

how quickly experience has accumulated. The

10:26

You Hydrogen Strategy Positive. Five

10:28

gigawatts of European electrolysis capacity

10:31

by Twenty Twenty Four. And

10:35

yes, Hydrogen project tracker suggests

10:37

the number will barely reach

10:39

a tenth of that. Second,

10:43

Electrolytes a stacks account for only

10:45

around forty percent of the capital

10:47

cost of green hydrogen plants. The

10:49

rest is stuff like compresses, tanks,

10:52

valves, pipes, power supplies, and site

10:54

infrastructure. Who's costs are not about

10:56

to fall off a cliff. By.

10:59

The more. Capital. Costs only account

11:02

for around one third of the cost

11:04

of Green hydrogen. The. Biggest element

11:06

is green electricity which is

11:08

already fall down it's own

11:10

experience cause. And. There's

11:13

an inescapable tradeoff between the cheapest

11:15

green electricity which is variable wind

11:17

and solar. And the need

11:20

to get or utilization raids on

11:22

your hydrogen plans. A

11:25

third reason why clean hydrogen cars

11:27

to going to stay way higher

11:29

than expected for way longer is the

11:31

current spike in inflation and interest

11:33

rates. Over the past

11:35

two years, the European Central Bank

11:37

and the Federal Reserve of hike

11:39

their main rates from zero to

11:41

four point five percent and five

11:43

point five percent respectively. It's.

11:46

Not just the interest cost of a green

11:48

hydrogen plants. That's the problem. Wind.

11:50

And Solar are all about higher

11:52

up front cutbacks with low running

11:54

costs so they are very sensitive

11:56

to interest rates. The.

11:58

Wind industry has. Hit particularly

12:00

hard as the business model that

12:03

drove it's profits for a decade.

12:05

Bidding low and letting equipment cost

12:07

reductions deliver profits has fallen apart.

12:10

The. Rise in interest rates has

12:12

caught many developers unawares and manufacturers

12:14

cannot pick up the sack.

12:17

Inflation. Product proliferation,

12:19

technical problems and extreme

12:21

cost pressure of driven

12:23

them to unprecedented losses.

12:26

So. Taking all of this

12:29

into account, what does clean hydrogen

12:31

really cost? Well

12:33

as a wealth of literature on what

12:35

clean hydrogen is supposed to cost at

12:37

some point in the future, there's a

12:39

dearth of data on the prices actually

12:41

paid to the small number of projects

12:43

that have actually secured finance. A

12:46

recent report by consultancy Bcg

12:48

estimates to figure out between

12:50

five Euros and eight euros

12:52

per kilo. That's between five

12:54

dollars for teeth and eight

12:56

dollars. Sixty per kilo. Bloomberg.

13:00

Any S. July Twenty Twenty Three

13:02

Level Eyes Cost of Hydrogen report

13:04

showed green Hydrogen costs of between

13:06

one dollar eighty and four dollars

13:09

per kilo in most countries of

13:11

the well. By Twenty Thirty. But.

13:13

That simply doesn't reflect financing

13:15

conditions in the second half

13:17

of last year which really

13:19

deteriorated. The. I

13:22

yeas, Twenty Twenty Three Global

13:24

Hydrogen Review still maintains that

13:26

green hydrogen could be produced

13:28

in Europe, but one Euro

13:30

Sixty party low by Twenty

13:32

Thirty. But. The assumptions needed

13:34

to achieve that such as a

13:36

cost of renewable electricity of. Thirteen.

13:39

Euros per megawatt hour or

13:41

a three percent cost of

13:43

capital. Or simply not credible.

13:46

Use. More reasonable assumptions and the

13:48

cost of European Green Hydrogen

13:50

comes out in the five

13:52

to seven Euro price range.

13:55

That's five dollars. Fifty to

13:57

Seven dollars. Seventy per kilo.

14:00

No prices. In the Us,

14:02

Saudi Arabia and Australia. Places.

14:04

With tremendous renewable resources and low

14:07

cost of capital may come in

14:09

lower. But. Even

14:11

they look unlikely to deliver hydrogen

14:13

much below three dollars per te

14:16

lo by twenty thirty. And that's

14:18

excluding subsidies and the U S

14:20

Inflation Reduction Act tax rebate. Inflation.

14:24

And higher interest rates have also sit

14:27

blue Hydrogen projects once more as it

14:29

does have real data. but at current

14:31

interest rates it's hard to see a

14:34

price much below three dollars per kilo,

14:36

even in the U S or the

14:38

Gulf Region. So.

14:41

For any clean Hydrogen project operating

14:43

by twenty thirty, you need to

14:45

count on production costs being in

14:47

the three dollars to eight dollars

14:49

per kilo range. Depending

14:52

on location, But.

14:54

What about imported hydrogen? If

14:57

you think importing green hydrogen from

14:59

places where it can be made

15:02

particularly cheaply like Australia, Namibia to

15:04

lay the Gulf Regional North Africa.

15:06

Can deliver hydrogen up prices below

15:08

three dollars per te lo. I

15:10

have bad news for you. In.

15:13

My December Twenty Twenty two p

15:15

Speak unbearable lightness of hydrogen. I've.

15:18

Highlighted: the Mckinsey and Company of

15:20

Hydrogen Slows Report on behalf of

15:22

the Hydrogen Council. Which. Promised

15:24

four hundred million tons of

15:27

internationally trade of hydrogen by

15:29

twenty forty. They. Just

15:31

have that forecasts for Twenty Forty.

15:34

Not their last downgrade, I'd be

15:36

prepared to wager, but still forecasting

15:38

twenty million tons of hydrogen impulse

15:41

as early as Twenty Thirty. It.

15:44

Is of course, technically feasible to liquefy

15:47

hydrogen and put it on a ship.

15:49

But. The cost of doing so will

15:51

be somewhere between three dollars and eight

15:54

dollars a kilo. Even by twenty forty.

15:57

Which. at that point will be more than double

15:59

the cost of pretty. Action. Liquid

16:01

Hydrogen on a Shit is frankly

16:03

even less plausible than Snakes on

16:06

a plane. But.

16:08

What about shipping ammonia instead? Today.

16:11

Sixteen and a half million tons

16:13

of ammonia are transported by ship

16:15

according to shipping services provider Clock

16:17

Son's. Setting aside

16:19

the need to build new ammonia

16:22

plants in faraway lands. Twenty.

16:24

Million tons of hydrogen translates into

16:26

a hundred and thirteen million tons

16:29

of ammonia else. That's just chemistry.

16:31

So. Send to get by ship

16:34

would constitute a sevenfold increase

16:36

in shipped volume. A

16:38

two fold increase by twenty thirty, plus

16:41

a few ships powered with ammonia. I

16:43

could believe. A. Sevenfold increase

16:45

by twenty thirty is just

16:47

not going to happen. As

16:51

for pipelines, the gas industry

16:53

is promising that they can

16:55

reap her purse pipelines. But.

16:58

By the time you account, hydrogens

17:00

extremely low density, the reduction in

17:02

prussia required to avoid and brittle

17:04

months, and the increase in power

17:06

requirements, a big new compressors and

17:08

more of them. That. Energy

17:10

carrying capacity could easily be reduced

17:12

by seventy five percent. Most

17:16

future hydrogen pipelines will be

17:18

purpose built and a sensible

17:20

cost estimate would be between

17:22

forty and eighty cents per

17:24

kilo of hydrogen transported. But.

17:27

That's irrelevant. It's hard to see

17:29

any commission this side of twenty

17:31

thirty. So. Which

17:33

ever way you look at it

17:35

your back at hydrogen costs of

17:37

three dollars to eight dollars per

17:39

kilo. And

17:41

now. You. Have to get customers.

17:45

As just suppose, you've managed to produce

17:47

or import your ninety million tons of

17:49

clean hydrogen by twenty thirty. Now.

17:52

You need to figure out how to get customers

17:54

to use it. Is

17:57

that produces of fertilizers and

17:59

petrochemicals. Fairly straightforward because

18:01

they already use hydrogen. While.

18:03

A few of their customers may be prepared

18:06

to pay a so called green premium. Perhaps.

18:09

Some western food brands that want to be

18:11

seen using a bit of zero carbon fertilizer.

18:14

Most. Went. This.

18:16

Means you'll have to match what

18:18

they currently pay for fossil based

18:20

hydrogen plus any carbon price to

18:22

which they're subject. And. That

18:24

means selling clean hydrogen. The two

18:26

dollars to four dollars perky live

18:29

below your production or import cost.

18:32

What? About six years which are

18:34

not currently using hydrogen such as

18:36

steel, heating and transport. Getting.

18:39

Them to use hydrogen will take much

18:41

more than just matching the current cost

18:43

of gray hydrogen. After all,

18:45

they could have switched to gray hydrogen

18:47

at any time they wanted, but they

18:50

didn't. For.

18:52

Heat related use cases. Even

18:54

if you ignore the cost of converting

18:57

equipment, you'll have to sell clean hydrogen

18:59

at the same price on the heat

19:01

adjusted basis as natural gas. Right

19:04

now, that means thirty cents per

19:06

kilo in the U S, One

19:08

dollar forty in Japan, and one

19:10

dollar seventy per kilo in Europe.

19:13

Or. Insects is covered by the

19:15

European Union's emissions trading system. Two.

19:18

Dollars Forty five per kilo. But.

19:20

That means selling clean hydrogen again

19:23

somewhere between three dollars and five

19:25

dollars below it's production or import

19:28

cost. For.

19:30

The steel industry. Getting. Manufacturers

19:32

to switch would require each of

19:34

them investing billions of dollars to

19:36

retire and replace existing coking coal

19:39

based plans, and then hundreds of

19:41

millions of dollars more per year

19:43

in high a running costs. Sweden's.

19:46

H to Green Steel has raised

19:49

five point Three billion Euros. That's

19:51

five point six billion dollars. Brits

19:53

first plans, but that does not

19:56

include running costs. Turning.

19:58

The levels of support. While across the

20:00

industry into a cost a killer of hydrogen

20:03

is hard. But. Conversion is

20:05

so staggeringly expensive. but even

20:07

providing free hydrogen you know,

20:10

geological white hydrogen anyone? Would.

20:12

Probably be insufficient to drive

20:14

update on the economics alone.

20:18

Getting. Hydrogen used for lamb

20:21

transportation is even harder. Bust.

20:24

You have to get people to

20:26

buy vehicles that costs significantly more

20:28

than petrol or diesel equivalent. Then.

20:32

You have to retell hydrogen at a

20:34

cost equivalent to Diesel Petrel around five

20:36

dollars per te. Even. Though

20:39

hydrogen filling stations. Post. One

20:41

or two million dollars each. And

20:43

it takes sixteen or eighteen

20:45

hydrogen tube trailers to replace

20:47

each diesel or petrol fuel

20:49

distribution tanker. Then.

20:52

You. Have to do this in

20:54

competition with electric vehicles which off

20:57

pasta simpler, more roommate, and already

20:59

offer broadly the same total cost

21:01

of ownership as as fossil fuels.

21:04

equivalence. It shouldn't

21:06

be remotely surprising that the

21:08

news is filled with stories

21:10

of cancelled hydrogen taxi, hydrogen

21:12

bus, and hydrogen train projects.

21:15

In many ways what's surprising is

21:17

the hope still being invested in

21:19

has he st. Although. Last

21:21

week patrick we are a testify

21:23

under oath before the French senate.

21:25

did say. Boat. We.

21:28

Decided to invest in a European network

21:30

of hydrogen filling stations for a see.

21:32

These. But. I'm not sure we

21:34

got it right. Eighty

21:36

percent of H T V's in Europe. Do.

21:38

Less than five hundred kilometers per

21:40

day and as soon as you

21:43

say that, it seems fairly obvious

21:45

they will go electric. Night.

21:50

So how much subsidy are we

21:52

talking about? In total? With.

21:55

All this information on costs. We can

21:57

now produce a ballpark estimate for the

21:59

total. You have subsidy or

22:01

support that would be needed in

22:03

order to hit the Hydrogen Energy

22:06

Ministerial target of ninety million tons

22:08

of clean hydrogen. Persia by twenty

22:10

thirty. Of

22:12

those ninety million tons, you'll recall

22:14

the forty million tons and then

22:16

to go to existing use cases

22:18

and sixty million to new ones.

22:21

Multiplying. The two dollars

22:23

per kilo to four dollars per

22:25

kilo cost penalty for existing use

22:27

cases by the forty million tons

22:29

use that. And. You'll get to

22:32

eighty to one hundred and sixty

22:34

billion dollars per year. But.

22:37

You use cases? Let's just be

22:39

incredibly generous and make them ass

22:42

a bit simpler and assume that

22:44

on average they require a three

22:46

dollars to five dollar per kilo

22:48

subsidy to drive up take. The.

22:51

Reality is, it'll be more than that. Multiply.

22:54

Those figures by sixty million tons

22:56

required in new use cases, and

22:58

you get an additional. One.

23:01

Hundred and Sixty to two hundred

23:03

and sixty billion dollars of support

23:05

required per year. Bringing.

23:07

The total subsidy requirement to

23:10

somewhere between two hundred and

23:12

thirty and four hundred and

23:14

ten billion dollars per year.

23:18

But. Actually, it's worse than that.

23:21

Much worse. Because. Of the

23:23

way project finance wants. To.

23:26

Get to a final investment decision.

23:29

One. Year have contracted. Revenue is

23:31

not enough for a project developer.

23:34

The. Median of take agreement in the

23:37

Bloomberg any of hydrogen of Take

23:39

database is fifteen years. With.

23:41

A range and seven years to

23:43

thirty years. Again, let's

23:45

be incredibly generous and make them

23:47

Fcc and assume that an average

23:50

turn of ten years will be

23:52

sufficient for projects to get built.

23:55

So. You have to multiply that annual. two

23:57

hundred and thirty Two, Four Hundred and Ten

23:59

billion. Figure by ten.

24:02

But. The hydrogen energy ministerial target to

24:04

be hit. Finance ministry's of the

24:06

wells need to put between two

24:09

point three trillion and so point

24:11

one trillion dollars on the table.

24:14

And they need to do it right

24:16

now if it's to be spent in

24:18

time for the project to be operating

24:20

by twenty thirty. In.

24:23

Fact is a quick surest if you

24:25

can use to check if targets being

24:27

thrown around make any sense. One

24:30

million tons is one billion

24:33

kilos. For. Each dollar

24:35

of subsidy or green premium but

24:37

has to be found per kilo

24:39

of green hydrogen. That translates

24:41

into a billion dollars per year.

24:44

Turn. That into a tenure of

24:47

state agreement and you have ten

24:49

billion dollars needing to be committed

24:51

up front by a government or

24:54

by some other bankable entity. So

24:57

remember this breach dollar of subsidy

24:59

required for each million tons per

25:02

year of hydrogen? Someone has to

25:04

find ten billion dollars. And

25:06

frankly, there are far too many

25:09

politicians today boasting of support in

25:11

the millions a hydrogen volumes. who's

25:13

costs will be in the billions.

25:17

So. If we're looking for two

25:19

point three to four point one trillion

25:21

dollars, how much has been committed so

25:23

far? Well. The

25:26

biggest provider of support for hydrogen projects

25:28

today is the U S. thanks to

25:30

it's Twenty Twenty Two Inflation Reduction Act.

25:34

At. The time it was passed,

25:36

the Us Congressional Budget Office estimated

25:38

to cost a hundred and ninety

25:40

billion dollars. Of. Which just

25:43

thirteen point two billion was expected

25:45

to go to hydrogen production. However,

25:48

That figure was uncapped.

25:51

And the real number would clearly be many

25:53

times higher. Bloomberg. M

25:55

E S estimates a hydrogen figure of

25:57

one hundred and thirty seven billion dollars.

26:00

Although. That is for disbursement over

26:02

the next ten years, not just

26:04

until twenty thirty. By.

26:07

The end of Twenty Twenty Three Bloomberg

26:09

any F was estimating the sake of

26:11

a Europe at one hundred and twenty

26:13

five billion dollars of subsidy. The.

26:16

You Hydrogen Bank was funded to the

26:18

tune of three billion euros. Germany.

26:20

Was set to commit three point six billion

26:23

euros to It's h to Global Plan for

26:25

disbursement over ten years. And

26:27

is working on a fifty billion

26:29

euros sixteen year contract for difference

26:31

plan for industrial Decarbonization. That.

26:34

You was a a mocking one

26:36

hundred billion euros, the Uk, nine

26:38

hundred million pounds and so on.

26:41

Japan was planning to spend

26:43

seven trillion yen. That's forty

26:46

seven billion dollars. China ten

26:48

billion dollars, and India two

26:50

billion. Bloomberg.

26:52

Any As estimated at the

26:54

time that the total committed

26:56

subsidies are Asia was twelve

26:58

billion dollars. Bringing.

27:00

The global total at the end of

27:02

twenty twenty three to just under two

27:04

hundred and eighty billion dollars. This

27:07

month's Bloomberg Any F released an

27:09

update showing that the overall Sega

27:11

had risen to three hundred and

27:13

sixty billion dollars. However,

27:16

Not all of this can be dispersed

27:18

in time to move the needle for

27:21

twenty thirty. My. Estimate for

27:23

the total slob subsidies that may

27:25

actually see the light of day

27:27

in time to produce clean hydrogen

27:29

for twenty thirty would be around

27:31

two hundred billion. X

27:33

amount of money. Clearly. Enough

27:36

to keep the hydrogen souffle some

27:38

was inflated. But. It

27:40

will leave the wells two point

27:42

one to three point nine trillion

27:44

dollars short of the amount that

27:47

would be needed to deliver the

27:49

Hydrogen Energy Ministerial. Ninety million tons

27:51

of clean hydrogen target. A.

27:53

Shortfall of ninety or

27:55

ninety five percent. So.

27:58

It's hardly surprising. That only

28:00

a few percent of the projects

28:02

in the Bloomberg any of database

28:04

have reached final investment decisions and

28:06

a being built. Now.

28:09

A quick aside. Before.

28:11

You Shoot also dismisses post telling me

28:13

I'm obviously wrong because the European Hydrogen

28:16

banks first option clear that a subsidy

28:18

of just forty eight cents per kilo.

28:21

Hold your horses. The

28:23

actual cost of hydrogen for the

28:25

winning projects is set to be

28:27

between Five euros. Thirty and Thirty

28:29

euros. Fifty per kilo. The. Support

28:32

from the Hydrogen Bank is not going to

28:34

cover anywhere near one hundred percent of the

28:36

cost differential. It's just the kind of bankable.

28:38

A Moose, Bruce. As raucous

28:41

Yano Rebel or Ceo of winning

28:43

bidder Maddow Qual Renewables explained to

28:45

Portugal's you're not economical. Suppiah.

28:48

Will pay the rest. There has to be a

28:50

premium. And is also betting

28:52

on electrolyzed. The costs being cuts in

28:54

half over the two years before he

28:56

has to actually build the projects. So.

29:00

Will the winning projects get built? May.

29:02

Be. Should. You wager your pension

29:04

on it. I would suggest

29:06

not. To finish

29:09

off, let's look at how much clean

29:11

hydrogen we might actually see. And twenty

29:13

thirty. It. Turns

29:15

out that the leaders of the

29:17

world's biggest economies were not taking

29:19

the Hydrogen Energy Ministerial ninety million

29:21

some target particularly seriously. Even

29:23

as they were signing the Summit communique.

29:27

Bloomberg. Any Of Hydrogen strategy tracker

29:29

shows that the governments of the

29:31

fifty two countries with Hydrogen strategies

29:33

are targeting total production of no

29:35

more than forty million tons by

29:37

twenty thirty. The.

29:40

U S is hoping to produce

29:42

ten million tons, Japan three million,

29:44

and South Korea four million. The.

29:47

Uk recently updates target to ten

29:49

gigawatts of production equivalent to about

29:51

one and a half million tons.

29:55

Then there's the Edu stated

29:57

of twenty million tons. Ten

29:59

million. of local production and ten

30:01

million of imports from outside the

30:03

U. Even. When you

30:05

aren't those, and ignore double counting,

30:08

you're still sixty million tonnes short

30:10

of a Hydrogen Energy Ministerial figure.

30:13

But. Even forty million tonnes

30:15

globally is an absurdly high

30:17

target. In. Fact: Bloomberg getting

30:20

yes has just published a Hydrogen

30:22

supply outlook for twenty thirty, forecasting

30:24

just sixteen point four million tonnes.

30:27

But. I think even that is

30:30

optimistic. Take.

30:32

Our two hundred billion have

30:34

committed and likely to be

30:36

dispersed support. Divide. It

30:39

into ten year of take agreements.

30:41

Divides it again by the two dollars

30:43

to five dollars per kilo subsidy required

30:46

to drive clean hydrogen into the market.

30:48

And. You get. Around six

30:51

million tons. If.

30:53

Inflation and interest rates continue to ease

30:55

and sings pick up. We might see

30:57

a bit more than that. Ten

31:01

million tons by twenty thirty. Equivalent.

31:03

To ten percent of the current global

31:05

hydrogen market. maybe? Sixteen.

31:07

Point: Four million tons. Of

31:09

take the under on that. Forty.

31:11

Million tonnes, Forget it. Ninety

31:14

million tonnes. Delusional.

31:17

Now reality is dawning on the politicians.

31:19

There's a live debate in the corridors

31:21

of the you about how to scrap

31:24

the twenty million some target for twenty

31:26

thirty, since it's obviously going to be

31:28

missed by at least seventy five percent.

31:30

And what the? replace it with. My.

31:33

Money's on a space saving claim that

31:35

the target was spot on. It will

31:38

just take longer to twenty thirty eight.

31:40

say. That a

31:42

cost problem is not going away.

31:44

Not by twenty thirty, Not by

31:47

twenty forty. Not even by

31:49

twenty fifty. Last.

31:51

Month, the Us National Petroleum Council,

31:53

a federally charted committee established in

31:55

Nineteen Forty Six at the request

31:58

of President Hurry. as. The

32:00

been published a major

32:02

report entitled harnessing hydrogen.

32:05

Led by are old friends Mckinsey

32:07

and Oil Company Chevron with modeling

32:09

by M I T, it found

32:12

that even and twenty sixty clean

32:14

hydrogen for refineries will cost two

32:16

dollars to five dollars per kilo

32:18

against the market price of just

32:20

one dollar. A

32:23

heavy duty trucking, clean hydrogen will cost six

32:25

dollars to ten dollars per kilo at the

32:27

pump. When. Two dollars to four

32:30

dollars per kilo is needed to

32:32

compete with diesel or electrification. The.

32:35

Report finishes with twenty one

32:37

recommendations, but the short version

32:39

is show us the money

32:41

or hydrogen doesn't happen. In

32:44

fact, is the same point as I

32:46

made my recent Five Horsemen of the

32:48

Transition Peace. But some sectors will need

32:50

a carbon price for the very, very

32:53

long time in order to decarbonise. So.

32:57

In. Conclusion: What's the take away. Next.

33:00

Time you hear a politician or

33:02

promoter waxing lyrical about the hydrogen

33:04

economy. The hydrogen wells, hydrogen, the

33:07

gas of the future. Please

33:09

remember this Reality Check! That

33:12

will be no. Ninety million tons of

33:14

clean hydrogen and twenty thirty. The. Might

33:16

be ten million. or maybe sixteen million.

33:19

Enough to decarbonise less than

33:21

twenty percent of the current

33:23

Arjun demand. sorry to burst

33:25

your bubble. In.

33:27

Fact: Fewer than one in ten of

33:30

the projects currently in Bloomberg any of

33:32

Hydrogen project database will have been built

33:34

by twenty thirty. Will. Be

33:36

able to look back in that yeah

33:38

and school my predictions against those of

33:40

a hydrogen boosters. Until. Then

33:43

let's just be realistic about how

33:45

much to rely on hydrogen to

33:47

do the heavy and difficult work

33:50

of decarbonization. As always, will put

33:52

links to the resources mentioned in

33:54

this episode in the show Notes:

33:57

That. My December. Twenty Twenty Three.

34:00

Bloomberg any of essays hydrogens,

34:02

missing trillions and which this

34:04

audio blog was adopted. The.

34:06

Chairs Summary for the September

34:09

Twenty Twenty Three Six Hydrogen

34:11

Energy Ministerial. My.

34:13

December Twenty twenty two piece for

34:15

Bloomberg and Yes entitled the Unbearable

34:17

Lightness of Hydrogen and the Cleaning

34:19

Up episode based on it. My.

34:22

September Twenty Twenty Three, Five Horsemen

34:24

of the Apocalypse piece for Bloomberg

34:27

Any Ass and the Cleaning Up

34:29

episode based on that. The

34:32

Us National Petroleum Council's Harnessing

34:34

Hydrogen reports. And.

34:37

Pw sees April Twenty Twenty

34:39

Four report on navigating the

34:41

global hydrogen ecosystem. To

34:45

access the Bloomberg Any of

34:47

Hydrogen Projects database and the

34:49

Hydrogen Strategy tracker. You. Will

34:51

need a Bloomberg Terminal or

34:53

Bloomberg Any F subscription. If.

34:56

That's what you're after. Please make sure you

34:58

com site. Bloomberg. Any s

35:00

they'll be happy to help you. Know

35:04

on June twelve, I'll be

35:06

the opening keynote interviewee. At

35:08

the Twenty Twenty Four Fourth

35:10

Financial Times Hydrogen Summit. Last.

35:13

Year's interviewees was Doctor Andrew

35:15

Forest, executive chair and founder

35:17

of Fortescue Future Industries and

35:19

of course one of the

35:21

leading hydrogen promoters in the

35:23

world. I'm. Hoping to

35:26

rejects a little realism physics and

35:28

economics into this year's event. If

35:31

you're planning to attend to grabbed

35:33

me and say hello. Unless

35:35

of course no one of my trolls.

35:37

And which case, please don't. If

35:40

you've enjoyed today's episode, please subscribe, give

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