Sustainability, Clean Energy, Recycling & ESG

It is hard to ignore the number of headlines on hydrogen initiatives, today, highlighted in our ESG and climate report, as well as the acceleration in project announcements over the last several months. In the 80s in the UK, it was trendy to drive a VW Golf GTI – everyone had to have one – hydrogen has the same feel today – everyone has to have a project. The projects vary and fall into a handful of categories:

1. Situations where cheap renewable power is likely to be abundant – Western Australia for example and anywhere else with a lot of sunshine or wind and not a lot of consumers for power – the Neom project in Saudi Arabia would be another good example. The issue with these projects is how you get the product to market – Neom is planning to make ammonia as it is easier to ship and then potentially convert back to hydrogen at its point of use. You are shipping a lot of inert nitrogen to do this.
2. Countries that have clear hydrogen ambitions for transport and heating longer-term but are looking at blue projects either first or alongside green projects. This would include the UK and other coastal European locations where CCS is possible, some projects in the Middle East, Canada, and some of the Japanese aspirations to acquire ammonia for the co-firing of coal power plants.
3. The purists – only looking at green hydrogen and likely underestimating the cost of future renewable power supply in their planning.

We would put our money on the middle group as they are likely far better positioned from a risk perspective. They stand a chance of meeting their “hydrogen economy” goals without the risk that it all falls apart because costs turn out to be much higher than expected and illustrated in the chart above. Also, if the middle group can demonstrate that the more obvious CCS opportunities are effective – i.e. drive both lower costs and lower emissions, there will be more work done on alternative containment spaces – allowing for further expansion of the “blue” model. For the CCS-based model to get full backing, however, the natural gas well-head and processing emissions will need to be addressed as discussed in our ESG and Climate report today.