# Things to Watch: Hydrogen

An episode of [Switched On](https://invisiblenetwork.ai/podcast/1469286286), 9 Feb 2024, 23 min.

Audio: https://podtrac.com/pts/redirect.mp3/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/01a10738-3608-4dec-883c-ae3c00026b36/53884588-0b5b-4ee2-8a06-b1110091abe3/audio.mp3?utm_source=Podcast&in_playlist=6d114f63-833d-4b78-bbf5-ae3c00026b44

On today’s bonus episode of the podcast, Dana is joined by Kathy Gao, a Senior Associate from BloombergNEF’s Hydrogen team, to unpack the things to watch for the sector in 2024. Together they discuss offtake agreements and the potential for shipping and aviation to step up as customers, whether nuclear could become a viable method of hydrogen production among the plethora of available options, and the policies that could drive supply and demand in the year ahead. Complementary BNEF research on the trends driving the transition to a lower-carbon economy can be found at BNEF<GO> on the Bloomberg Terminal, on bnef.com or on the BNEF mobile app. Links to research notes from this episode: Hydrogen: 10 Things to Watch for 2024 - https://www.bnef.com/insights/33105/view See omnystudio.com/listener for privacy information.

## Transcript

[0:00] Speaker 1: This is Dana Perkins, and you're listening to Switched on
[0:03] Speaker 1: the B and EF podcast. On today's bonus episode, which
[0:07] Speaker 1: is actually our final one in our twenty twenty four
[0:10] Speaker 1: Things to Watch series, we speak with Kathy Gao about
[0:13] Speaker 1: what we should be watching in the hydrogen space in
[0:15] Speaker 1: the year ahead. We start by discussing off take agreements
[0:19] Speaker 1: and the potential for shipping and aviation to step up
[0:22] Speaker 1: as customers and sources of demand. We also look at
[0:26] Speaker 1: methods of hydrogen production across different regions and whether nuclear
[0:30] Speaker 1: or pink hydrogen may become a more viable option in
[0:33] Speaker 1: the air ahead, and we assess the global policies that
[0:36] Speaker 1: could help drive hydrogen production in twenty twenty four, in
[0:40] Speaker 1: particular in the US, where the long awaited guidance on
[0:43] Speaker 1: the IRA has now been released. To access this research
[0:47] Speaker 1: note titled Hydrogen ten Things to Watch for twenty twenty four,
[0:51] Speaker 1: B and EF subscribers can find it at BNF dot
[0:54] Speaker 1: com and at BNF go on the Bloomberg terminal. If
[0:56] Speaker 1: you like this podcast, make sure to subscribe, and if
[0:59] Speaker 1: you want to share with others, well, you can send
[1:01] Speaker 1: it to them, or you can give us a review
[1:03] Speaker 1: on Apple podcasts or Spotify. But right now, let's speak
[1:06] Speaker 1: with Kathy about the year ahead for hydrogen. Kathy, thank
[1:19] Speaker 1: you very much for joining today to talk to us
[1:22] Speaker 1: about the year ahead for hydrogen.
[1:24] Speaker 2: Thanks Dana, happy to be here.
[1:26] Speaker 1: So as we think about the year ahead, you know, really,
[1:28] Speaker 1: when I think about hydrogen, I think about it as
[1:30] Speaker 1: this solution that's going to be used more in the
[1:33] Speaker 1: longer term, both from the standpoint when we think about
[1:36] Speaker 1: how the economics are likely to work out and get
[1:40] Speaker 1: a bit cheaper over time, and when we look at
[1:42] Speaker 1: some of the learning rates for the technology. So we're
[1:45] Speaker 1: really talking about hydrogen in what I consider to be
[1:47] Speaker 1: a really unique space for us to talk about it,
[1:49] Speaker 1: which is very time delimited. Right, We're going to talk
[1:51] Speaker 1: a little bit about the year behind us and then
[1:53] Speaker 1: about the year ahead and resist the temptation to look
[1:56] Speaker 1: too far into the future. So with that in mind,
[2:00] Speaker 1: let's talk a little bit about this hydrogen predictions. We
[2:04] Speaker 1: did them last year. We do tend to give ourselves
[2:06] Speaker 1: a bit of a scorecard. How well did you do
[2:09] Speaker 1: versus well what you thought would happen in twenty twenty three.
[2:13] Speaker 2: Yeah, I think we did pretty well on overall the
[2:16] Speaker 2: kind of judgment of the industry. What I'm actually really
[2:19] Speaker 2: want to hide light is actually the one that we
[2:21] Speaker 2: got wrong is around sort of the project financing kickstarting
[2:26] Speaker 2: in the US, which obviously didn't happen last year because
[2:30] Speaker 2: of the delays of the US I a guideline on
[2:33] Speaker 2: the hydrogen text credit. So I think just by drawing
[2:35] Speaker 2: this one examples, this actually highlights the policy and recutory
[2:40] Speaker 2: complexity and uncertainty the whole industry's facing right now. So
[2:43] Speaker 2: this is actually one thing that we're closely watching for
[2:46] Speaker 2: twenty twenty four as well to see whether there could
[2:49] Speaker 2: be any policies coming out to actually lift the sector
[2:52] Speaker 2: and give positivity to the sectors into twenty twenty four.
[2:56] Speaker 1: So that actually was one of your predictions for the
[2:58] Speaker 1: year ahead, and the US had finally released this long
[3:01] Speaker 1: awaited guidance on the what is it the forty five
[3:04] Speaker 1: V tax credit from the IRA. Can you talk a
[3:06] Speaker 1: little bit about what the prediction is for that for
[3:09] Speaker 1: twenty twenty four.
[3:10] Speaker 2: Yeah, So obviously the delays in the IRA guide like
[3:14] Speaker 2: coming out has actually slowed down a lot of projects
[3:16] Speaker 2: eating FID in twenty twenty three in the US. So
[3:19] Speaker 2: just to give you an idea of the landscape of
[3:21] Speaker 2: the project being proposed. In the US, there's a total
[3:24] Speaker 2: of around one point six millimetric town of clean hydrogen
[3:27] Speaker 2: projects proposed by twenty thirty and of that amount, only
[3:30] Speaker 2: twenty percent has found an off ticker and even you know,
[3:33] Speaker 2: less than one percent has reached FID by the end
[3:36] Speaker 2: of last year. So it tells sort of the challenge
[3:39] Speaker 2: the whole industry is facing right now. There's not much
[3:41] Speaker 2: demand and much less keating the financial milestone. So the
[3:45] Speaker 2: IRA guide like coming out actually right before Christmas last year,
[3:48] Speaker 2: was actually very good news for the whole industries. So
[3:51] Speaker 2: the US actually offers one of the most generous subsidy
[3:54] Speaker 2: for clean hydrogen production, as high as three dollar packge
[3:57] Speaker 2: of hydrogen. The highest subsidy actually lies for hydrogen with
[4:02] Speaker 2: very low emission standard of less than point forty five
[4:05] Speaker 2: kg of CO two, so those hydrogen could get the
[4:08] Speaker 2: highest level of subsidies. So the IRA actually comes out
[4:11] Speaker 2: much trigger than most have hoped. So it requires project
[4:15] Speaker 2: to meet a few criterias to be able to qualify
[4:18] Speaker 2: for the subsidies, one of them being the hydrogen having
[4:21] Speaker 2: to couple with new build or additional renewable resources, so
[4:25] Speaker 2: it cannot draw power from existing power such as nuclear.
[4:29] Speaker 2: The second one is that there should be hourly matching
[4:32] Speaker 2: between hydrogen production and the renewable generation. So this is
[4:36] Speaker 2: also really hard to hit because a lot of the
[4:38] Speaker 2: renewable generation are intermittent and electualizer are actually not ready
[4:43] Speaker 2: to take those intermittent power. So in order to match
[4:46] Speaker 2: the renewable generation and hydro production, you need the technology
[4:50] Speaker 2: to be ready. We also probably need a portfolio of
[4:53] Speaker 2: renewable to support electualizers. You probably need solar and wind
[4:57] Speaker 2: and battery storage on signed to support electualizer production, which
[5:01] Speaker 2: will obviously raise the cost of clean hydrogen production. So
[5:05] Speaker 2: a lot of people are actually quite worried about a
[5:07] Speaker 2: Republican presidency and whether that would revoke the IRA subsidy
[5:12] Speaker 2: for US. We don't think that would be the case
[5:14] Speaker 2: because the IRA subsidy on hydrogen actually has by parties
[5:17] Speaker 2: and support, and then we think even with a Republicans presidency,
[5:21] Speaker 2: the subsidy would actually survive.
[5:23] Speaker 1: So there's a lot happening with IRA implementation, which is
[5:27] Speaker 1: a federal policy. But now let's actually talk a little
[5:29] Speaker 1: bit more about the US and states are individual states
[5:33] Speaker 1: getting in this game and thinking about hydrogen.
[5:35] Speaker 2: There's actually a lot of states that are interested in
[5:37] Speaker 2: supporting hydrogen. So as we've seen some states actually when
[5:41] Speaker 2: I had to launch their own demand site incentive in
[5:45] Speaker 2: twenty twenty three, which could actually trigger more states to
[5:48] Speaker 2: follow this suit. For example, Colorado has introduced a subsidy
[5:52] Speaker 2: of up to one dollar perkg for the users of
[5:54] Speaker 2: clean hydrogen in mid twenty twenty three. Illinois has introduced
[5:58] Speaker 2: similar subsidies of one dollar package credit as well, but
[6:02] Speaker 2: it's more strict so it's only limited to hard to
[6:04] Speaker 2: abate sector users. Pennsylvania has also released a text credit
[6:08] Speaker 2: of around point eight dollars package of clean hydrogen purchased
[6:11] Speaker 2: from the regional Clean Hydrogen HOB which recently got the
[6:14] Speaker 2: founding from the federal government. So we expect more stays
[6:18] Speaker 2: actually to launch more subsidies because currently only on the
[6:22] Speaker 2: federal level, although the government has announced a one point
[6:25] Speaker 2: six billion incentive package for supporting the demand of clean
[6:29] Speaker 2: hydrogen in twenty twenty three, there was very little detail
[6:32] Speaker 2: of how the government is actually going to implement that,
[6:35] Speaker 2: so we'll still need to wait and see, you know,
[6:38] Speaker 2: how the federal government will do this, but with the
[6:40] Speaker 2: lack of certainties on how the federal government will implement that,
[6:43] Speaker 2: we think there will be more states actually going ahead
[6:46] Speaker 2: and launching their own subsidies to incentivize more demand on
[6:49] Speaker 2: the local level, especially the states which got the regional
[6:53] Speaker 2: Hydrogen hob funding for the production side.
[6:56] Speaker 1: So we'll come to some of the conversation around technologies
[6:59] Speaker 1: and application, but I think it would be great for
[7:01] Speaker 1: us to actually continue to talk about this in terms
[7:04] Speaker 1: of what's happening in different parts of the world. So
[7:06] Speaker 1: can we next go to Asia as a continent, And
[7:10] Speaker 1: I know this is going to vary widely by country
[7:12] Speaker 1: by country, we zero in on, say Japan and Korea.
[7:16] Speaker 1: This was an area of the world that were early
[7:19] Speaker 1: proponents of hydrogen and actually looked at applications when it
[7:22] Speaker 1: came to cars and fuel cells since that was a
[7:25] Speaker 1: part of their early strategy. Do you see a bit
[7:27] Speaker 1: of a pivot to some of the other applications that
[7:29] Speaker 1: parts of the world have looked at, And what is
[7:32] Speaker 1: happening in Asia and how is their year head look
[7:35] Speaker 1: for hydrogen.
[7:36] Speaker 2: APEC is pretty interesting because, as you said, every country
[7:39] Speaker 2: has slightly different approach and on the policy wise, is
[7:42] Speaker 2: actually less sophisticated than the US and Europe in terms
[7:45] Speaker 2: of hydrogen policies. It's interesting to see how these countries
[7:49] Speaker 2: will actually push forward the hydrogen subsidies So far, if
[7:52] Speaker 2: you compare the subsidy level from APAC to the US,
[7:56] Speaker 2: and Europe is actually lagging behind for a lot. The
[7:59] Speaker 2: only trees that have implemented subsidy for hydrogens are India
[8:03] Speaker 2: and Australia, but they're tiny compared to the US are
[8:06] Speaker 2: A subsidies. The upcoming one that we're actually pretty excited
[8:10] Speaker 2: for is the potential subsidies in Japan. So Japan has
[8:14] Speaker 2: introduced a contract for different mechanisms similar to the one
[8:18] Speaker 2: that EU is implementing for clean molecule supply, including clean hydrogen,
[8:22] Speaker 2: so that would benefit both domestic supplier and overseas suppliers.
[8:26] Speaker 2: This will basically subsidize the cost difference between the cost
[8:29] Speaker 2: of importing clean hydrogen and the cost of producing or
[8:33] Speaker 2: using great HydroD domestically or fossil fuel. This is actually
[8:37] Speaker 2: quite a lot of money that the Japanese government is
[8:39] Speaker 2: putting into this mechanism, but it solely depends on whether
[8:42] Speaker 2: the government could actually raise that much money because this
[8:44] Speaker 2: pool of money is actually going to come from the
[8:46] Speaker 2: transition bonds that the government will be issuing. So depending
[8:49] Speaker 2: on whether there will be anybody buying transition bonds, it
[8:52] Speaker 2: would actually determine how much money will be available for
[8:55] Speaker 2: this pool of CFD subsidies. And then the other countries
[8:59] Speaker 2: that we are pretty optimistic about on hydrogen import is
[9:03] Speaker 2: South Korea. So similar to Japan, South Korea is actually
[9:06] Speaker 2: also thinking to import clean hydrogen or clean ammonia, mostly
[9:11] Speaker 2: for domestic power generation and a bit of transport. South
[9:14] Speaker 2: Korea is interesting because it's actually one of the few
[9:16] Speaker 2: countries in the world that implemented a usage manday, so
[9:20] Speaker 2: it's basically a mandate for the power sector for the
[9:24] Speaker 2: utilities to use a portion of clean hydrogen or clean
[9:27] Speaker 2: ammonia derived power from now to twenty thirty. So by
[9:31] Speaker 2: twenty thirty, the goal is for South Korea to consume
[9:34] Speaker 2: at least eight hundred thousand towns of clean hydrogen or
[9:37] Speaker 2: equivalent for power generations, so that it's quite a lot
[9:40] Speaker 2: of demand that they actually mandated for domestic utilities. South
[9:44] Speaker 2: Korea is a big steel manufacturing hub. They also have
[9:47] Speaker 2: plans to use hydrogen in the industrial particularly steel manufacturings.
[9:51] Speaker 2: So overall for Asia, we think South Korea and Japan
[9:54] Speaker 2: are the two markets that we're most excited about for
[9:57] Speaker 2: twenty twenty four.
[9:58] Speaker 1: And you would reference that in your This has been
[10:00] Speaker 1: a part of the world that has historically had favorable
[10:03] Speaker 1: policies on the books for hydrogen. And without going into
[10:06] Speaker 1: individual countries, let's talk a little bit about the European
[10:10] Speaker 1: Union and the year ahead and whether or not you
[10:13] Speaker 1: see more of those policies coming down the pipe.
[10:16] Speaker 2: Europe is really interesting because it's actually something that all
[10:20] Speaker 2: the other countries are looking after as kind of a
[10:23] Speaker 2: model in terms of hydrogen policies. And in Europe there's
[10:26] Speaker 2: actually quite a lot of policies, mandates, and subsidies that
[10:30] Speaker 2: they implemented to support hydrogen. But one thing that we
[10:33] Speaker 2: actually looking out for for twenty twenty four is the
[10:36] Speaker 2: clean hydrogen definition because right now in Europe they actually
[10:39] Speaker 2: hasn't really clarified any regulations around sort of the production
[10:43] Speaker 2: of clean hydrogen and blue hydrogen in particularly as well
[10:46] Speaker 2: as pink hydrogen. So a lot of people kind of
[10:48] Speaker 2: planning those kind of projects in Europe are worried that
[10:51] Speaker 2: those project might not get any support in you at
[10:54] Speaker 2: the end, So in twenty twenty four, we actually would
[10:56] Speaker 2: expect you to publish clear definition on how the emission
[11:01] Speaker 2: from producing low carbon hydrogen should be measured. So, for example,
[11:05] Speaker 2: right now EU has adopted a emission criteria of three
[11:09] Speaker 2: point three akg of COE to equivalent per kg of
[11:12] Speaker 2: hydrogen as the benchmark or criteria of low carbon hydrogen.
[11:16] Speaker 2: But EU hasn't really clarified like how those emissions should
[11:20] Speaker 2: be measured, whether leakage would be accounted. So those are
[11:23] Speaker 2: the things that the industry is actually looking out for
[11:25] Speaker 2: in twenty twenty four for the EU to actually clarify
[11:28] Speaker 2: the emission accounting methodology for clean hydrogen. And then another
[11:32] Speaker 2: thing on EU is that in addition to the EU level,
[11:35] Speaker 2: which already have run the first round of hydrogen auction
[11:39] Speaker 2: in late twenty twenty three and it is expected to
[11:41] Speaker 2: run another round of auction in twenty twenty four, a
[11:44] Speaker 2: lot of people are actually looking out for sort of
[11:46] Speaker 2: the member country level subsidies. For example, like Germany is
[11:50] Speaker 2: expected to launch its carbon contract with different schemes. Friends
[11:54] Speaker 2: is also running its own hydrogen auctions. So in addition
[11:57] Speaker 2: to the EU level a lot of people are looking
[11:59] Speaker 2: at for the member country level subsidies and auctions in
[12:02] Speaker 2: twenty twenty four.
[12:04] Speaker 1: So the hydrogen color wheel is something that people talk
[12:06] Speaker 1: about a lot. It's all of these different colors that
[12:08] Speaker 1: stand for the different technologies that we use to make
[12:12] Speaker 1: the non naturally occur during hydrogen. So be it blue
[12:15] Speaker 1: or pink or green, it all stands for something. But
[12:18] Speaker 1: really what I want to know about is in the
[12:20] Speaker 1: year head, which technologies are really going to come out
[12:22] Speaker 1: on top. So is it going to be the application
[12:25] Speaker 1: of CCS, which is largely coupled with colon gas. Is
[12:28] Speaker 1: it going to be green hydrogen produced from renewables, or
[12:32] Speaker 1: are we going to see a resurgence in the use
[12:34] Speaker 1: of nuclear which is referred to often as pink hydrogen.
[12:38] Speaker 1: What does it look like and what does that mix
[12:39] Speaker 1: look like from a technology standpoint in the year ahead.
[12:43] Speaker 2: Yeah, So for CCS, it's interesting because EU right now,
[12:46] Speaker 2: you know, it's actually have a preference on green hydrogen
[12:49] Speaker 2: over blue because it wants to get rid of fossil
[12:51] Speaker 2: few use, so blue hydrogen is not particularly popular in EU.
[12:56] Speaker 2: The blue hydrogen actually only concentrated in a few countries
[12:59] Speaker 2: that actually have support on carbon capture. For example, the
[13:02] Speaker 2: US have the forty five Q subsidies on the carbon
[13:06] Speaker 2: capture and utilization and storage as well, so a lot
[13:09] Speaker 2: of those blue hydrogen projects are concentrated in the US
[13:12] Speaker 2: the UK as well. UK. Actually blue hydrogen would we
[13:16] Speaker 2: expect it would be the biggest source of clean hydrogen
[13:18] Speaker 2: by twenty thirty in year really depends on, as I
[13:22] Speaker 2: mentioned earlier, how the emission accounting methodology will comes down to.
[13:27] Speaker 2: For example, the emission accounting for clean hydrogen will account
[13:31] Speaker 2: for the upstream meat and leakage and all the other
[13:33] Speaker 2: upstream emission associated with blue hydrogen that would make blue
[13:37] Speaker 2: hydrogen really difficult to meet the emission criteria under the
[13:41] Speaker 2: EU Centard. And then in terms of pink hydrogen, it's
[13:44] Speaker 2: interesting because there's not a lot of countries in the
[13:46] Speaker 2: world that have the nuclear required to produce pink hydrogen.
[13:50] Speaker 2: So the few countries that have that could produce pink
[13:53] Speaker 2: hydrogen include the US friends for example in Europe and
[13:57] Speaker 2: in China, and South Korea is actually pretty cue with
[14:00] Speaker 2: the new presidency to explore pink hydrogen as well in Asia.
[14:04] Speaker 2: So those are only you know a few countries that
[14:06] Speaker 2: could produce clean hydrogen using nuclear and then in the EU,
[14:10] Speaker 2: it really depends whether again sort of the new emission
[14:13] Speaker 2: accounting methodologies that is counted in the US with the
[14:17] Speaker 2: IRA guideline, it actually required, as I mentioned earlier, additional
[14:22] Speaker 2: new build renewal boat to be coupled with the clean
[14:24] Speaker 2: hydrogen for it to qualify for the subsidies, which would
[14:27] Speaker 2: make it really difficult for pink hydrogen, which would most
[14:31] Speaker 2: likely use existing instead of no built nuclear as a
[14:34] Speaker 2: power source, would make it really difficult for it to
[14:36] Speaker 2: get them IRA subsidies. So you know, it really depends
[14:40] Speaker 2: on the policy regulation and emission accounting methodology under those
[14:44] Speaker 2: different countries whether this source of hydrogen will be qualified
[14:49] Speaker 2: for any subsidies going forward.
[14:50] Speaker 1: So next I want to talk about two of our
[14:53] Speaker 1: favorite hard to evate areas, shipping and aviation. We've spent
[14:57] Speaker 1: a lot of time thinking about the solutions for these
[15:00] Speaker 1: in the future, and one of them is hydrogen. Are
[15:02] Speaker 1: we seeing off take agreements that indicate that twenty twenty
[15:06] Speaker 1: four could be a really big year for application for
[15:09] Speaker 1: these two hard to abate sectors.
[15:11] Speaker 2: Yeah, so we're actually pretty optimistic about this two sector
[15:15] Speaker 2: lifting the demand for hydrogen in the year ahead. This
[15:18] Speaker 2: two sector are under pretty tight regulation in the EU
[15:22] Speaker 2: for de carbonization. For example, that Refuel EU Aviation initiative
[15:27] Speaker 2: which mandated one point two percent of the fuel supply
[15:30] Speaker 2: to aircraft at the EU airport must be synthetic by
[15:33] Speaker 2: twenty thirty, so that would our estimate result in at
[15:36] Speaker 2: list zero point thirty five million tounds of green hydrogen
[15:39] Speaker 2: demand by twenty thirty. There's also the few EU maritime initiatives.
[15:43] Speaker 2: Similar to the aviation one, it mandates a shipping sector
[15:46] Speaker 2: to de carbonise following a fixed emission intensity target from
[15:50] Speaker 2: now to twenty fifty. So this carbon intensity target will
[15:54] Speaker 2: require the shipping companies to redeal fuel emission by two
[15:58] Speaker 2: percent by twenty twenty five, which would rise dramatically to
[16:01] Speaker 2: eighty percent by twenty fifty. And then in addition to
[16:04] Speaker 2: the few EU maritime initiative, we also have the EUETS,
[16:08] Speaker 2: which included the shipping sector into the ETS scheme last year,
[16:13] Speaker 2: so the shipping sector would have to pay carbon price
[16:16] Speaker 2: starting from this year and then full carbon price starting
[16:19] Speaker 2: from twenty twenty six. A lot of shipping companies are
[16:22] Speaker 2: actually under a lot of pressure to decarbonise, they are
[16:26] Speaker 2: looking for green fields globally trying to be compliant, so
[16:30] Speaker 2: that would actually drive a lot of demand as we
[16:32] Speaker 2: are already seen from the shipping and aviation sector. Just
[16:36] Speaker 2: to give you a couple of examples. For example, in
[16:38] Speaker 2: the aviation sector, Airfrance and Kelm and Delta signed eight
[16:42] Speaker 2: seven year sustainable aviation fuel off tack with a US
[16:45] Speaker 2: based synthetic fueld producer d G Fuels to make aviation
[16:48] Speaker 2: fuel using hydrogen. Merz, which is one of the biggest
[16:52] Speaker 2: European shipping company, also signed a binding off taic contract
[16:56] Speaker 2: with the Chinese developer Goldwin for a five hundred thousand
[16:59] Speaker 2: towns of methinode off take which will be using around
[17:03] Speaker 2: one hundred thousand towns of green hydrogen for those methino productions.
[17:07] Speaker 2: So this is actually one of the largest green methinoe
[17:10] Speaker 2: off take that we've seen so far, and this give
[17:12] Speaker 2: a lot of hopes to the whole industry, especially to
[17:15] Speaker 2: the countries with very cheap renewables and abundant biomass resources
[17:20] Speaker 2: such as China and potentially South America as well as
[17:23] Speaker 2: the Nordic country to actually step up to produce green
[17:26] Speaker 2: fields for the shipping sectors.
[17:28] Speaker 1: And on some of these ships are electrilyizers for other
[17:32] Speaker 1: parts of the world to make hydrogen. As we ship
[17:35] Speaker 1: the required equipment around the world, and we've got some
[17:38] Speaker 1: predictions for volumes of elect shipments in the airhead, what
[17:42] Speaker 1: are those.
[17:43] Speaker 2: For the shipment of electrializer, which is, you know, a
[17:46] Speaker 2: key component or equipment to produce green hydrogen. From twenty
[17:50] Speaker 2: twenty three to twenty twenty two, we saw shipment of
[17:53] Speaker 2: electrizer double going ahead in twenty twenty four. We expect
[17:56] Speaker 2: the shipment to continue to grow in twenty twenty four.
[17:59] Speaker 2: In our conservative scenario, the shipment in twenty twenty three
[18:03] Speaker 2: would be around one point seven gigawatt, and then we'd
[18:05] Speaker 2: expect that to double in twenty nwenty four to reach
[18:08] Speaker 2: around three point six gigawatt. But in terms of like
[18:11] Speaker 2: the exact amount whether in twenty twenty four would actually
[18:15] Speaker 2: achieve that double, it really depends on a lot of
[18:17] Speaker 2: different factors. We think there's a lot of certainties around
[18:19] Speaker 2: the exact shipment in the year had because there are
[18:22] Speaker 2: a couple of factors that could affect it, for example,
[18:25] Speaker 2: policies and also macroeconomic environments. And also sort of the
[18:29] Speaker 2: technical issue is a big one. The issue that the
[18:32] Speaker 2: technology like electrialized has been around for over fifty years
[18:36] Speaker 2: as a technology to be used in multiple sectors to
[18:38] Speaker 2: produce hydrogen on site, but those are mostly small scales.
[18:43] Speaker 2: In order to deploy those technology in a megawat scale,
[18:47] Speaker 2: you need to have technology improvement. And then we're actually,
[18:50] Speaker 2: we don't think the industry now is ready for this yet.
[18:54] Speaker 2: We've heard a lot of manufacturer having technical issues, so
[18:57] Speaker 2: we think this is something that industry have to fix
[19:00] Speaker 2: for the technology to be deployed in a larger scale.
[19:03] Speaker 2: So one of the key technical issues is the compatibility
[19:07] Speaker 2: with renewable power because in the past, electualizer is used
[19:11] Speaker 2: to getting stable power input from the greed, but now
[19:15] Speaker 2: if we want to couple that with renewable electricity, the
[19:18] Speaker 2: power input will be intermittent and that's something that the
[19:21] Speaker 2: manufacturer has to figure out.
[19:22] Speaker 1: And now let's talk about interest rates, which are raising
[19:26] Speaker 1: costs for power projects all over the world, and when
[19:28] Speaker 1: it comes to hydrogen, do we think we're going to
[19:30] Speaker 1: end up seeing the impact of these higher interest rates
[19:33] Speaker 1: in auctions? And the reason that I asked this is
[19:35] Speaker 1: so often we're looking for cost declines in hydrogen projects,
[19:38] Speaker 1: So will this be a year where essentially the costs
[19:41] Speaker 1: go up and will we see that in the auctions.
[19:44] Speaker 2: So it's actually something that we've observed in the past
[19:46] Speaker 2: year in a couple of the auctions around the world
[19:49] Speaker 2: that the production costs that produce a bit for is
[19:51] Speaker 2: actually much higher than we expected. For example, in the
[19:54] Speaker 2: first auction that UK run in twenty twenty three, the
[19:58] Speaker 2: cost is actually much higher than we estimated, mostly because
[20:01] Speaker 2: of a couple of factors. For example, the rising equipment costs,
[20:04] Speaker 2: rising electricity costs, additional grid connection cost you know, alongside
[20:08] Speaker 2: with a couple of other factors that push up the
[20:10] Speaker 2: cost by at least six to seven dollars package So
[20:14] Speaker 2: this is pretty significant. We think that the auction plan
[20:16] Speaker 2: in twenty twenty four are likely to be affected by
[20:19] Speaker 2: higher costs as well. There are a couple of auctions
[20:21] Speaker 2: that we are closely watching al four, such as the
[20:24] Speaker 2: second EU Hydrogen Bank auction that will supposedly happen in
[20:29] Speaker 2: spring twenty twenty four. The UK and Idland would also
[20:32] Speaker 2: have its second hydrogen auction. Friends in Germany, as I
[20:35] Speaker 2: mentioned before, would also have its hydrogen tender Japan as well,
[20:39] Speaker 2: as I mentioned earlier, would have its CFD schemed launched
[20:42] Speaker 2: this summer as well. So there are a lot of
[20:44] Speaker 2: auctions that we're watching alpha in twenty twenty four. I
[20:47] Speaker 2: think it remains an outstanding question whether this kind of
[20:50] Speaker 2: higher cost will be applied to all the markets in
[20:53] Speaker 2: the world. It really depends on sort of the subsidy
[20:56] Speaker 2: and auction mechanism design as well. For example, in the EU,
[21:00] Speaker 2: you wear some sectors face quotas or mandates to buy
[21:03] Speaker 2: clean hydrogen. This would create demand and also willingness to
[21:07] Speaker 2: pay for the green premiums amount the buyers. In that case,
[21:10] Speaker 2: then the bidding price in Europe might be lower than
[21:13] Speaker 2: the UK because the buyers are willing to pay to
[21:17] Speaker 2: count the cost. As I mentioned, some other countries that
[21:19] Speaker 2: have a different bidding mechanism might see a lower bidding
[21:24] Speaker 2: costs as well. This happened in the Denmark auction in
[21:26] Speaker 2: late twenty twenty three, and then also the Indian auction
[21:29] Speaker 2: that we've seen results just came out in Gen twenty
[21:32] Speaker 2: twenty four also saw a pretty low bidding price, like
[21:35] Speaker 2: some bidders actually bid zero in the auction, which is
[21:38] Speaker 2: quite interesting. So we think in those countries where the
[21:42] Speaker 2: lowest bidder would get the subsidy first, in such a mechanism,
[21:46] Speaker 2: the bidders would tend to underbid to be able to
[21:48] Speaker 2: get into the auction. So in that case, the overall
[21:51] Speaker 2: bidding price might be lower than we expect, whereas in
[21:54] Speaker 2: countries like Japan as well as the UK, where the
[21:56] Speaker 2: government just subsidized the cost difference between gray a green hydrogen,
[22:01] Speaker 2: the prize difference would actually be quite high.
[22:04] Speaker 1: Kathy, thank you very much for joining us today from
[22:06] Speaker 1: Hong Kong to talk about what's happening in the year
[22:08] Speaker 1: ahead in the world of hydrogen.
[22:10] Speaker 2: Thank you, Dana.
[22:19] Speaker 1: Switched On is produced by cam Gray with production assistance
[22:22] Speaker 1: from Kamala Shelling and Ulushi Kurunorate. Bloomberg NEIF is a
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