The Hydrogen Economy #52
One Year On, and The Challenge is Unchanged – The Elusive Low-Cost Abundant Electron
Key Points
- We celebrate the 52nd edition of this report by discussing one of the challenges we identified first – inadequate power supply to meet hydrogen needs. Power is getting more expensive, which is not good for hydrogen.
- More reports on the industry talk about constraints to project advancement while at the same time identifying a greater need. Few will pay the very high prices needed to cover costs, and government subsidies need to rise.
- Offtake agreements are challenged by overly optimistic expectations for hydrogen costs – if you believe it will cost half the price today in 6-8 years – because the government says so – why sign a longer-term contract today?
- Cheap power only exists in small intermittent pockets, and the higher capital costs of exploiting the cheap power overwhelm any benefit of getting power for free while capital costs need to be repaid.
- This week, we see a project based on existing nuclear power in South Korea, although it is only a pilot, and a too small biogas-based SMR project in Hong Kong – these are both avoiding the intermittent power challenge.
Exhibit 1: We see substantial challenges in supplying the high-volume hydrogen needs given the ability to pay, and consequently expect to see a wave of blue hydrogen before we see meaningful green volumes.
Source: Client Discussions and C-MACC Analysis
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