J.P. Morgan Private Bank CIO Michael Cembalest on the Energy Transition | Part 4

Legacy uses of hydrogen (completely reliant on fossil fuels to create hydrogen)

• Create ammonia for fertilizer
• Oil refining – to reduce sulfur content of diesel fuel
• Small amount also used in steel production

Less than 1% of hydrogen created by electrolysis using renewable energy (green hydrogen)

Hydrogen is not a native energy source, it’s an energy carrier

Do theories of hydrogen optomists make any sense?

• Tagline: some do but only over a very long period of time. A lot don’t.
• Potential use cases all rely on emergence of competitive green hydrogen which is not anywhere in sight

A lot depends on:

• How quickly the costs of green hydrogen decline
• The time and cost required to build electrolyzer storage and distribution
• Time it takes for all of the worlds machines and engines to be designed to use hydrogen

Green Hydrogen

• Hydrogen produced via electrolysis powered by renewable energy
• If it could be produced at a low cost it would be interesting
• Goldman Sachs, others are projecting steep declines in electrolysis costs over the next decade
  • This is based on learning curves seen for wind, solar and batteries

Grey Hydrogen

• Produced by steam-methane reformation of fossil fuels
• This is how most hydrogen is currently produced

Blue Hydrogen

• Same as grey hydrogen, except you are capturing carbon emissions and storing underground
• Carbon capture and storage is overhyped – enormous infrastructure needs
• Not optimistic on anything related to blue hydrogen or sequestration

Blending Hydrogen into existing natural gas pipelines

• There are limits to how much you can blend in
  • At blending rates over 10% or so a lot of equipment may need to be replaced
  • Embrittlement (cracking, other pipeline degradation)
  • IRENA critical of blending in new report

Long-Haul Shipping

• • May make some sense
    • Challenge is how to store and transport the hydrogen
      • Hydrogen has very low energy density by volume
      • Storage tanks on ships would need to be huge, even if using liquified hydrogen

Steel Production

• • Using hydrogen as reduction agent for primary steel production
    • Demonstration plants have been announced by European steelmakers
      • Issue – the timeline. Likely not to be competitive until 2030-2040, and even then only in the Nordics

Trucking

• • Interesting
    • Faster refuelling rates than EVs

• 1.5 GW of electrolyzer capacity under construction
• All projects that have reached final investment decision stage total 40GW electrolyzer capacity
  • If all of this were used in oil refining it would offset ~2.5% of EU emissions
• Projects have started but they are not transformational
• Where is electricity going to come from to run electrolyzers?
  • Currently adding wind + solar energy to grid just to displace coal and natural gas
  • Where is capacity for the hydrogen going to come from