Although many individuals and organizations talk about the energy transition and sustainability in general terms, most are unclear on how or when changes to support this transition will be implemented. Several forms of renewable energy sources, such as wind and solar, have been used for decades in various sectors globally. Other forms, such as hydrogen, while up and coming are not as widely understood.
Fugitive Emissions Journal had the pleasure of speaking with Peter Kelly- Detwiler, Principal of NorthBridge Energy Partners, to learn about the importance of renewable energies, how hydrogen is becoming more and more prevalent, and the several ways it may be used.
By Sara Mathov and Angelica Pajkovic
Q: Why is it important to pay attention to the energy industry?
A: We are now, as a society, running into limits. There is a renewed focus on how much carbon dioxide, methane, and fluorocarbons the atmosphere can absorb, without temperatures getting so warm that it starts to create damage to our plant, and our economies where we may incur trillions of dollars in damage.
As a consequence, we have to think about how to reorient our entire global energy economy, which is the largest thing humanity has ever collectively tried to accomplish, dwarfing the Industrial Revolution. Some estimates suggest that the cost of the energy transition could exceed USD $100 trillion, maybe even USD $200 trillion.
Q: Why should people, and companies, care about renewable energy?
A: Last year, Bloomberg, New Energy Finance, announced that $1.1 billion USD funds were invested in clean energy technology, which is equal to the amount that was invested last year in hydrocarbons. This is the first time that clean technology investments have been equal to investments in the hydrocarbon economy. Bloomberg also said the investments in this decade must triple that number to maintain the 1.5°C target we have set to limit the increasing global temperatures. To keep our planet semi-habitable, for ourselves, our kids, our grandchildren, and generations to come, this is what it will take.
The question, therefore, becomes, how do we, as a globally collective society, reorganize our economies and create the right economic signals, regulatory policies, investments, and behaviour, driven down to the individual level, to shift the arc so that we are on to something that is more sustainable?
My role is to absorb and read the available information and make sense of it. As Wayne Gretzky famously said, ‘you have to skate to where the puck is going to be’. I think about how these trends and technologies are conspiring to create a future change, and then help clients figure out how to get there, or anticipate where that future is going to be. This is to ensure companies are making the right investments, the right hires, and the right strategic shifts, to ensure they are advantaged by these changes rather than disadvantaged.
I recall interviewing a CEO of a company, who informed me that he believed this will be the largest opportunity to either make fortunes or incinerate capital, that humanity has ever seen; there is nothing less than the future at stake.
Q: Why is there a need for hydrogen within the energy transition?
A: There are three main areas where emissions can be grouped. First is the power grid, and collectively, we are doing a pretty good job decarbonizing that sector relatively quickly. Many places are using wind and renewables. In Texas, their about 90,000-megawatt capacity grid is utilizing over 30,000 megawatts of wind, and will soon have up to 20,000 megawatts of solar. Cleaning the power grid is becoming increasingly viable, but we will need a great deal of energy storage to help mitigate the variability of renewables. There is still heavy lifting needed to get to 100%, but we can see a way there. The customer side of the grid will flex as well, with efficiency, batteries, and end uses that change in response to prices and grid signals.
Then, there is the category of transportation, which accounts for about a third of global emissions. Here, we take the electrons from the power grid and start to electrify transportation, like we are seeing with electric vehicles. A large amount of the emissions related to transportation can be solved by applying electricity, by expanding the grid; between electric vehicles and other end uses that displace gas and oil, such as heating, some individuals project that the grid will become two or three times the size of what exists today. The next and most difficult part of the economy we must decarbonize is the hard-toabate sector, industry.
Industry often involves thermal applications, and high amounts of concentrated heat, for processes such as cement production, steel manufacturing – smelting iron ore to create steel – and other large industrial processes. That is where hydrogen comes in. Right now, there is no other way to decarbonize these processes; we need to find other ways to bring in clean fuels. Hydrogen can be burned for many industrial thermal applications.
Q: What are some of the challenges with hydrogen?
A: After hydrogen is brought into the equation, many factors must be considered. It burns hotter than CH4, or methane gas, and it has a faster flame speed. It is also not as dense; three times the amount will have to be burned moving through a pipeline to achieve the equivalent energy as what can be produced with natural gas. So, there are some interesting challenges with hydrogen.
The most challenging aspect of hydrogen is its inefficiency. People refer to hydrogen as a fuel, however, it is not, it is a carrier. Green hydrogen, for example, is made from wind and solar. It involves using electrolysers, that apply an electric current to water, breaking that water down into hydrogen and oxygen. The hydrogen will then have to be either liquefied or compressed to make it usable for most applications, stored, and then burned in a turbine or a fuel cell to generate power, or a furnace to create heat.
By the end of that process, roughly two-thirds of the raw energy that the operator started with has been lost. The sheer inefficiency of this process creates a big economic hindrance.
Most hydrogen made today is so-called gray hydrogen, which utilizes natural gas in a process called steam methane reformation, and while it creates hydrogen, it also releases carbon combined with oxygen in the atmosphere as CO2. That is also quite energy-intensive and has all of the same downstream challenges as green hydrogen.
To restate, the advantage of hydrogen is it burns hot, it can be put in a lot of the industrial applications we are using today, and we are starting to develop those technologies; the turbines, the furnaces, etc. The disadvantages are that it takes up a lot of space and has different characteristics when you burn it than natural gas does.
Q: Can you describe how valves will be used in hydrogen applications?
A: Hydrogen is a simple molecule. From a valve or pipeline perspective, it can leak from every place, because it does not have a very high atomic weight. To refit a pipeline with new valves, that pipeline will have to be engineered to minimize the leakage. Where one type of pipe can contain the CH4 molecule, the H2 molecule is going to act similarly to a prisoner escaping through a prison with lots of gaps in the walls.
One must therefore figure out how to develop the pipelines and valves to account for that. It could be a very large opportunity for valve companies, to either retrofit or replace existing valves in infrastructure that already exists.
Alternatively, companies will have to build out new hydrogen infrastructure from scratch, creating a completely new greenfield opportunity. Based on the speed with which the hydrogen economy has started to pick up its pace, there is a huge opportunity for valve manufacturers that can deliver a high-quality product, with minimal leakage, at an affordable price.
Q: How will this industry progress over the next few years?
A: For many decades, we have used hydrogen and industrial applications for refining and fertilizers. As we begin cleaning up the economy, one of the first things that will happen, especially with the subsidies that the U.S. now offers for clean hydrogen, will be to produce more clean green hydrogen. These cleaner hydrogen varieties are going to supplant the hydrogen that is already being used in the agricultural economy to make fertilizer and ammonia.
In the U.S., the Department of Energy (DOE) just announced that they will be creating hydrogen hubs; regional groupings of between six to 10 communities of producers of hydrogen, and storage, and certainly end users of hydrogen. The DOE said they were going to make $7 billion USD available – they wanted at least one to be blue (steam methane reformation with carbon capture and storage), one green, and one pink (from nuclear). The result was 79 different regional groupings submitting letters to the DOE, and only 33 were encouraged to continue. What I foresee happening in the next year, is that we will know who is getting the $7 billion USD to fund hydrogen hubs. And that will spur a lot of activity and investment.
The next piece will be what is going on in places such as Europe, whose offshore wind industry is massive, taking a bigger leap into the hydrogen space. They are now starting to figure out how to take offshore wind and convert that into hydrogen. There will be the development of what they call ‘hydrogen valleys’, and areas like this will become suppliers of hydrogen from offshore wind or other renewable sources, and then find off-takers of hydrogen. As a result of U.S. initiatives, many European companies are now wanting to step up their game even further, and support the hydrogen industry, to be more competitive.
Over the next two or three years, there will be a lot of announcements, and then a lot of steel in the ground by 2026-2028, with real projects by 2030, where we will probably see the first developments of these physical hydrogen hubs well underway. By then, a couple of them will have been established for a few years, and then we will know what the costs are, and how viable a full blown hydrogen economy is.
Q: How will the future of hydrogen and renewables impact oil & gas?
A: The goal, ultimately, is to push hydrocarbons out of the picture. Some gas companies are already threatened with the idea that we are going to use beneficial electrification, such as induction stoves instead of gas stoves, and heat pumps instead of gas heating, and they will lose several major end uses. The smart companies are saying, well, maybe we can take our pipelines and refit them for hydrogen blends, or otherwise figure out how to reposition themselves in that space.
The oil & gas companies, including upstream exploration and development, generally see hydrogen as something that is quite familiar to them. In the same way that some companies had historically begun developing offshore wind farms because they knew how to build platforms, some of the more astute hydrocarbon companies understand that this energy transition is inevitable, and are positioning themselves based on the expertise they have to play in this game. And some of them will keep producing hydrocarbons but try and offset that by doing tons of carbon capture and storage.
Most companies understand there is a transition afoot. They may drag their heels a bit, but they are beginning to position themselves for that inevitable energy transition, even though it is unclear how much hydrogen will be in the mix as an energy carrier, and how much of that will be in the form of ammonia, or methanol, etc.
But oil and gas will not go away immediately, or for a long time. In the more established economies, there is an inertia built into it. If we want to electrify the vehicle fleet, say in the U.S., there are roughly 17 million electric vehicles sold every year, and the average car lasts 12 to 13 years. This year, around 5.8% of U.S. automobile sales were electric vehicles. Even if this increases every year, there will still be a trailing effect, as 94% of the cars sold this year were still gasoline. This trail will last quite some time, simply because of the inertia built into the age of these assets that we use all the time.
The real question for oil & gas companies is, how much will they invest in new resource development? And, if they underinvest, what are the consequences? Companies have a focus on providing returns for shareholders, which is what they are meant to do – they are not immoral, they are amoral. They are just meant to provide returns to shareholders in the most expeditious and efficient way possible. The role of government, then, is to provide incentives for these amoral actors to accelerate their behaviour in one direction, and decelerate it away from another one. The role of government is to protect its populations from either foreign adversaries or other dangers, and climate change is one of them. So companies will move as fast or as slow as societies tell them to, provided the right incentives are put in place.
Q: What do you foresee for the future of the industry?
A: People generally think, on a really cold day, that it may never be warm again, and vice versa. That is to say that generally, we underestimate how quickly the changes that are already around us are taking place. For example, in the solar industry in 2009, there were 1,000 megawatts of solar units installed on U.S. rooftops and at utility scale. Now, there are well over 100,000 megawatts of rooftop solar and utility scales, in just 13 years. And solar will be the largest source of new generating capacity installed this year in the U.S.
Likely by 2025, maybe a quarter of cars sold will be electric. As I noted, the inertia is built in, but the pace of change, the adoption curve of new technology, is steeper than it has ever been before. As communication is faster, and more people have the economic wherewithal to adopt new technologies, companies have to be a little bit more astute and proactive in anticipating change than they did 10 or 20 years ago. I think it will therefore be beneficial for individuals and corporate leaders to be informed by a healthy sense of optimism, co-mingled with paranoia; this is how to be an effective business leader and position oneself for future success.
