20th July 2024

Lately, somebody reached out to me with this query. They received an engineering diploma and an MBA from good colleges, have labored at one of many world’s high consultancies, have performed CEO-level technique work, and at the moment have decarbonization accountability for a $Four billion annual income transportation firm. They’ve the STEM and monetary chops that make it apparent hydrogen for vitality is a lifeless finish, in addition to pores and skin within the sport.

As a result of they really know the science, run the numbers on decarbonization options, and take care of in any other case brilliant, knowledgeable, competent individuals who have lots of these attributes, they have been deeply perplexed why they have been getting hydrogen for vitality questions and proposals twice a day. Of their phrases, “What drives this insanity on hydrogen?” They hoped I might shed some gentle on the topic to assist them take care of the matter extra successfully and effectively.

I’m withholding the identify for a few causes. One, the individual in query has an necessary and already conflict-laden position of transformation, and wouldn’t be helped by changing into a lightning rod inside their agency, consumer, and provider group. I’ll floor that cost for them. Second, I get this query on a regular basis from totally different individuals I have interaction with globally. After I take care of funding teams, regularly they’re questioning the identical factor even when they don’t have the STEM chops to comply with Paul Martin’s explanations within the area. They respect my full disregard for individuals’s emotions in my ruthless adherence to working the numbers in a number of domains, respect the outcomes in areas they perceive, but see the disconnect between the present hydrogen hype and my positions and evaluation of hydrogen for vitality. We’re all bullish on hydrogen electrolysers and constructing numerous inexperienced vitality to energy them, however are lifelike about what off-takers really exist for tasks.

The newest individual to ask the query had the identical context I do with my projection of hydrogen demand by 2100, the identical as BNEF founder Michael Liebreich together with his wonderful hydrogen ladder, and the identical as chemical engineer and co-founder of the Hydrogen Science Coalition Paul Martin together with his many explainers on the science and actuality of hydrogen. They know we use about 120 million tons of it yearly in trade — 90 million tons of pure hydrogen and 30 million tons of hydrogen in artificial gases. They comprehend it’s a vital industrial feedstock and that it’s a significant local weather change drawback. They know that we’ve to fabricate low-carbon hydrogen for these functions. They know we’ve to make ammonia-based fertilizers so much greener by changing black and grey hydrogen with inexperienced hydrogen.

However as a transportation and decarbonization professional with STEM and enterprise levels, my most up-to-date correspondent on this matter is aware of that it’s simply nonsense as a retailer of vitality for the overwhelming majority of functions. (Michael Liebreich is bullish on hydrogen for very long-duration storage in salt caverns, whereas I believe we should always simply fill the caverns with as a lot of the biomethane we will’t keep away from producing as doable and construct much more HVDC. I believe that may be a subject of dialog at dinner with him and inexperienced funding banker Laurent Segalen subsequent week in London.)

They’d a minimum of a tough concept of why oil and fuel majors have been motivated to push hydrogen for vitality, if solely to delay the inevitable transition. However they have been very perplexed (and undoubtedly regularly aggravated of their day jobs) about the remainder of the hydrogen foyer pushing hydrogen into non-viable small pockets corresponding to their phase of transportation to justify their investments. They have been questioning the way it helped them. As they requested, “Absolutely they will need to have run the numbers though they don’t dare present them. Proper?”

Right here’s my response, evenly edited:

There are a number of teams I separate this into.

Clearly, there are the oil and fuel corporations. They’ve two motivations. Delaying the transition is certainly one of them, in fact. But when they’ll’t persuade everybody that hydrogen is required for vitality, they received’t be capable to flip their hydrocarbon reservoirs into cash through blue hydrogen, and they are going to be nugatory. As corporations like Shell and bp have 4–10 billion barrels of confirmed reserves, these property will grow to be nearly nugatory. And these corporations deal with these reserves as a fiscal instrument for debt financing. Nugatory reserves = monetary establishments calling of their money owed, the collapse of their inventory costs, and the chapter of these corporations.

Monetary establishments with massive positions in oil and fuel corporations have a vested curiosity in these corporations persevering with to be wholesome, they’re crammed with individuals with enterprise levels, however often empty of individuals with STEM levels. I’ve been in periods with 25 funding managers for multi-billion-dollar infrastructure funding funds, and after I received to hydrogen I requested how many individuals had chemistry, physics, or different STEM levels. Nobody did. This doesn’t make them unhealthy individuals, however the lack of STEM chops signifies that they’re depending on advisors and centered on due diligence on the enterprise facet, not the technical facet. The oil and fuel trade tells them hydrogen is the reply, fills their eyes with greenback indicators, after which primary human nature turns them into boosters.

One thing comparable occurs within the corridors of governmental energy. 6.1% of Norway’s GDP is from its fossil fuels. 25% of Saudi Arabia’s is. There isn’t any future the place hydrogen isn’t a supply of vitality the place these percentages don’t simply disappear. There are secondary and tertiary GDP impacts as effectively, so the precise financial losses are greater, probably double. And because of the outsized financial significance in fossil-fuel-heavy nations like these, Canada, Venezuela, and Australia, governmental politicians and bureaucrats have a revolving door into and out of trade, and their doorways are at all times open to lobbyists. Politicians and bureaucrats could also be wonderful individuals, but it surely’s fairly uncommon to search out exhausting engineering backgrounds amongst them. And so, the oil and fuel trade tells them hydrogen is the reply, they usually imagine them as a result of in any other case they don’t have a great reply, governmental revenues plummet, they usually don’t have their soft jobs or board positions after they exit public service.

The following are individuals with a know-how that makes hydrogen or makes use of it, like Ballard or Plug Energy. They received invested in it sooner or later prior to now, typically previous to 2000 when batteries and renewables sucked, after which affirmation bias and their paychecks simply maintain them from accepting actuality, reducing their losses, and pivoting to one thing helpful. I at all times like to have a look at inventory value historical past with corporations like that. Each of these corporations had peak inventory value in March of 2000, which clearly means it was peak hype in the marketplace, and are actually at 3% and 0.6% of that inventory peak respectively, which actually ought to inform the fiscal individuals one thing.

Then there are the businesses who’re lifeless, however nonetheless shifting round. Cummins is a working example. They construct massive engines, nearly completely for floor transportation (though, they’ve a marine division). All of their mental capital is about burning stuff inside massive inside combustion engines. Nearly their total market goes away if hydrogen isn’t the reply. Since I needed to search for if they’d a marine engine division, I can assure that they’re unlikely to be the chief in supplying the comparatively few marine engines left in spite of everything inland and two-thirds of quick sea transport electrifies (my projection). Wärtsilä, Hyundai Heavy, and STX Heavy usually tend to persist. Cummins people have crossed my display ranting about my hatred of hydrogen and that I’m unsuitable as a result of if I (and plenty of others like me) are proper, they haven’t any future.

Then there are the credulous followers, nearly completely devoid of STEM abilities. (Though there are additionally deluded individuals with good STEM backgrounds in there that produce other cognitive biases.) The credulous followers have a well-thumbed copy of Rifkin’s e-book on their bedside desk, they click on on each clickbait article on hydrogen that crosses their display, they usually watch hydrogen movies. They’re the helpful idiots, spoonfed hydrogen crack by those with fiscal oars within the water. Many are readers of CleanTechnica, and fill the feedback part with statements about how I’m the biased one who doesn’t perceive the science.

So, sure, the hydrogen foyer is a many-headed hydra. It’s a self-reinforcing circle of individuals whose livelihood is dependent upon hydrogen for vitality changing fossil fuels. There’s some tribalism happening. There are a bunch of apparent cognitive biases which might be retaining them from accepting actuality, with the prospect concept being key amongst them. That concept was the one which received psychologist Daniel Kahneman a Nobel Prize in economics in 2002 and is a cornerstone of behavioral economics.

At its easiest, all prospect concept says is that human beings worry potential loss greater than they worth potential acquire, and can make choices accordingly and solely considerably rationally. Affirmation bias (the tendency to disregard data that contradicts one thing you imagine and take into account authoritative what does help your beliefs), availability bias (considering that what your mind shortly supplies as examples is statistically legitimate for the world), and familiarity bias (no matter you’ve heard or seen a number of instances being thought-about higher and extra dependable than something novel) all play a component too.

As Liebreich says, it’ll take till 2030 for the hype to die down, as a result of that’s how lengthy it takes to deprogram a cult.

 


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