Green Hydrogren: Jorgo Chatzimarkakis, Wataru Ikushima & Miguel Angel Lopez Borrego #FII8

So we have an awful lot to discuss in the next couple of days here at FI. One of the areas we'll be hearing time and time again is that wonderful hydrogen dilemma: are we going to do it, what color? But we're going to talk about green hydrogen at this session. Etna Trainer is my name. Let me get my panel up here. We have the CEO of Hydrogen Europe, Jorgo Chatzimarkakis; from Marubeni Corporation, the general manager new business development, Wataru Ikushima; and the CEO from thyssenkrupp, Miguel Borrego. Gentlemen, make yourselves comfortable. Talk to me about what's going on. We see a lot about green hydrogen. Where are we going with it? It's in its infancy in some places, getting great support in Europe. But talk to me about the multiple factors that need to be developed: technology, demand, supply, infrastructure, investment. I get the feeling it's not all aligned right now.

Well, in your introduction you talked about the hydrogen dilemma. We always have the chicken and egg dilemma in every new technology. However, there's no question anymore whether hydrogen or not. When we listen to the energy minister today, when we listen to the governor, hydrogen was mentioned plenty of times. Saudi Arabia is definitely one of the most attractive places to produce both green and clean hydrogen. We call it the end of the rainbow. Both pathways are doable and needed. Today we talk about electrolytic hydrogen based on electrolysis using renewable energy. It's a fantastic place. It's not a question of whether, it's a question of how.

I'm sure it is. How and when? Electrolytic – I get a new word at every session, that'll be my word of the day. Thank you for that. Ikushima-san, talk to me about demand. Where do you see the market in the next 5 to 10 years, looking ahead to 2030 and beyond, particularly from Japan and Asia? Where do you see the growth?

The growth: in Japan and Korea we have lots of coal-fired plants, still the base load. It's difficult to expand renewables because of land and conditions. I believe Japan and Korea will be among the first to introduce green hydrogen co-firing in coal plants, starting at 20% co-firing, with the idea to convert to ammonia using green hydrogen. In Europe and the US, for mobility, regular automotives will shift to EVs, but for trucks and big buses, fuel cells have a big chance. Marubeni is chasing opportunities for hydrogen trucks in Europe and the US. We are also chasing a green hydrogen project in Queensland, Australia, to convert green hydrogen to green ammonia for use in the mining industry. There are many potential markets. We can also make green ammonia for bunkering, though we have to compete with MCH or methanol. Many shipping companies are seriously thinking to convert their engines to ammonia. The possibilities are endless.

Miguel, there's a lot of interest. Analysts say there's a lot of hype around green hydrogen. Some people tell me we're never going to get there, but this panel says we're on the right direction. Look at the investment in Saudi and hopefully to come, but many big projects have not been delivered. You're a technology provider, in a sweet spot. Talk to me about where the opportunities are and what the big stumbling blocks are right now.

You want to follow that one? Do that first and then we'll come back. Please.

Yes, because what Miguel just said highlights a real dilemma. The dilemma is not hydrogen yes or no, but whether we use gas as a transition technology to install DRI. Politicians say no, we need green hydrogen, but they don't understand that sometimes you need to accept a 50-60% reduction in CO2 with another technology. They fear a lock-in effect, but that's not true; you can have sunset clauses. We need to convince policymakers to accept transition periods. We don't have the hydrogen in that volume right now. Market penetration of coal took 55 years, gas 45, oil 44. We are in year four of the European hydrogen strategy. I ask for realism and pragmatism. Some politicians say they are elected for four years and want green now, but we need to make it affordable.

I think we have to bring them talking about what government should do. Wataru, talk to me about what governments can do in Japan. They have put initiatives in place, but is their role as an enabler? Should they work more on the regulatory environment? Clearly we need the support of governments.

The support of the government is very important. Politicians also have to speak the problem. People should understand that going green is expensive, but not spending this money may mean the Earth will be gone. When I was a kid, we had no air conditioning, but now people die without it due to global warming. Government and leaders should clearly mention we need to fight global warming, but it is expensive. Without this word, everyone thinks companies go green without saying who pays. The government should make it clear that it is necessary to make this additional payment.

Miguel again, I think we're not going to sort the government issue today, but we might give them some advice. Do you think anywhere is getting it right? Where do you see the role of the government? Miguel, pick up.

Jorgo, as CEO of Hydrogen Europe, you have friends in the European Union. What's the feeling you're getting? Where is the understanding and desire? And then we look at the media, which probably gives a hard time to anything not super green. They need to understand as well.

Let me start with the media. I've seen three articles about this event that are very fact-based and friendly. Politicians are not to blame for everything. We owe the politicians in Europe the strategy based on infrastructure, the European Hydrogen Backbone. Last week, the German government launched the core grid, which would connect 10,000 km of pipelines in Germany, with a way to finance it over generations. That's smart because this is a multigenerational approach. However, there is one problem: over-complexity. Europeans always want to describe exactly how a green molecule has to be produced. For example, European green hydrogen must be produced by electricity from a windmill not older than 24 months in the same bidding zone. That's crazy and unrealistic. This comes from the European idea to be thorough, but it doesn't work with new technologies. We can learn from Japan, which was the driver of the hydrogen economy, followed by Korea. Europeans created a monster of bureaucracy. We have a new European Commission starting December 1, and we are trying to convince them to reduce this burden and be pragmatic.

Yeah, I think that'll be welcome by everyone around the world. Because of the regulations in Europe, others are coming on board. It's having a wider impact. I witnessed a conference two years ago with a European commissioner and an Indian minister. The commissioner read out the complicated definition of green hydrogen. The Indian minister stood up, spoke freely for 10 minutes criticizing every paragraph. He was absolutely right: why are you shooting yourself in the foot? The commissioner was furious because she knew he was right. India is much more informed about European legislation because they want to import into Europe. India has a much better power grid. The rest of the world is better prepared than Europeans think. They are not the center of the world anymore; they need to qualify for being the best market.

And that's where everyone's chasing that European market. Let's look at the technologies. When we think of the technologies out there that will help us bring the cost down, talk to me about what's most promising and helps reduce the cost in green hydrogen production.

We have a real project under FEED, trying to go to FID within 12 months. The biggest cost is the power cost from renewables, second is electrolyzers. Even reducing electrolyzer cost by 10% won't help much; the biggest challenge is the power price. Electrolyzers are a key component. Chinese and European companies are competing. Chinese companies are doing very well. If more people buy electrolyzers, the price will go down, similar to solar panels which dropped from 40 cents to 5 cents in 10 years, and offshore wind from 80 cents to 10 cents. We believe renewable costs can still go down, and electrolyzer technology itself is not high-tech, so more production will make it cheaper. Another challenge is EPC, common for all mega projects.

Miguel, any chance of end of your sale on electrolyzers right now? How do we bring the costs down? And please have a look at costs in terms of infrastructure. Every element is a big cost.

Please go ahead about transportation.

The easiest way to transport by ship is to liquefy hydrogen at minus 262 degrees Celsius, which requires new technology. We are conducting FEED for an Australian project. Liquefaction is extremely expensive. If someone can make a good proposal, the price will go down. Also, the vessel for liquid hydrogen will be much more expensive than existing LNG vessels. We have to challenge that.

And again, we have to look at what ships the fuel is transported on. You may get your green hydrogen, but it may have been shipped on a ship with less than green fuel. Jorgo, talk to us about the choking points in regulation and what's hindering the market. Also the Renewable Energy Directive version three is happening. Will this come with the new group of people in the European Union? How can we see our way through it?

After the European hydrogen strategy was established, we had four very intensive years of legislation: 3,000 pages, 1,000 mentions of hydrogen in the Fit for 55 regulation. One idea is to oblige off-takers in industry to take 42% green hydrogen. It's a good idea, but it needs to be put into national law. Germany would love to oblige, but if Miguel is obliged to take expensive green hydrogen, it might not be profitable. Fertilizer companies are closing in Europe, steel companies under pressure. We need to combine the obligation with a de-risking strategy, like contracts for difference where the government covers extra cost for some years. Cheap producers can bring down cost if they have long-term clients. We saw a 30-year off-take agreement between Adani and Yara. That's the way to go. Also, transport is a big issue. Embedded hydrogen in products like ammonia or hot briquetted iron is easier to transport. It's better to bring the process close to cheap hydrogen production. Europeans will lose a third of their jobs and value chain if they don't act fast.

Leading on from that, we look at demand. Miguel, in the steel sector, that's one we can see clearly. Aviation has been talked about but with uncertainty. Where do you see demand, and how fast?

Quickly, talk to me as a trading house that covers the whole supply chain. What do you see as top of the agenda?

Every segment of the supply chain is top agenda. It's a chicken and egg situation. As an owner/operator of a future green hydrogen project, one organization should cover the whole supply chain from renewables to final supply to control costs. Marubeni is going to build a 1 GW project here with power cost at 1.56 cents, very cheap. With that, we can start from renewable part, production, transportation, and also use as off-taker. We should cover the whole.

We have to start wrapping this up. Jorgo, let me start with you. I'll come to you, don't worry. I'm going to save you to the end. Jorgo, talk to me about what's urgent, what's essential, a call to action to the industry. What do we need to do?

First of all, get a lot of green renewable energy. We will drive hydrogen fast, but we will not have enough green electricity. Many projects are delayed in Europe. I would put the focus on green energy development faster, because that is the main ingredient for the hydrogen economy.

Yeah, and I think around the world people need to realize it's not just about providing local power. It's a much bigger picture.

Wataru, so I wait for a request for PPA for green power. We are ready to supply. My sense is this is a big challenge, and one organization cannot do it alone. Let's share the challenge for the hydrogen future.

And you're Jorgo, not Miguel. I'm mixing the two of you up. Okay, I'm back with you. Close us off. Tell us, you're talking to your members, your people, all the associations. The big call to action. Where you look at this maybe frustrated sometimes and say what we can do now to really move this forward.

De-risk the off-takers. That's the most important thing. The rest is on the go. Also, stop thinking about electricity as the only thing. In Germany last year, we had grid congestion costs of 11 billion, this year 18 billion. That's money thrown out of the window if you don't combine it with the smart use of molecules that can store energy like hydrogen. We need to think integrated. That's why we're here. It's a good start.

Super. Okay, well it's a good start from all of you. Thank you so much. A lot of great ideas. We might not solve the whole world's problems today, but we have good ideas to get it moving. I want to thank our dear audience for joining us, and again to our dear panel: Jorgo, thank you so much; Wataru, and Miguel, thank you so much.