 the Europeans have been going forward with this in in a lot of research and demonstration and development projects. I think the US is lagging a little behind. This may be sort of part of a race where different continents are sort of placing money and bets on different clean energy technologies. You may know that Japanese firms and particularly the very large automotive firms have for a long time sort of been talking about hydrogen and have been developing these hydrogen transportation solutions early on. So altogether the race is on and I guess we will see in the course of time really how this is going to play out. I want to talk to you today a little bit about really the economic side of hydrogen and different hydrogen solutions, what we know about it, how I sort of look at this and this is really ongoing work towards the end of my talk if time permits. I'll be, I'll sort of sketch for you some of the work we're currently doing. I find it quite exciting but this is really sort of fresh off the press if you want to. Right here I've already mentioned so I'm perfectly happy to make this a little more interactive. Do interrupt at any point in time if I sort of can keep the talk halfway on track through the 45 minutes that we have. That's good if there are too many questions I may sort of ask you to. Let me move forward a little faster but I would like this to be interactive so please interrupt if you want to. Okay so let me then get started. Here is a what you may call background slide in which hydrogen does not yet play a major role and this is sort of for a good reason. Those of you who have really followed this discussion about decarbonization intensely in the last five minutes may have seen this part earlier or this slide earlier. It was produced by Shell in 2019 and it's called the Sky Scenario and let me first say right off and in no way want to sort of endorse this trajectory. It's a projection really of carbon emissions over the next so many decades. It's just a forecast that Shell made and Shell of course being an oil and gas company that is however investing actively in clean and new energy solutions on a number of fronts. So what you can see there is they project that emissions are going to be increasing for a few more years roughly till the middle of the decade that just started and then they're going to come down and reach zero for the world. These are global CO2 emissions by 2070 okay and you see in sort of the little icons suggest to you the energy technologies carriers that are going to get us to this trajectory and the point to notice here is yes there is when you when you look at the truck here there is some hydrogen transportation but overall you see at the very end here even out for the next 70 or 80 years Shell really projects that the role of hydrogen in this new energy economy is going to be relatively small so that's their forecast as of 2019. The larger impact sort of our importance of this slide in my mind is that if you ask yourself well if Shell were right what would this do sort of to the world's climate and where would this leave us collectively on this planet the answer is not very good because if you add up all these annual emissions so mathematically you take the area under this curve the integral and you add that all up as to the year 2070 you get to something like 1200 gigatons 1200 billion tons of CO2 on an accumulative level now that is by the literature that I read way more than what most climate scientists tell us what we have left as a carbon budget so we better all hope that Shell is not right with this forecast otherwise we're going to really blow through the carbon budget that we are being told that we have if we want to keep temperature increases to two degrees Celsius relative to pre-industrial levels Shell better not be right and that in my mind reinforces the question well so with hydrogen deployed early and widely in a number of industries in a number of sectors of the economy could that make a contribution that would help us to really bend this curve down faster so that the total area would be more in line with the 700 gigaton budget that people are talking about okay so from here more broadly the questions that are sort of you know we face in this whole field those of us who look at the energy transition from a climate change perspective is is radical decarbonization within the next 25 to 30 years doable what are the most cost-effective pathways to such a decarbonized economy for this talk in particular what role should hydrogen play in this what policy support is required when I mentioned early on the Europeans are now sort of not only with funding for demonstration projects but also in pricing schemes seem to sort of be favoring the deployment of hydrogen to get that going early so the policy aspect in my mind in all of this is is crucial if we're trying to make a forecast where things are going to go over the next couple of decades and the last question in all of this is if the world sort of just goes on makes improvements as we as we go along but incremental improvements is that going to be good enough to meet those decarbonization goals there are people like for instance Bill Gates who have sort of said you know we need in all of this we need technology breakthroughs so my position on this technology breakthroughs would be great but let's first see if we do the kinds of improvements that we have seen for renewables and that we are now also beginning to see for hydrogen if those improvements continue at the same pace roughly there wouldn't be a technology breakthrough but incremental improvement would that still be consistent with meeting the decarbonization goals and particularly staying within the carbon budget as we've seen a moment ago on the last slide so this whole I will talk about change technological improvements but gradual ones and then we can get in my mind to the question do we need to swing more for the fences do we need something radically new a real breakthrough rather than just incremental improvements so here is a slide that once again in the last I would say a couple of years has been shown a lot I wanted to also show it here again it's from a paper published in science was a lot of authors actually a very short paper it's one of those papers where the number of authors seems to be writing down the names of the author seems to take more space in the paper itself and the key thing in this paper is really this slide or this picture this pictorial that you see there which is sort of a vision for what you may call a future hydrocarbon economy very different from the one that we see today and you're seeing basically in green on the lower right hand side here you're seeing the supplies of energy that includes also a supply of co2 co2 is sort of the red road that goes through this economy and there are takers off takers for this co2 there's of course electricity in green presumably from renewables or carbon-free sources and there is a hydrogen path here is hydrogen in blue and then in purple you see the the last major freeway through this new economy these are basically the synthetic hydrocarbons in this economy that could be produced from hydrogen carbon dioxide oxygen with the help of clean electricity and over here then is the demand side from air travel to hospitals to manufacturing you see their cement and steel so that's how this whole new economy would go would have some features of the circular economy that people sort of talk about in which these types of molecules are combined emitted and combined in a completely new way which ultimately leaves emissions much much smaller so much for the vision now there are also people who are saying this is really it's a nice vision but it's unrealistic this is not going to happen so perhaps the most vocal critic of the whole hydrogen approach and the vision of the hydrogen economy if you want to is none other than Elon Musk who of course nowadays has a lot of credibility just on account of the success of his company Tesla so let me perhaps here ask the group for a moment if anybody wants to sort of chime in here what is what's Elon Musk's criticism about hydrogen why does he not believe this is a viable path he says the conversion efficiency is too low yes that's that's his major beef exactly right so the conversion efficiency is low or the round trip efficiency losses in particularly if you were to convert clean electricity to hydrogen and then go back in the other direction you would be losing ultimately a lot of the energy that you have produced in the first place so low conversions that point is valid at some level in that these conversion losses must be taken into consideration when we ask how competitive is it and we'll do that in the calculations that I want to show you in a moment so something to keep in mind but in my mind also not the ultimate argument you know you could you could also argue with the in the other direction look if renewables are becoming as cheap as they seem to be coming and we're wasting most of the sunlight anyhow for the purposes of harnessing the energy from the sun if then we can we have further losses conversion losses as we go to go down the hydrogen route so what if it's cheap to begin with we might as well waste a portion of it because we're wasting 99.9% of it any day anyhow because that much of the sun energy is not being absorbed or used by us okay so here is perhaps my slide in which I'm sort of talking a little bit about all the potential uses of hydrogen so the proponents say this could be a significant building block in this transition to phasing out fossil fuels and what did they mention in particular well one thing that we already have seen in particular from Japanese manufacturers for in certain spaces is the idea of hydrogen as a transportation fuel where you would basically do the power generation via fuel cells and we have a number of established fuel cell manufacturers all over the world second usage for a scenario for hydrogen is blending it with natural gas and using the current infrastructure and if you do that then you would basically reduce the co2 footprint of natural gas if you had the synthetic gas that's a mix of natural gas and hydrogen my colleagues tell me sort of how large the share of hydrogen could be if you want to use the current infrastructure of piping and say burners for natural gas is sort of not entirely clear this hasn't been pushed yet but generally it would then be used for both power generation and heating purposes the hydrogen finally the one that I'm going to probably be speaking most about today the idea of simply energy storage as a medium or as a hydrogen as an energy as a chemical energy storage medium both for large scale and for long-term energy storage to some extent an alternative to battery storage or other forms of of long-term storage and finally what I sort of showed you in this pictorial from science for the new hydrocarbon economy this idea that once we have hydrogen and we have co2 of which we obviously have too much at the moment we could produce all sorts of valuable hydrocarbon molecules in particular synthetic gas ch4 this generally goes sort of under the heading power to x in other words you have you have power you have hydrogen and other molecules to combine basically produce then a whole range of products synthetically so that's really sort of a long-term type of vision of which we don't we haven't seen all that much so far okay that was sort of a that's the vision part let's talk for a moment where we are today so this is a slide that I have picked you probably can't see it if you're seeing the same thing as I do on the screen sort of blocked out because we have here the participants on this zoom call on the right but it's a slide from the international energy association IEA and this has this really shows you nothing more than the hydrogen that's being produced where is it coming from and where is it going to and so on the left you see the largest block here is natural gas is being used as a feedstock to produce hydrogen roughly 200 million tons and thereby the largest of all the sources this is sometimes goes under the heading steam methane reforming so hydrogen is being produced from natural gas in the process co2 emissions arise that's why it's sort of considered dirty quote unquote and other uses are other fossil fuels like coal oil and the like there are also some production processes which produce several projects at the same time so you see here hydrogen as a byproduct that's another bucket on the right you're seeing basically all the use cases or the industries that this is going to say refining for all sorts of refineries the next category is pretty much fertilizer for agriculture some into transportation methanol another useful molecule in a number of industrial processes and the like so this is basically where is it coming from in most cases today the feedstock is a fossil fuel and here are the users now depending on how sort of closely I followed this there is sort of in this industry or when people talk about hydrogen there is sort of a color coding that's popping up and I'm never quite sure whether people use the same color labels use you see I've written them down there at the bottom let me actually try this on this crowd um gray blue green or turquoise turquoise is probably the the iffyest of those color labels I've only heard this informally I haven't seen it really written down so just so that we get the language straight what do you associate or do you associate anything with these labels say blue hydrogen versus green hydrogen or gray hydrogen anybody just I want to sort of get a little bit of sense of where where this group stands without having looked into the making the assumption green hydrogen coming from renewable sources where this is gray coming from say fossil fuels yeah not sure where to place blue but would assume something like natural gas by product um yeah so absolutely right on gray and green that's my interpretation too blue is um the way I understand it and once again I'm not entirely sure that the labels are being applied consistently but that would actually be from fossil fuels but with carbon capture so the idea that you wouldn't have any co2 emissions and from a co2 perspective it would still be a clean carrier um turquoise as I said is sort of a slightly newer label here I'll introduce that in a moment that's basically going to be that's why the color label was chosen that's going to be pretty close to actually green which as you said to teelo is a combination where we're basically relying on renewable energy in the first place um to make this so turquoise is close to green a slight variant of green and I'll come back to that uh when we look at some scenarios okay okay moving right along so uh we said this gray is what we have today primarily steam reforming um and that is sort of the way it has been uh going for some time in my mind um the big question to ask sort of as a first stage when we before we get to the loftier questions of what is the role of hydrogen really going to be in in the long term future is um do we have the clean energy alternatives like the green hydrogen or the turquoise hydrogen production processes are they already competitive in today's world with steam reforming that is do they have a chance to displace uh it simply if investors didn't care much about co2 emissions they're just going to follow the trail of the money they're going to make these investments if they pan out um if we did that would that already be sort of you know an accomplishment uh into from a co2 perspective if we just did we we didn't widen the footprint of hydrogen in the economy but we just replaced what's currently being done in terms of um producing that valuable raw material hydrogen from a green source rather than going down the traditional path of relying on mostly on natural gas or other fossil fuels to do so so question how large is that footprint you know when i showed you the slide a moment ago in terms of all the uses and the sources of it so here's a little quiz question for you uh written there on um on my first bullet point um relate the co2 emissions from global steam methane reforming across the world to the emissions of the entire german economy i picked germany again because i split i spent a lot of my time there so just orders of magnitude how large is this i'll guess two orders of magnitude larger in which direction two x in so who is two times larger the co2 emissions from global steam methane reforming uh okay that would be that would be really significant so let's order of magnitude germany's economy accounts for about 800 million tons of co2 which is roughly two percent of the world's emissions um so dean you're right in that it's larger that's why i chose germany as the benchmark but it's not quite two x it's about 900 so slightly larger so it's 1.1 x if you want to okay um but so you know that's significant uh out of the uh you saw the the shell the shell scenario early on out of the 32 gigatons billion tons of co2 that the world has steam methane reforming uh today is already two percent so if we were to displace that that would already make somewhat of a contribution okay question is that going to happen so what are the alternatives um the main alternative that's really on the block and that is being commercially practiced already today is um electrolysis uh you see there that's the green hydrogen in particular if you rely on clean electricity to split water molecules into hydrogen and oxygen uh by injecting basically the electric power into the water an alternative that's at the development stage by a number of large company is pyrolysis um which splits the methane the ch4 directly into hydrogen and solid carbon but wants to do so without releasing any of the carbon or not letting any of the carbon react with the oxygen to produce co2 that's uh another alternative again not yet a number of large companies in the world are spending a fair amount of money on this but it isn't yet at a commercial stage in my to the best of my knowledge so the conventional wisdom is and this has been true sort of for now for some time is okay this electrolysis is cool in that it's green um it if we have a lot of renewable power and the renewable power then gives us the hydrogen um then we avoid the emissions uh and that would be sort of a really a classic clean energy technology in which we're putting renewables and all the progress we've made on renewables to good use um but the conventional wisdom is well fine but it doesn't withstand the market test um natural gas in many parts of the world is cheap particularly cheap in the us because of fracking um so if you do the numbers to get one kilogram of hydrogen which one is going to be cheaper which one are going to investors what type of facilities will investors be willing to um really put their money on the answer is the traditional steam methane reforming steel still wins and so electrolysis isn't quite positioned competitively that has been true for the longest time um our numbers the work that we're doing show us that this is actually changing it's changing relatively quickly and it's now a real race um and so it isn't sort of a done deal yet in my mind in favor of green hydrogen uh but it's getting very close and it's changing uh in the right direction from from from uh sort of my preference perspective on this one okay um so what has what has contributed to these changes uh first one we all know renewable electricity renewable power is becoming very cheap very very quickly probably both solar and wind have seen sort of spectacular cost declines um with in some of the auctions i saw a report the other day that um at the first time uh we actually for sun for solar pv uh got to the point of a ppa a power purchasing agreement was a bidder at an auction to one cent per kilowatt hour in portugal recently um i i know was my reaction to you know when when i heard two cents in certain parts of the world i thought boy that's uh that is already a record one cent um i also had a hard time sort of rationalizing but even if it's two cents you know uh this is very low very close to zero we obviously won't be able to go below zero uh but sort of think about now the clean electricity um part being very cheap electrolyzers have also improved because more of them have been produced so this is sort of a learning curve concept that i want to talk about in a moment and the last part and this is really sort of the one that i think most people um in the popular press are not paying attention to that i want to sort of at least give you as an intuition i don't know whether it will be possible for me to fully explain it is um wholesale power markets largely because of what has been happening to renewables have become a lot more volatile in terms of prices in other words the prevailing price on say a wholesale market in california or in texas or on the east coast or in europe the trend that we have seen over the last couple of years is or the last 10 years almost is that average prices have come down per kilowatt hour again wholesale not not retail wholesale but at the same time the fluctuations in prices across the day across the hours of the year has gone up and has gone up dramatically so that volatility in prices so again think of the price at um late in the afternoon you know here in california um as you can imagine the late afternoon price in the summer is sort of the super high price because industry is still working people are cranking up their air conditioning units that's the time when you really pay premium for power in the wholesale market and vice versa at five in the morning or 10 in the morning or even now at noontime was a lot more solar these prices tend to be much much lower and these fluctuations as volatility has been increasing and that is in this whole economics of hydrogen volatility is a good thing um usually you know in in economics and in finance we worry about volatility it's something that investors market participants don't like but here it actually goes in your favor so the more the larger the fluctuations um the better the positioning of some of these uh technologies like electrolysis uh or other types of fuel cells in the hydrogen market okay so i i realized that this may sort of sound a little counterintuitive at this point i'll just sort of throw it in there as a thought and if time permits i'll sort of try to show this a little in a little bit more detail so here is a simple picture of an electrolyzer this is actually a so-called PIM electrolyzer i think i have the labels here on the next slide the proton electrolyte membrane sometimes also called proton exchange membrane that's the type of electrolyzer that has come up in recent years sort of more prominently you see here a couple of firms that are in this space um it has replaced the traditional AEL uh electrolyzer at the very end if i have the time i'll talk a little bit about so-called uh an alternative to this type of electrolyzer the PEM electrolyzer called the solid oxide cell electrolyzer what is important about this one is you see this here in in this sub-bullet point it is a fuel cell that can run in both directions that is it can run from as an electrolyzer um convert electricity and water into hydrogen and oxygen but you can also go in the opposite direction you can use it really as a fuel cell if you are combining hydrogen um you're getting uh or if you're using hydrogen and oxygen you're getting power and power and um water back uh in in the other direction why is that important well all of these from an economic perspective all of these technologies of course are very capital intensive they cost a lot of money the variable cost of operating them is relatively low the raw materials if you want to that go into this production process are relatively cheap so if you have something like a solid oxide cell that can run in both directions depending on what the market constellation tells you you're really um you're sort of in business so to speak because you get much higher utilization of your expensive capacity in all of these technologies whether it's uh uh here electrolysis or something else it always at the end of the day when you ask is this going is this going to pencil out is this something that sort of can withstand the market test at the moment the key thing is utilization of your capacity of your expensive capacity and if you have that you're good and here the solid oxide cell which at any point in time can either can run in either direction has an inherent advantage over the traditional chemical electrolyzers that the world has sort of been looking at okay so here's a slide that if I were to show this over in the business school probably most people would uh say ah sure um it really speaks to nothing more than the price development for so-called PIM electrolyzers so again this is the the workhorse at the moment of this industry for the port on exchange membrane and what you see here is a graph that shows on one axis the cumulative output measured in kilowatts that is the the power absorption capacity of your electrolyzer and over on this axis you see the market price in 2018 dollars this is a chart that my institute in in Germany and I sort of we worked on this recently for a presentation and you have here also a couple of years when so much output had been produced all the way through 2019 through the end of last year and the bottom line we conclude here is a so-called 86% learning curve over this time period from 2004 through 2019 so let me pause here perhaps for a moment um what's the importance of these learning curves they have actually been looked at in a number of industries also outside energy say in general with silicon uh processes uh what is one trying to capture here again depending on your background this you may have never seen this but some of you also may um people in uh in business schools and technologies sort of stare at them all the time in general efficiency gains as you gain experience with something so I think you have this very similar trend to automotive as uh the numbers go up the prices tend to fall quite a lot models on exponential decline so we were talking about this learning curve and basically price reductions that the industry has been able to achieve in terms of for how much these electrolyzers are sold per kilowatt of power that the electrolyzer can absorb over time and Tilo brought in this concept of an exponential curve so there is something exponential here you see on both axes the volume of output and the prices are drawn actually on a logarithmic scale so the opposite of the exponential and um when you get to this um when you sort of do the the linear regression through your actual price curve you come to an estimate that says every time you double your output the cumulative output of this particular PEM electrolyzer technology that has been built now for a number of years the price has been falling by 14 percent in other words it is only 86 percent of what it was before you doubled your output and this happens with every doubling of output this goes further so this is of course a relatively short uh interval here of only 15 years for solar pv we have been able to study this for 40 years and the learning is actually has been faster it has been something like an 80 or even 70 percent learning curve in other words on average was every doubling of output um the cost has gone down by 20 percent here only by 14 percent because it's an 86 percent learning curve so it's always the complement okay that's really important when you do the projections uh as to where hydrogen sort of stands today and um really uh how much um how much in terms of cost and um pricing improvements we're likely to see uh for the these types of technologies in the market in the coming years so uh in particular um the we talked earlier green hydrogen the idea here is and this has been sort of done now in connection with PEM electrolyzers is you may want to actually not just do what you see on this slide by install an electrolyzer if you use hydrogen uh by tapping on the on the uh into the electricity market i call this sort of color neutral hydrogen but that it may make sense and this is this idea of volatility in prices again to actually do a vertically integrated system in which you're combining a renewable power source be it wind or solar with your electrolyzer um and then you either sell your output from the renewable source to the power market if you can or and your um uh the output your your hydrogen you're selling to the hydrogen units on the hydrogen market so if you do that then the critical question will be how do you scale these two things in proportion to each other the tradeoff is going to be um the renewable energy source will only run at certain times because of the intermittency and wind of wind and solar um and then you can feed your electrolyzers cheap electricity okay um if the prices are very high it may be better to make actually money in the in the electricity market so you're starving your electrolyzer an alternative to that is that you really go a step further and this is where I come to turquoise hydrogen is that you actually do exactly what we just what I just described a moment ago but in addition you open yourself up to the electricity market so that at certain times you still um feed your electrolyzer remember this is expensive equipment that you don't want to starve at any point in time um so you're also opening up to yourself to the electricity market during certain hours when your renewable source is actually not producing electricity so this is turquoise because it relies mostly mostly on green power green electricity but not exclusively and this angle here turns out to make really a large difference so with an eye on the time I'm going to uh go right to um the whole following question what are in today's environment the break even prices in other words if you invest in one of those electrolysis processes um how much must you be able to sell hydrogen for per kilogram so that you're making money on this okay so it has a what we call um over in on the in the business school what we call a positive net present value that is your investment is um is paying off for investors that minimum price at which you're breaking even will call the break even price and that determines um if you now benchmark this against prevailing prices for hydrogen from steam methane reforming um whether your technology is cost competitive so what do we find here is um you unfortunately not seeing the whole slide a comparison where we are really looking at germany versus texas and we're looking at wind energy again texas being a market with a lot of price volatility also high saturation of wind power germany also a fair amount of wind power not quite as high in terms of the percentage generation and the interesting thing is the best the lowest break even prices that makes things the most competitive you get in both cases for this integrated system so that's the turquoise hydrogen um while if you only rely on green on renewables you see you're having quite uh a drop off here so it really helps to not to put this sort of in a in a slightly flat um a course away if you insist on green hydrogen um you have your work carved out for yourself if you're willing to compromise and say yes i'm building this renewable source and at the same time i'm also relying on the power market at certain times to feed electricity to the electrolyzer your numbers are going to get a little a lot better so in effect these numbers here the two dollars fifty the two euros and fifty nine cents per kilogram or in texas 244 they put us already in the range of what hydrogen sells for nowadays even for large scale hydrogen supply so this is just on the verge of becoming cost competitive uh in the traditional hydrogen market that's as i said at the beginning is nowadays largely based on uh steam methane reforming as the last thought on this so this is going to get better for the reasons i that i'd indicated and as the last thought i mentioned these um solid oxide cells the reversible power to gas um uh or the reversible fuel cells there the interesting thing is they're much newer they're much more expensive but they can also run in both directions if we recently did the numbers on this and we're getting actually to a value now of two dollars and 60 per kilogram in texas so that's pretty close it's not quite as good yet but this is the new kid on the block here so to speak these guys are going to my prediction is these guys are going to do a lot better in the coming years and that's why there's a lot of enthusiasm to build these uh and go down that same learning curve that the others have so when all is said and done this remains an open race but i might take it is um on it is hydrogen is well positioned in this uh and it may uh of the many use cases it may carve out quite a few slots in the transportation area also as an open storage medium uh we're already getting close as it is and this is a technology or a group of technologies that are relatively young so if we fast forward another 10 years this could really grab a significant slice of the overall pie in in terms of these clean energy technologies i end with a quote from the chair of the international hydrogen association i actually agree at the end of the day i think our numbers support this the the coming decade maybe for hydrogen what the 1990s were for wind and solar um there is a lot of indication that this may play out in a similar fashion with the same dramatic results