Episode 46 - My Favourite Martin: Wright's Law, scaling up and why hydrogen won't decarbonise energy products with Paul Martin

In this extended episode we had our first three-peat, with Paul Martin from Spitfire Research rejoining the podcast. When he first joined us in February and April of 2023, we had a terrific discussion on the diseconomies of scale, hydrogen and hopium, and it seemed timely to revisit the outlook for scale and technology transfer in the hydrogen market.

It was great to explore why funding has continued to flow towards hydrogen in the face of the techno-economic and thermodynamic challenges that these investments are seeking to overcome. We discussed the notion of predatory delay and the emerging infrastructure challenges of connecting renewables to the transmission infrastructure. Paul also debunked the underlying assumption that Wright's Law is broadly applicable to reducing capital costs whereas the cost improvements are largely restricted to hydrogen electrolysers and note the balance of plant. We also explore the importance of reserves and resources.

Paul then offered a reprise of why the techno-economics simply don't work for green hydrogen with current black hydrogen prices at around USD 1.00 – 1.50 / kg EXW. We contrast two (polar) scenarios where we assume free capital or free electrons to try to make the numbers work. We conclude that a carbon pricing mechanism is needed to get green hydrogen competitive with current production routes. Paul referred to his discussions with Michael Cembalest and the recent JP Morgan Energy Paper as moved into discussions around e-fuels.

We briefly explored the outlook for renewable fuels and reflected on policy history, our podcasts with Paul Bryan in March 2022 and April 2022 and the differences between price of sale (to market) and cost of production (at refinery). We discussed why harder to abate sectors (such as aviation) are getting their efforts underway while easier to abate sectors (such as land transport) appear less systematic in the uptake of low-carbon energy alternatives. Paul introduced the concept of the time value of CO2 in the atmosphere and the need to make quicker inroads into atmospheric reduction.

Is there a place for industrial green hydrogen? Paul brings us to Michael Liebreich cost per ton of abatement rankings and reflected on some of the confusion that has arisen around using hydrogen as a decarbonisation strategy rather than decarbonising hydrogen (in its current industrial applications – which for the avoidance of doubt rarely if ever is an energy carrier). In the absence of policy, super additive benefits are needed (beyond carbon reduction) to drive consumer and industrial product uptake.

We then explore some policy interventions and Paul contends that subsidises make sense where Wright's Law is likely to apply, and in turn support technology scaling. We discussed the development of battery technology reflecting on LFP market trajectory and the scale-up challenges for sodium ion technology. We reflected different approaches to capital for technology scale up, and the importance of patience. We specifically touched on the Biden Administration Loans Office and a recent podcast with Jigar Shah on Cleaning Up podcast, as an example of targeted policy support.

Paul and I conclude our conversation with Paul reframing the question we are trying to answer. We should not be thinking 'what we burn?', but 'how we provide energy services?'.