It may seem a bit like the Wild West right now, but blue- and green-hydrogen could have an established market place and trade like oil does now in 10 years’ or so time. That’s the view of Air Products CEO Seifi Ghasemi, someone who has a front seat in the energy transition and has been around the element a long time.
Biden’s Inflation Reduction Act has jump-started an energy transition and money is flowing in from all sides. It’s a struggle just to keep up with all the announcements. Air Products alone is talking about a $100 billion investment opportunity over the coming decade.
At some point, when the dust settles, and there will be a need for price discovery. A way to work out en masse whether a steel and chemical maker or a trucking company is willing to pay a premium for clean energy. It’s a big unknown right now as the nascent market feels its way. Even a Goliath like Saudi Aramco has struggled to find buyers for its blue hydrogen, yet it’s progressing with growth plans nonetheless.
“If it’s going to be a source of energy then it’s going to have to behave like the sources of energy that we have now,” Ghasemi said. “In 10 or 15 years from now, I can see there being some kind of index for blue hydrogen and an index for green hydrogen that people look at.”
The first few years could be proper old school for the “energy of the future,” something more akin to metal markets than the slick crude set-up. Different parties will negotiate on price privately, the deals settled with the modern version of a hand-shake (is that a happy face emoji?).
In the beginning, there’s not going to a lot of product hitting the market, Ghasemi said, so demand is going to outstrip supply.
Thereafter, the natural order of things should kick in. Some feel there’s a bit of a whiff of ethanol in the air with the current hydrogen frenzy, driven by a confluence of capital, environmental hopes and political will. There are the small matters of needing to keep hydrogen at -253° Celsius (and ammonia at -33°), plus a pipeline network and associated infrastructure that can cope with the pressure.
While Air Products has been doing hydrogen for 60 years and has the know-how and infrastructure in place, a tiered market will probably emerge depending on the kilos of CO2 per kilo.
Ghasemi said he doesn’t see an oversupply in “true blue ammonia” for example.
“There’s a lot of people running around aspiring to be hydrogen companies and they are going to find out that it’s not that easy,” he told participants at Goldman Sachs’s Industrials and Materials Conference this week.
“A lot of people who are talking about making blue hydrogen are not going to get there. They are going to have something that has 10, 20 or 30% of the carbon taken out. You can’t just fake it.”