With Lron's segal and from London and Gerard read from Berlin. This is Redefining
Energy minutes today on redefending Energy. It's a solo from Job at Ecosummit twenty
four last months in Berlin. Job, what was the topic energy storage and
hydrogen. Fantastic, let's listen to your show. Yeah, and asked me
to come and talk about storage and hydrogen. And I thought to myself,
Okay, well, I have to frame this somehow. And I just thought,
okay, well, let's start with this energy transition we're going through,
right, and I'd start with what the path forward is. Ultimately we decarbonize.
What we have to do is do two things. We have to electrify
as much as possible the system. That's the key point. Electrify as much
as we can of the energy system. The second thing is reduce fossil fuel
consumption. Now, remember what I just said, Didn't I said reduce?
I said not get rid of. I don't believe we'll ever get rid of
it, Okay, because they're too valuable. But we have to do these
two things. That's what we have to do going forward. Now. The
good news is we've got incredible low cost technologies for generating electricity and managing power
flows. And this is very, very very important because if you look at
the innovation here and compare to innovations in other parts of the energy sector,
the cost reductions are just incredible. So just very simple cost reductions and power
electronics in the last year about fifty percent. Solar costs are down thirty percent
since the beginning of the year sol batteries and again innovations continuing in and around
this space. The issue, though, of course, is we don't have
this word in English, and we do now called dunkle flouter. What happens
when you've got no wind and one and no solar? What do you do?
But really simple, guys, you store the energy. And I really
just want to make a point. We've been doing this for hundreds of years,
so why we make a big deal about it. We store the energy.
And there's a few ways. Look, we can use the existing fossil
fuel systems that are there, you know, other words, you can burn
coal on that January day, you can burn gas. I mean that's one
possibility. The second possibility is you go and use these incredible array of new
technologies that are being developed across the world, and as has said that,
I can't even keep up with the amount of technologies that are in this space,
and I've been looking at it for years. But the point is we
could do that. That's very clear. So we have a solution. It's
called storage. So let me just talk about one storage technology that stands out.
It's called lithium ion batteries. Lithium ion batteries have enabled the digital world
that we live in. And also in terms of the scale that this technology
has come to market, we've never seen an energy technology do what lithium mine
has done. But we take it for complete. Granted, be really clear,
we would not have electric cars without these type of batteries. If we
went back fifteen years ago and somebody said we're going to have electric cars,
they say, no, no, it's all going to be fuel cells,
it's going to be hydrogen because they didn't see the movements in energy density and
the improvements and costs that we've seen in batteries. And the result is this
is that I give you the statistic in China and Q one, thirty five
percent of all cards are electric. But it's not just cars that are electrifying.
I think The most interesting one is two wheelers, scooters, motorbikes,
et cetera. Forty four percent go to China ninety percent. The only ones
that are still buying internal combustion ejured motorbikes and scooters are the Europeans and the
Americans. But again you can see what we're doing here. We're going to
buses, we're going to trucks, et cetera, etcetera. The other thing
very interesting this is California. This, by the way, happens on a
weekly basis, but this was the first time it ever happened on April the
sixteenth. What you see is the yellow there is the sun. So what
happens when the sun goes in? What happens when the sun's not there?
Well, it's interesting is if you see this little blue and there's a blue
here, what you see is it's batteries. So batteries taking that excess solar
and storing it for the period that you don't need it. And so what
you're seeing on a regular basis is that there are three hour periods where batteries
are the biggest source of generation in California today. So that's the big picture
of batteries. If we look at the tailwinds, it's just incredible cost reduction
and improvements and energy density. And they are continuing, really, they are
continuing. They're continuing because we've got the best minds in the world, Japan,
China leading this, US following and trying to catch up. And guess
what, we're all doing the same thing. The second thing I want to
say is transport. Transport's a game changer because what it does is it gives
you massive scale. Instead of doing a tiny little battery, suddenly you know,
you're putting a ninety five kill what our battery into a car, and
you're scaling this up and you do a huge amount of things with it.
What's fascinating about this, though, and all of it, is that,
just to give you an idea, is that we're at a point now where
we are price parity at the upper end of the car market in Europe between
an internal combustion engine and an electric vehicle. If I go to China,
it's already at the mid level. Okay, So it's very very very interesting
what's going on there. And again that just drives more and more scale and
again prices down. Next thing is we need the batteries in the system.
So I don't know if you know yesterday what happened. Germany power prices yesterday
hit ten thousand euros of mega what hour. And the reason was was because
there was bad weather across Germany and they couldn't predict what level of sun that
was going to be, what level of wind that was going to be.
And you had two periods nine o'clock in the morning and then later on the
evening where prices were at that. Well, guess what, if you've enough
batteries in the system, you can see what you can do. You don't
have that volatility and use a battery only you make a lot of money out
of it. What's also clear is we're going to continue adding more intimate and
renewables. You do that, what you do is you still have more periods
of excess power. Again lends itself to batteries. The situation is the Dutch
grid right now, the Dutch grid. If you decide now you want to
build a new house, good look to you. You will not get grid
connection in the most of the country for eighteen months. And you might say,
okay, that's just the Netherlands. No it's not. I live in
Brandenburg outside Berlin. Here Iranienburg city north to Berlin, exact same thing.
There's a construction stop because of congestion in the grid. Guess what batteries help
reduce that. Other thing, I'd say is just the level of R and
D that's going into this area. It is mind boggling, really, the
amount of money that's going in. And the reason is is because everyone realizes
from a strategic point of view that this is critical. And I tell you,
if you asked me ten years ago and said would we ever electrify airplanes
and ships, I would say no way, I'm not sure anymore, Okay,
And the reason I'm not sure is because again it's the innovation that's out
there in this space. So anyway, that's what we're seeing there. Let
me talk a little bit about the economics of it. The economics of it.
What we're going to see is batteries used in our power system behind the
meter. That means in our buildings in front of the meter, which means
ultimately as part of the power system and located with generation. We're going to
see this. And what we're also going to see is batteries being used in
different locations so Germany has a whole pile of batteries that are sitting behind the
meter. They're not really used in the power system. I've got batteries in
cars, they're not really used in the power system. You can see where
I'm coming. This is all going to intermix for me. I think it's
a really exciting world because we don't know what the services are, we don't
know what the offerings are, etc. Etc. What we know is this
technology really does make a game change. I want to give you an idea
of just how profitable these things are. If you put in a battery in
the UK in twenty twenty one one hour battery, you've had a thirty five
percent ir or some of the words, you had to payback period of two
years in it. Now. Obviously, the more batteries to go on system,
the less the volatility goes down. And you can see if you're putting
in a system today, you're probably getting fifteen percent irois, but you're still
getting good returns on this. What's interesting though, is if you really want
to put batteries in a system, what you need to have is prices going
differences between charging and discharging, with about fifty to sixty euros. There's three
markets that are really interesting Germany, Spain and Portugal. And you're gonna see
batteries put in. This is when you see ten thousand euros of megawat hour
for battery no offense. If that happens three times in a week, I
have a payback period of a year on the battery, okay, and we
will see this volatility going forward. The other thing is behind the meter.
We recently did some numbers in and around payback periods for putting in solar and
storage. What you're looking at is in particular countries which have high power prices
Denmark, Germany, Italy, Ireland, UK and what you suddenly see is
that payback periods for putting in the two of them, they're in around six
years. This is without a subsidy. And by the way, it's only
gonna get better because, as I said to you, storage prices down thirty
percent since the beginning of the year. Let's assume they get down twenty percent
again, you can see what happens to the numbers storage solar the exact same
thing. And also, by the way, again I just say innovation really
was going to lead to trains, planes, and ships being electrified. So
that brings me to hydrogen. Let me just start by saying that hydrogen is
incredibly important as part of our energy system. And if you think global emissions
in relation to hydrogen production, hydrogen, for example, is used for fertilizers
globally. It's also used in the oil industry, and the gas industry and
the chemical industry. It produces more emissions in Germany. Okay, so it
really is a focus to decarbonize as quick as we can this system. What
I would say is the opportunity is ginormous if you just look at it.
McKinsey here came up and look at what they thought the opportunity is going forward,
and you can see these a huge, big facilities that at some point
in time are going to be decarbonized. You just take the count across the
world three hundred and thirty two large scale industrial production units that need to decarbonize.
What I will say though, is hydrogen is not the silver bullet.
I want to go back. If i'd sat here and I had an autoown
executive beside me ten years ago from BMW, he would tell you the future's
fuel cell and hydrogen. Okay, it's not. They betted on it and
they got wrong and they're in trouble. Okay. Now why I say that
is that what we have is must must decarbonize our fertilizers, hydrocaffering, desulfurization,
steel. Then there's maybees. What's interesting is there used to be loads
of maybees, but the maybies have now gone into unlikely. So if I
just want to say unlikely urban delivery, metro trains and buses, lorries,
even short haul aviation, they've now gone into unlikely. And I want to
say this is very important because it's the innovation that's taking place in storage.
As an analyst that has been looking at the sector for now on, I
haven't seen innovation in hydrogen and field cells in a decade. It is changing.
But if they've lost a decade against batteries, okay, So that's why
I say. What I will say though, is that the opportunity is ginormous.
They really are ginormous, and they are huge projects. You know these
projects. One project we're looking at it's a billion euro project. See,
these are not small to actually do. These these are big industrial plants.
But I will say is that there's lots of supply hydrogen out there, green
suprie hydrogen, but the demand's not there. So there's a lot of blah
blah blah in the market that we're gonna buy it and they're going to buy
it. But actually what the issue is that a lot of the production costs
and I'm looking for example in euro here you're looking at eight euros for a
kilogram of hydrogen. Well if you do it with natural grass, you're at
two euros. Buy some offsets and there you're at three. That's the issue
that we still have in it. But again it's early days, but the
price is not right at present, but it will change. What I also
say about hydrogen is we don't know what color it's going to be. Now,
this is the industry talks about colors. Gray is you're using fossil fuels.
Green is obviously what you're doing is you're losing electrolyzes and using renewables to
do it. Issue there is that we've got intermittent renewables not that easy.
So then the idea of blue hydrogen is what we do is carbons questration,
in other words, we store the carbon turquoise is where we use this pyrolysis
technology, a completely different technology that use. This has been pushed by sort
of BASF and some of the big chemical companies. And then we got pink
at the end, which is we use nuclear all right. And each of
these are different, and as I said, there's proponents of each, and
there's also people who are very critical of this, like a lot of the
green guys don't like the pink guys. Nobody seems to like the blue guys.
I call it the hydrogen wars we really have at present. What is
clear though, is that a lot of talk from hyrogen people that oh,
we're going to use all the electricity is going to be for free. Yeah,
right, it's going to be free for a few hours a day.
The battery is going to take that, okay, And the battery's got much
more efficiency. That means the battery actually from a cost point of view,
they can even pay more, always pay more because of this. But what
is interesting in it is it is a huge investment opportunity. So I very
quickly talk about investment opportunity batteries all about Asia, Okay, very difficult.
I'm waiting for north Wall to actually come out with batteries into a car.
For the last five years still haven't got anything, so tough. Second thing
is be really clear leaves in the innovation. This is number of clean energy
patents, this is in fuel cells, it's in hydrogen, the batteries,
the solar wind. They're way ahead of us in terms of innovation. Second
thing, they're dominating actually all key raw materials, so you have to be
very, very very careful in and around that. Second thing I would say,
though, is well commodities is also interesting. We're gonna need lithium,
we're gonna need copper, we're gonna need all this type of stuff. These
companies are publicly listed and they need capital. We can't do this transition without
capital going into that mining area, and there's lots of innovation in that area.
The other thing I would say is in terms of chemistry, it's tough
to pick the winner. It really is tough to pick the winner. There's
so much innovation and so much competition going on. Each have different advantages and
disadvantages. Difficult but exciting they get it right, the opportunity is enormous.
I'll use one example I think quite interesting is sodium mine. Sodium mine is
a cheaper alternative to lithium mine and I think you're probably gonna see this used
in stationary storage come into the market this year. Finally, I would say
about how hydrogen is. What you're going to see in hydrogen is, whether
I criticize it or not, what you're going to see is a massive roll
out of hydrogen in the next few years. And so the opportunity is ginormous.
There's a whole pile of government money going at it. And I know
this from the solar boom in the past. You chase subsidies, That's what
you do in this energy space, so chase it. So that definitely is
a huge opportunity. And it's been led by the oil and gas companies who
are looking at this and sort of seeing it as a way to decarbonize.
Plus it's their skill set. And actually, I want to say is the
end of it. What really gets me exciting is this is these are all
the startups in and around the energy storage area. You cannot just put batteries
in. You have to manage the batteries. You have to make sure that
the batteries and the homes are managed properly, etc. Etc. And then
you've got a whole pile of interesting business models. Now I'm just going to
tie this and then I'm going to stop at this point. This is a
business we recently find that's called Wonderwall. They go into a new building home
with a full decarbonization solution, so they're basically putting everything in behind the meter
and you're putting it in flat so you give the customer a flat rate for
their energy going forward. That's where we're going with this, guys. That's
where we're going, and I think that's what really excites me most of all,
is combining these technologies into solutions that actually decarbonize our world quicker than we're
doing it up to them. Finally, growth opportunity is enormous, which is
all the reason why we're here. There's money to be made, but it's
a difficult part going forward. At the same time, I'll stop at that
point in time. There you go. Thank you for listening to Redefining Energy.
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