WILL A NET ZERO FUTURE BE POWERED BY HYDROGEN?
22 NOVEMBER 2023 - 23 MINUTES
Welcome back to the Future in Focus podcast by LRQA, and if you’re new here, welcome. In this episode, presenter Josh Flanagan is joined by Leanne Halliday, LRQA's global expert on hydrogen. They discuss the pivotal role of hydrogen in achieving a net zero future and how it compares with other renewable energies. The conversation delves into the need to increase transparency to combat greenwashing, the integral role of the supply chain, and key barriers to hydrogen development.
Hi Leanne, it's great to have you back on the LRQA Future in Focus podcast. Today we're diving into a topic of great relevance and importance, which is hydrogen and its role in powering a net zero future. Before we get started, could you briefly introduce yourself and your role at LRQA to our listeners?
So I'm Leanne Halliday. I'm based in Perth, Australia. I have a dual role, Territory Manager for Oceana and Global Subject Matter Expert for Hydrogen, supporting our sales and delivery personnel across the world to support our clients in their hydrogen journey towards net zero.
Thanks Leanne. The overarching question we're exploring today is will a net zero future be powered by hydrogen? Given your expertise, what's your perspective on this, especially as we look decades ahead? Will hydrogen be a driving force?
It's a very good question. Um, and I talk a lot about hydrogen. I am an advocate for hydrogen being part of the solution and that's the key word being part of the solution. So we have a lot to do in order to meet our net zero commitments, and our targets across the world and hydrogen is just one part of that solution that will make it happen. The advantage of hydrogen is the technology isn't new. The way in which we produce hydrogen, the way we can store hydrogen and transport hydrogen is a new technology and therefore it's available to us now, and able to be part of the solution in the short term.
So with the global push towards cleaner energy, how does hydrogen compare and compete with other renewable energy sources in terms of scalability, efficiency, and also sustainability?
So in order to meet these very challenging net zero targets, we have to look at all of the solutions out there. And also, during the course of the next few decades, we will have to innovate all of these solutions to make them more efficient and to make them work for us on not only a target towards getting net zero but also a cost-effective targets.
I think we've all got to accept that in order to meet these net zero targets, we are going to see a rise in costs. And as consumers, we're going to have to accept that we're willing to see an increase in our energy costs, which I'm sure a lot of you listening to this call don't want to hear, but we have to make a choice. And the choice that we have to make is now, do we want to make a difference to our climate or do we want cheap energy? So when we look at all the options that are available, I feel that hydrogen, although not necessarily the most economic solution at the moment, is the most available in all of the different locations.
So why I say that is, in order to get the amount of power from wind, you have to have very large areas. You have to have a windy climate. Similar for solar, you have to have very large areas. very large amount of sun to create the power that we would need to have these net zero targets. However, hydrogen we can do on a much smaller scale.
The first area where it's going to make a big impact is reducing the amount of carbon in our industrial sector. So when I look at the steel industry using a lot of power, we can use hydrogen to do that. When we look at a lot of our industrial heating, et cetera, we can use hydrogen.
Hydrogen is also easy to transport, so unlike wind, you don't necessarily have to create and use the energy at the same place. You can actually transport hydrogen using a number of different carriers, such as ammonia or methanol. So just to summarize, I guess economics is one part of the argument or the conversation, but we also have to recognise that we're trying to make a difference to our climate. We're trying to make a difference to meet our targets that we've set, and therefore the economics is just one part of the solution.
Thanks Leanne. So based on what you've said so far, it's fairly clear that technological advancements are also quite pivotal for hydrogen's growth. Can you shed some light on how innovations in hydrogen production and storage are addressing some of the current challenges, making it a potential primary energy source in the future?
Yeah, so like I said at the start of this podcast, um, the technology we use to produce hydrogen isn't new. We've been producing hydrogen for many, many years and that's through all the different technologies available to us. So electrolysis, SMR, coal gasification, they've all been used for a very long time.
The problem is now we're looking at dramatically increasing the scale of hydrogen. And like we said in the last question, also making it a cost-effective solution. So if I give you an idea of the size of what we're looking at expanding to, so currently the global manufacturing capacity of electrolysis is around 8 to 12 gigawatts per year. In order to meet the targets what we're seeing, we're looking at 70 gigawatts a year. So that's a massive increase in the amount of electrolysis and electrolysis available in the market. So the innovation is more around making the production more efficient. We're also making the units themselves more efficient. And we're seeing a lot of companies coming up with new innovative solutions for electrolysis, etc. So that's about production.
The other area is storage and transportation, and this is where I'm seeing a lot of innovation. So, we're seeing a lot more solid storage solutions coming to market. And also, we're seeing in the production side, some very innovative ways of producing hydrogen. So, hydrogen is naturally occurring. Hydrogen is one of the most abundant molecules on our Earth. It's just how do we harness that. So we're already seeing projects happening, um, here in Australia of something called white or gold hydrogen, hydrogen that is naturally occurring in our Earth's surface.
How do we extract that? There is a, um, a solution in Africa, a small plant in Africa, which is actually harnessing this gold hydrogen and powering a small town. So there is ways that we can do it, but I don't see that coming into fruition for about another 10, or 15 years. We're also looking at how do we use hydrogen for bio? So how do we do it through, um, harnessing of algae? So there's lots of innovations out there, but at the moment, even if we just focus on the technology that we already have, it's just about making it more efficient and being able to produce it at a lot higher capacity, and a lot quicker in order to meet the hydrogen project targets that we see.
Great, so as some of those hydrogen technologies mature, what do you perceive as the primary challenges and opportunities in commercializing hydrogen solutions?
There's absolutely one that stands out and this is access to finance. So what I said earlier in the podcast was around we are having to look at the economics of hydrogen developments differently. They're not the same as oil and gas. They're not the same as power. We're not looking at just purely the financial and economics. We're also looking at the, the impact that it's going to have on our climate and the impact that it's going to have on our companies as a whole and our ability to meet our future commitments and ESG commitments. So that we're analysing the projects, the way that financial companies are actually going to be able to give finance and analyse that is going to be very different. And we're involved in some technical due diligence projects at the moment, where again, we're looking at different parameters than we would for a traditional project.
Some of the other barriers is also access to infrastructure. The cost of development of a big, large wind farm to feed the hydrogen plant or a large solar farm to feed the hydrogen plant. The cost of upgrades of existing pipelines if you're going to do some blending. And then actually if you're producing electricity, is the hydrogen plants actually connected to a grid at the right point? So that infrastructure question is also something that is of note and a challenge. It's actually a little bit easier with hydrogen than it is for other large-scale renewables. Like I said, with hydrogen, it is a lot more transportable, um, and storage is a lot more easier. So that's one of the advantages, but the infrastructure is something to consider.
The final one, and one that is actually getting spoke about a lot at the moment is competency. So hydrogen has been around for years. People have worked in hydrogen industry, but not at the scale what we're talking about. If we're talking about by 2050, 6. 8 trillion US dollars will be spent in producing hydrogen. You can only imagine the amount of projects that was and some analysis what I did back in 2022. If you just take a blind look at the amount of projects that are out there, there's over a thousand projects potentially. I'm not saying that all of them are going to go ahead, but there's a lot of projects in the pipeline. So we need people who understand hydrogen. We need people to go into this industry with their eyes open. It has got similarities to other sectors that people have worked in, but it's also got a lot of uniqueness. The way that hydrogen interacts with certain types of metals and materials, the way that hydrogen reacts from a process safety perspective, is very different. And therefore we need to take that into account and when we're looking at barriers, look at where the people are going to come from and how we're going to train them people.
Also on competency, where we have oil and gas projects or power projects and therefore where we have the hubs of these people, the competent people aren't necessarily where the hydrogen projects are going to be. So we also have to look at the geographics of where our people are. In today's world where we can work from everywhere, then it's not such a problem, but it is something to consider.
So, just to summarize, the three points that I would say currently, which are the key barriers to entry are access to finance and the way that we analyse the financial models to be able to give funding for these projects, infrastructure and competency.
So based on what you said there, Leanne, around competence, I think every growing sector requires a skilled workforce. Based on what you've seen within the industry, how is it preparing to ensure that it's equipped with the necessary technical expertise? And have you seen any significant examples of change to that effect?
Yeah, so we are seeing a lot of the global institutes, universities, iChemE, iMechE putting out training courses specifically for hydrogen now. So there is a recognition that we do need to see some increase upskilling of traditional workforces, but also an increase in the particular skills needed for this hydrogen sector. So there is a realisation out there. But I guess what we've also seen is we're in a bit of a unique situation, um, around the world. So not only have we got everybody racing towards net zero and projects around that, but we've also got a lot of agent oil and gas assets, and therefore they require a lot of skilled people.
We've also seen the mining sector increase, particularly around rare earths, and that is linked to new energy. So the rare earths for batteries, et cetera. So usually what we see is we see a curve, whereas when you've got a lull or a dip in the mining sector, you have an increase in oil and gas and vice versa, but actually both of them are increasing at the same time at the moment. So our competencies, even if we don't take into account the new energy sector, is actually stretched anyway.
So we have to look at it from a bigger perspective, not only do, how do we upscale, but how do we attract more people into the sector? What I haven't even mentioned there is the construction and infrastructure sector, which again is growing globally. So we need, basically, we need a lot more engineers, we need a lot more inspectors, and we need a lot more highly competent people. We've also got the age gap, which has been hanging around for a long time, where we've got a lot of retiree people coming to the end of their career. We've got young people coming in, but there is a gap in there that we need to fill and we need to consider that. If I look at who we've been working with, across the world, so we're working with manufacturers, end users, financiers, et cetera, um, we are seeing a common theme. So a lot of them are just looking for actually some fundamental hydrogen training. So they want to understand what are the process safety risks, what are the key metallurgy risks if you're using to hydrogen. They also want to understand the regulations, and I think this is one of the biggest gaps. So, along with the hydrogen sector, there's been a whole suite of hydrogen standards produced in hydrogen regulations.
Whether that's at a global ISO level, or it's at a local, regional level. So, people are a bit wary, um, moving into this sector and therefore there's a real need for us to build that trust, um, with the new standards and to be able to give training with that standard. So, we've been helping our clients out a lot with that. Not only doing specific training on specific standards, we're also doing some road mapping to help them to understand if they've got a project or they're supplying a piece of equipment to a particular country. Then what standards do they need to apply and how do they prove compliance to those standards? So there's a lot of work happening in that space and the industry is cognizant of that and using people like ourselves to help fill that gap. We're also seeing people move from industries such as the automotive industry into the electrolyser industry. So people are seeing this real opportunity and jumping on that opportunity, but these sectors are very different.
So if we look at, for example, the way that people do inspections and the way that people do manufacturing, it's very different in the automotive industry than it is necessarily in the oil and gas or the electrolyser industry. So we're helping people to bridge that gap as well to understand where best practice lies, at what level of detail you need to go into and even going as far as helping to actually develop such things as ITPs, inspection test plans, making sure that they are correctly identifying the right standards and going to the right level of detail that's appropriate for the industry. So there's a lot more I've said there, but to summarise I would say the whole industry is thirsty for talent and because we've got a lot going on at the moment out there, we need to increase our infrastructure. We need to deal with aging assets, and we also have this rich one at zero. So there's a real need for more people into the industry. There's also a need to have some fundamentals to understand new standards and to allow people to make sure that we're not putting too much of one sector's needs onto this sector. We're doing it for a fit-for-purpose approach.
So I'd also like to take the opportunity today to talk to you about greenwashing. So greenwashing is a pressing concern when discussing anything really relating to sustainability. How can consumers and stakeholders discern genuine efforts in hydrogen adoption from mere corporate rhetoric? And do you see this as a significant risk?
Absolutely. So when we talk about hydrogen, there's lots of different ways that you can produce hydrogen. Um, so we can produce hydrogen from using natural gas. We can use hydrogen for producing coal, or we produce hydrogen from electrolysis. The way that you produce them, and whether you put carbon capture and storage on the back, et cetera, all have a level of carbon associated with them.
Okay. We also talked earlier in the podcast about transportation. You might produce hydrogen in Australia, but actually might be used in Japan. What is the carbon that you're actually using in that life cycle? So in order to avoid greenwashing, because there is a real potential for this, we have to have transparency and consistency in the way that we determine the carbon content of the hydrogen that is produced. And that's not available at the moment.
So a lot of the world is talking about guarantees of origin, certificates of origin. How do we actually certify or how do we determine how green the hydrogen actually is? And there's some really good schemes out there, such as CertHY, in Europe, Australian Virgin Red 2.
There's a lot of schemes out there that are trying to get there, to have this transparency and consistency. But actually, in order to be able to have a global trade of hydrogen, and also be able to get that trust and avoid greenwashing, we need to have a global consistent approach. And that's something that we're lobbying for within LRQA. And we're trying to educate the clients and educate the market on this is the way to go.
One of the problems with a lot of the certificate of origin schemes out there is the boundaries are actually quite narrow. So it's only looking at the boundaries of production, whereas actually if you want to have a true picture of the true carbon intensity of the hydrogen, you have to look at the manufacturing, you have to look at the transportation, you have to look at that whole life cycle from when the equipment to produce the hydrogen is manufactured, all the way through to when the end user is actually using the hydrogen. And that's something that's not actually been taken into account by a lot of parties at the moment. What we feel is something needs to happen. So basically, in order to avoid greenwashing, we need our governments, we need our policymakers to really look at how are we going to certify, how are we going to determine the percentage carbon content of hydrogen to increase transparency and have consistency across the world.
I think as we consider other key topics when we, when we talk about hydrogen and when we consider its role in shaping a net zero future. It's quite clear that the success of hydrogen as an energy source is inevitably tied to the supply chain. How do you see the supply chain evolving in the next few years to keep pace with net zero commitments?
It's a really good question and something that we've been talking about for quite a while now. I mentioned earlier that we have got new people entering the market, so that the supply chain is growing. But I also mentioned earlier some statistics, which are actually mind boggling. So in order to see the growth of the hydrogen sector taking place We're looking at just the electrolyser market moving from around a 12 gigawatt per year market at the moment to 70 market That's massive Um, we're also looking at if we look at some of the other items in the supply chain So one of the good ways of storing hydrogen is in grp vessels or glass reinforced plastic vessels or composite material vessels That market at the moment to meet demands will have to have a 20 per cent year on year growth and we're looking at that market being around 900 billion pounds by 2027. So that's a massive growth in just two small sectors and then you've got all the add-ons as well. And that's even without talking about the way in which we're going to produce the energy for the electrolysis, so for wind farms and for solar. So the whole supply chain is in a massive growth.
The other thing that's actually been quite interesting is that we were expecting this growth in the supply chain earlier, but because of lack of finance and the projects being delayed, etc, we haven't seen this actual growth yet. So it has given us a little bit of time for the supply chain to actually prepare itself for the potential growth, which I suspect we're going to see in the next 5 to 10 years if we're going to be able to hit 2030 and 2050 targets.
So the supply chain not only has to grow, but when it grows, it also has to grow in a sustainable and quality way. And that's something that we're working with our manufacturers and our end users to try and ensure. That whenever any market increases in size, you've also got the risk that corners are cut and therefore we're making sure that we're putting the right quality in place. We're sitting on a lot of different standards committees around the world in order to lobby and make sure that quality is at the heart of all of these standards and making sure that basically the supply chain is prepared to produce vast quantities of equipment at a quality that is going to make this industry safe and sustainable.
I think based on that as well, Leanne, assurance plays a pivotal role in the energy transition as a whole. Can you elaborate on how assurance can anchor some of the best practices that we know about and also drive the growth of the hydrogen sector?
Yes, I've mentioned that there's new people entering the market, and I think it's one of the key areas where we see us adding benefit. So really moving our quality and inspection up front. So, at the moment, people are moving from oil and gas and from power into the hydrogen sector. They don't necessarily have trust in the supply chain. So, rather than spending a lot of time at the back end managing quality, we're actually advocating, and we've seen a lot of our clients looking for this as well, to move their quality up front.
So, actually spending a lot of time at that vendor assessment stage, making sure that you're actually engaging with the correct company, making sure you're spending time at the design review stage, Making sure that you're specifying the right standards and that the company understands them standards and if necessarily providing training. So this is where we're seeing a shift is just moving that quality from the back end and managing quality to actually proactively building quality into the procurement stage.
Great. So to wrap up our discussion, what would be your key advice for businesses considering the role and potential of hydrogen energy in the journey to that zero?
So I would say that consider hydrogen as part of a solution. It's not the only solution. It's not going to be your golden key. But it is part of the solution and it's a solution that's available now. When you're engaging with suppliers for hydrogen Make sure that they understand the regulations and standards and if standards and regulations are available, reach out to understand what best practices and build this into your design. Making sure that quality is built into the front end and so that you get a sustainable and safe product all the way along your supply chain.
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