Alicia Eastman, President of Intercontinental Energy, discusses the nascent global market for green hydrogen and her company’s development of more than 100 gigawatts of hydrogen production hubs along coastal deserts in the Arabian Peninsula and Australia. Eastman explores the economic and policy factors, including the Inflation Reduction Act in the U.S., that are driving the market for green hydrogen, which has the potential to serve as a substitute for fossil fuels in hard-to-decarbonize industries including steel and cement production, aviation and shipping. She also talks about the challenges that the development of green hydrogen infrastructure can present to local communities, and efforts to include these communities in project governance.
Andy Stone: Welcome to the Energy Policy Now podcast, from the Kleinman Center for Energy Policy at the University of Pennsylvania. I’m Andy Stone.
A growing number of countries and industries have adopted the goal of aggressively reducing carbon dioxide emissions over the coming decades. A strategy that is central to the effort to decarbonize is electrification or the switching away from fossil fuels, such as the gasoline that’s used to power cars, to alternatives that run on cleanly produced electricity, such as EVs. Yet there are major parts of the economy where electricity does not yet offer a practical alternative to fossil fuels and where other carbon-free solutions are needed. Industries where decarbonization is particularly challenging include steel and cement production, and aviation and shipping. On today’s podcast, we’re going to explore what may be the most promising low-carbon alternative for these hard-to-address industries. Hydrogen is the most abundant element in the universe, but it’s notoriously dirty to produce in its pure form here on earth. Hydrogen and its derivatives are combustible and could replace fossil fuel industry, assuming that they can be produced economically, cleanly, and at scale. Today’s guest is involved in developing large-scale production of green hydrogen. Alicia Eastman is President of Intercontinental Energy, a company that’s developing large hydrogen hubs in the Arabian Peninsula and Australia. Alicia will discuss the economic and political drivers behind green hydrogen and what a global hydrogen market might look like. She’ll also talk about the challenges that the hydrogen supply chain can present to local communities and efforts to address these challenges. Alicia, welcome to the podcast.
Alicia Eastman: Thank you so much. It’s an honor to be here.
Stone: And welcome back to Penn, at least virtually as you’re recording from London. You are a graduate of the University of Pennsylvania I understand.
Eastman: That is true. I went to Wharton for undergrad.
Stone: So I wonder if you could start us out with a brief introduction to the role that hydrogen might play in the energy system. As I mentioned in the intro, hydrogen can replace fossil fuels in certain industries, but could you tell us more about where clean hydrogen might be most valuable?
Eastman: Sure. And I think that when I speak to these industries, it’s not just clean hydrogen, but also the derivatives of clean hydrogen. So maybe ammonia, synfuels, there’s lots of different things that you can make with the clean hydrogen that also make it easier to transport. So there’s a number of reasons why you might want to go downstream a bit further. Just to circle through the top categories, marine shipping is a big one. Heavy industry and chemicals for grid stabilization and microgrids, aviation, coal firing, I think data centers and computing, heavy machinery and trucking, trains, and fertilizer, which is pretty much the only use right now for ammonia.
Stone: Now, so there’s a lot of talk about green hydrogen. I wonder before we get into the rest of the conversation here, if you could differentiate between green and blue hydrogen for us?
Eastman: Sure. Blue hydrogen is essentially gray hydrogen with carbon capture and sequestration or carbon capture and usage layered on top. So currently there really isn’t very much blue hydrogen. Most of the hydrogen produced today is gray and it’s produced using mostly natural gas with the steam methane reform process. To be blue, you add on that additional equipment which takes the carbon away and doesn’t release it into the atmosphere, and then you need to store it somewhere, which is actually a bit difficult because it is actually hard to store. So people are considering putting it under the North Sea, or they are using salt caverns, or different ways to store it, but it needs to be stored forever. So it is a bit of a conundrum for the industry. Plus, the equipment to capture the carbon has been to date extremely expensive and not terribly effective. But green hydrogen is produced by using renewables of some sort, wind, solar, hydro, sometimes geothermal. So, essentially, using that green electricity in order to split the water into hydrogen and oxygen, and that’s done using a process of electrolysis. You need an electrolyzer, you feed in the water and you get out oxygen and hydrogen. So the green process obviously doesn’t involve any fossil fuels. The blue process could theoretically remove all of the fossil fuels, but to this date, that has not happened. And there’s also a lot of problems just with flaring of the gas even before you talk about producing blue hydrogen. So the whole process from beginning to end involves a lot of carbon and methane that needs to be captured and needs to not go into the atmosphere in order to compare with green.
Stone: So basically gray with the capture of the carbon or greenhouse gas emissions, essentially?
Eastman: Exactly. And in each market the percentage captured in order to qualify as blue will be somewhat different. But it seems like people are circling around at least 90% has to be captured.
Stone: So I wonder if you could introduce Intercontinental Energy, the company that you lead, and your approach to the market. Essentially, what you’re working on is developing hydrogen hubs. What is a hydrogen hub?
Eastman: So a hydrogen hub is similar to what other people are referring to as hydrogen valleys or hydrogen ports? Because we were first, I think hydrogen hub captures it a little bit better. Essentially, it is the ecosystem for a hydrogen. So by building very large projects, we can attract the whole supply chain to build near us. And that allows you to create even a circular economy. So, for instance, if we attract a steelmaking company nearby, we can provide green hydrogen to them. They produce steel, we buy the steel, we roll it ourselves, and we can put up our own turbines in order to produce the green electrons that then become the hydrogen, that then becomes the steel. So you get the circular economy thing going. I think what differentiates our hubs from other locations is we’ve been very specific about the sites that we’ve chosen, and they’re all quite similar to one another. So there are at least 25 gigawatts of upstream wind and solar. And just to give you an idea of what that means, that’s larger than Three Gorges Dam. So that’s the largest power plant in the world for the smallest project we have planned. And these projects use are always in coastal deserts. So they have a lot of sun during the day. They have a lot of wind at night. That gives you near baseline power. And because you have such a high input of sun, the solarity is very high and the speed of the wind is very high, it’s the cheapest green electrons in the world and it’s located where there is nothing else. I mean, in Oman it literally looks like the moon, there’s just absolute flat. There’s nothing to see in a complete 360 round each mast.
So that profile, in addition, we add on economies of scale. So they’re all very large projects and we’ve optimized fully integrated projects. So we have the upstream wind and solar, we have the midstream creation of hydrogen, and then we have the downstream ammonia. And we use every opportunity we can to optimize every step in that balance of plans, as well as in the production of the major cost driver, which is the energy, which is the electrons. So all of our projects are exactly like that, which means that they offer the least expensive form of energy in the world. And it is very extractive for most companies to spend a lot less on energy and be green. So that is how we anticipate building out the supply chain around these projects. And these projects, because they’re not extractive, they literally lasts forever. You repower at 25 years. The ammonia lasts only 50 years, but the resource doesn’t go away. It’s not extractive. And that means that you can really commit an entire community to the project. You can create a community and you can cater to the needs of that community. I’ll just take an example in Western Australia where we have two projects. There’s a lot of mining there now. In the past, there has not been a lot of consideration for the true traditional owners of the land for the Native population of Australia. Recently, Native title has been recognized by the country and by more and more different industry players.
And in our case we decided to take it a couple of steps further and we have partnered with the mining people who are the traditional owners of the land on our 50 gigawatt-plus western green energy hub. So they own a portion of the project and they have a permanent seat on the board. And we have a charter with them which means that we really can’t do anything to the land that they don’t agree to. And this structure is now going to be copied through the rest of Western Australia, not just for hydrogen but also for other extractive activities like oil, and gas, and mining. We think this is just a huge step change improvements in best practices with partnering or interacting with traditional owners. And the end of the day, it makes it a much more successful project in the long term. And it, I think allows us to help create a community that the community actually wants as opposed to determining what they need. They’re actually part of the company, they’re part of the board, and they can steer us in the direction of what it is that they like, whether it’s something as simple as architecture and indoor-outdoor shade structures or the type of schooling that they need. We cater to the community and go beyond just upskilling or having jobs available in one industry. We really want to have a full ecosystem that is entirely renewables-based.
Stone: So you have four projects under development. Two are in Western Australia, one is in Oman, and I believe you have one in Saudi Arabia as well. What these all have in common, as you said, is that they have strong wind and solar resources so you could maximize electricity production in the electrolyzers that would be producing the green hydrogen. Also, these are all pretty much coastal, so I assume that that facilitates the export of hydrogen or ammonia to markets. Now, I want to ask you here, where are these projects in the development process right now in terms of investment? And have offtake agreements been signed with customers to take this green resource?
Eastman: So all of the projects are in development. The first project that we announced, which is the Asian Renewable Energy Hub in Western Australia, we just announced that BP has become an investor and they will be the operator of that project. So that will eventually speed up the project. But while we were negotiating, it obviously slowed down the project. So we’re really looking still FID around 2025, 2026. But that means we don’t really have product until 2027, 2028. That seems really far away, but it is actually around the corner. And for a lot of these markets that we’re catering to, especially if we’re making ammonia, for instance, we think that ammonia as a marine fuel is really the best bet for that industry. There’s been a lot of analysis, and using any other solutions should cost 40% more in order to make the energy transition. So green ammonia is fast becoming the green fuel that the industry is coalescing around. So I think that they will not have the ammonia ships ordered, purchased, build, everything available until around 2027, 2028 anyway. So I think we’re actually quite aligned to the market for what we’re really focused on. The benefit of our projects being in these coastal deserts is, as you said, it’s on the water, which is not only a good thing for export, but also we use water, right? We’re electrolyzing water. So we can take water from the sea, we desalinate it at the cheapest possible price because of our inexpensive green electrons, and then we can split it there. But these locations are very far from other places. Australia is very far from anywhere. Oman and Saudi are closer. But still sailing days are the same from Oman to Europe as it is to Japan. So we’re really having to move the product a considerable distance.
That means that we really need to think about the transport vector because hydrogen is not that easy to transport. If you want to ship it, you have to keep it at -253 degrees Celsius. That is 20 degrees above absolute zero. So it’s quite expensive. And by making ammonia, which is essentially just adding nitrogen from the air to the hydrogen and the air we breathe is about 70% nitrogen. So this is not scary stuff here. You create ammonia. Ammonia is so much more energetically dense than hydrogen. And you can ship it. It needs to be kept at -33 degrees Celsius, or with some pressure at 10 bar it would be the ambient temperatures. So it’s much easier to ship. And that’s the best travel vector or the best transport vector that we’ve found. But we also think that ammonia can be used as ammonia. So in shipping, they’re talking about using ammonia in essentially an internal combustion engine. And all you’re doing is adding a bit of a scrubber. Because what you get when you burn ammonia is (NOx), which is nitrogen and one oxygen or nitrogen and two oxygens put together. All you really need to do is have a kind of scrubber, which ironically uses ammonia, in order to separate those apart and you can release it into the air, so it’s normal air with oxygen and nitrogen separated. So it’s really a zero greenhouse gas solution for shipping. It’s a great way for us to not just transport the product, but the product is used in that way. So you’re really retaining the most amount of energy from the whole production of hydrogen and ammonia.
Stone: I want to jump in a little bit deeper into that issue of emissions. In July, the EU targeted €5.4 billion to hydrogen subsidies, and the EU plan, although I don’t believe it’s finalized at this point, is to import 10 million tonnes of green hydrogen by 2030. I would imagine that would be on your radar for the project you’re working on.
Stone: Now, with the European goals for hydrogen, as well as what we’re seeing in the United States with the Infrastructure Investment and Jobs Act and the Inflation Reduction Act, both of which have incentives and subsidies for hydrogen, there are some standards for the greenhouse gas emissions associated with the resource. Looking at the value chain, you’re talking about converting the hydrogen to ammonia for export. I am not a scientist, but I believe there are some emissions involved in the production of ammonia from hydrogen. What’s the total footprint–
Stone: Oh, there is not.
Eastman: No. So just to back it up, our projects don’t involve any fossil fuels at all. I guess you can say that when the steel that goes into our turbines and so the actual equipment has, people will from the start not be able to use only green electrons, or hydrogen, or green sources in order to build that equipment. So carbon emissions have occurred to create that equipment. But the eventual goal is, as I said, in a circular economy where we are providing green electrons to the whole supply chain, so they’re not using fossil fuels in their production of the products as well. But if you just take a standalone project and you’re not talking about the equipment, you’re just talking about the OpEx, you’re talking about the running of the system, you’re using the wind and solar to create green electrons, you’re desalinating the water, you’re splitting the water, and then you’re using what is called Haber-Bosch, very old school way to make ammonia from hydrogen. But there’s no need for fossil fuels. It’s just what other people have always used. The energy is all that’s necessary. And what makes this actually work out for us is that our energy is so inexpensive. It’s not just green, it’s the cheapest in the world.
Stone: All right. So let’s jump into the economics of this. What are the drivers that determine the cost structure and the economics of the green hydrogen industry?
Eastman: So predominantly, it is the resource. The most expensive element in the whole production of hydrogen and ammonia, or any synfuels or any type of derivative of hydrogen, the primary driver is the cost of energy. So the cost of that renewable energy. That’s why it’s so important that these large facilities be located in areas that have that very strong sun during the day and the heavy winds at night. So you’ve got round-the-clock really strong, very inexpensive energy. So it’s the absolute most important factor.
Stone: And then you have no fossil fuel market volatility to look at either, do you?
Eastman: Exactly. And that’s something people are only just starting to realize. They think that the war in Ukraine has obviously made people very aware of just how capricious the fossil fuel markets can be. It’s always been the case. I think it was only four years ago when oil was negative, when people were paying to keep oil. And Cathay Pacific very prudently decided to hedge the cost of oil beforehand, and they almost went out of business for that because oil went down in price so dramatically. So it’s really tough to manage a serious input to your business. Almost no matter what you do, that is going to go up and down in price quite dramatically and very often out of your control. And this exact opposite is the case with renewables. Once you have your 25- year plans for your upstream wind and solar, you know what it’s going to cost. You know what your pricing is going to be. There will be some inflationary pressures from probably workforce, or you could be going through a period of inflation like right now, which is unusual, but there will be a lot of deflationary pressures. So the electrolyzers and a lot of the supply chain is going to go down in price dramatically. There’s still reductions in price for just wind turbines. So what you see outside, what you see offshore is going to come onshore at a much cheaper price, but the same capacity. So you’re really looking at a pretty solid understanding of what your costs are going to be. And they’re probably going to drop, and phase by phase, they will definitely drop.
So when you do an offtake agreement with a buyer, they can actually rely on that price and plan for that price for 25 years. And I think this is back to a question you asked earlier and I think I forgot to answer it entirely. But there is definite interest from all over the world in offtake agreements and long-term offtake agreements, because they definitely want to get a decent price. When the market is small, when the demand is so much higher than what is being produced, the small market is going to be extremely expensive. So there are a lot of people that want to do offtake agreements now. Typically, you don’t really do offtake agreements until right before FID. It’s just standard project finance to do all that papering and that last year. So we have relationships. We know what people want. A lot of people are sending demand signals and obviously, we’re sending supply signals. And we have tight relationships with the different markets. So we know what is necessary, but we won’t be announcing offtake until much closer to the FID. So things that are announced this year are really based on nothing because neither the buyer nor the seller is prepared for the products in most cases.
Stone: Well, that’s a really interesting point. At this point, the market for green hydrogen, I imagine, is quite small. We hope that it expands. The idea is that there would be many small potential customers today. But in a few years are you looking for much larger customers, one or two kind of anchor customers for your output? How does that look?
Eastman: Yeah. I think you’ve seen the greatest push by Northern Asia. So Japan is looking into coal fire with coal and gas in their turbines. They’re going to start at 20% coal firing. So that’ll be a 20% reduction in their pollution coming from power. And they’re planning to increase that to 100%. So they’ll basically be just using ammonia in their production of power instead of coal and in some cases, gas. So that’s one big buyer that already has an ammonia purchasing office set up in Japan. They’ve already had companies like JERA put out RFPs for purchase of gray ammonia. So they’re very ahead in this case and definitely want to do long-term contracts. Korea is also really ahead. Korea has had legislation forcing companies to have a certain percentage of their energy coming from hydrogen. And it’s a different way of doing it versus a target, or incentives, or taxes. It’s just a law, essentially. So it’s interesting to see how all the different hydrogen roadmaps are not only different in what they expect to use based on their own resources, and what they have access to, and what kind of industries that they’re in, but also how they choose to announce, or enforce, or incentivize is all very different around the world. And then the last one I would say, which is of global demand, and the one that we’re quite focused on is the marine shipping. So using green ammonia as bunker fuel in lieu of dirty diesel or a bunker fuel. And that is a global market, we are members of the Getting to Zero Coalition, which is essentially 120 different shipping companies, including some of the largest that have agreed that by 2030, 5% of their fuel will come from hydrogen or hydrogen derivatives like ammonia, which is more likely.
And most of them have commitments that are far beyond that, they’re closer to 30% or higher. So but even a minimum 5% is a giant market. It’s a market that we really can’t meet by 2030. There just won’t be enough of– so there’s going to have to be a lot of different solutions in the short term. And that’s one of the reasons you see some players using green methanol that they’re going to use because they can do it now and then eventually they will be switching to green ammonia. And then you get into the 2030s and you’re going to have a lot more availability. But just to give you an idea of the size of the market and what’s required, if we were to switch over all of shipping to green ammonia– which of course we wouldn’t because there’s lots of different, cruise ships are probably not going to use green ammonia. But if we were to switch the entire industry, that is about 660 million tonnes of green ammonia in one year. And one, 25 upstream gigawatt project would serve our smallest project like AREH in Australia would produce about 10 million tonnes per year of green ammonia, which means you would need 66 of those projects to meet the demand for just the shipping sector. And I think that that really shows how much more demand there is than supply for these difficult-to-decarbonizeph sectors.
Stone: Well, I just want to note here that there are a number of other companies that are involved in developing green hydrogen projects in addition to Intercontinental. All kind of look about the same stage at this point. I want to point out the fact that the countries that you’re working in right now, developing the projects for green hydrogen, those countries for the most part have substantial fossil fuel infrastructure in place. Is there a chance that blue hydrogen, for some reason may be favored in these areas, again, to make use of that already in place infrastructure?
Eastman: Well, I think personally that especially in the case of fertilizer, because fertilizer is essentially in a captive situation right now, you have gas and then they’re creating the hydrogen. And then from the hydrogen, they actually make their own ammonia or urea and sort of ship that out. So because that’s already in place and that just requires the add on of the carbon capture technology, I do think that that particular area of fertilizer will probably be blue. I don’t think it is likely to be green. I’m not saying that it can’t be equal to green, because if they are able to capture, say, 95% from start to finish of any kind of greenhouse gases, and then the other 5% they offset in some way, well, then you’re pretty much same. It’s fine. But it doesn’t make as much sense for green companies to make fertilizer as it does for blue. In terms of the country’s strategies, I would say that Oman did just have a discovery of a bit more oil, but they don’t have a lot and they’ve never had as much as Kuwait or Saudi or any of these others. They don’t have a lot of hydrocarbons, actually, but they do have some of the best areas and resource for wind and solar is far better than anywhere in the rest of the Middle East. So for them, this is a fantastic opportunity to really be a leader in this space. In the case of Saudi, they definitely want to be a leader in green hydrogen. They also want to be a leader in blue. But I think that they recognize that blue is not here forever, that it’s sort of a stopgap until we can create enough green. Because of the problems that we’ve mentioned before about the volatility of fossil fuels, obviously, the decarbonization efforts and promises that different countries have made in different sectors and different regulations upon different sectors, blue is not a long-term solution. It’s a short and medium-term solution at best. And I think that most countries, at least Saudi, does recognize that.
And they want to be one of the largest players in green because they do have a lot of resource. They certainly have a lot of solar, but they also have a number of areas that have both solar and wind, which is where our project is. Australia obviously under the last Prime Minister was not very supportive of a clean environment, but the new one is supportive. Everybody fully recognizes what a huge opportunity green hydrogen is, because Australia is gigantic and it’s just so much easier, it’s so much less risky to build a hydrogen project than it is to do a new oil and gas development. If you think about it, with oil and gas, you can dig a billion-dollar hole and find out it’s dry. That doesn’t happen with renewables. Even with the satellite maps, I can tell pretty much what the general wind and sun are going to be. And then I might spend a year or two inexpensively putting up masks and SODARS and LIDARS to gauge with a much more specific data so we can really plan for the very specific data. But I’m not going to find out two years later that there’s no wind or that there’s no sun. So the risk going into a new project is way, way, lower for renewables. And I think if you’re going to start a new project to make renewables or hydrogen, then renewables are definitely a less risky way to go about it. On top of that, the need to electrify is still there as well. So these green fuels are for difficult-to-decarbonize sectors, but it’s not like we’re done with electrification. So all of the renewables there is always going to be a need for more renewables. So whatever can get approved, people can build and will do well because that’s the only direction that we’re moving in.
Stone: I’d like to get your thoughts, building on what you just said, on a fundamental tension that exists. And that is the tension between using electricity or clean electricity to produce hydrogen versus using that same clean electricity as an energy source for homes, for businesses, and for industry. Obviously, a lot more wind and solar is going to be needed to meet the decarbonization needs of the world. But when we’re looking at all the wind and solar power that could be dedicated to producing hydrogen, there’s a question would that be better used for the process because it’s in the rapid decarbonization to produce electricity that is directly used by consumers?
Eastman: Yeah. Can I take this in two parts? So, one, is the electrons do not travel well. You do have some overland HVDC and also AC. You have undersea cables that can go maybe 3000 kilometers. But it’s not very easy to move green electrons around. So the only time that you’re really making the decision between using renewables for electrification and using renewables to create hydrogen, are in pretty crowded and pretty crowded areas like Europe or even parts of the United States. In most places where our projects are, there is no demand for electrons at this time. We will be creating demand for it. So in a way, because we’re making the hydrogen, we make the electrons. And because we’re making the hydrogen, we attract the supply chain, and we will begin giving electrons and hydrogen to the supply chain and to all the other ancillary businesses that are in that hub. So we may turn from an export-oriented entity into a much more locally used resource entity. So as the phases continue, as the buildout continues, you might see a very different breakdown between where the energy is actually going, starting with the offtake because in some cases the offtake is also a better security risk. So for places like Oman that don’t have very high ranking in ratings, it’s better to have an off taker to get the project started. But then once you attract different companies to buy the product and they all have great sort of credits, then you’re able to finance these next phases that can be more locally focused.
That’s sort of our situation and on one side of it. But there is another side that where I would agree with your initial hypothesis. People are talking about Algeria making hydrogen to send to Europe, and Algeria meets its energy needs 99% with coal. So, for me, that just seems wrong, that you would set up renewables in Algeria and instead of using first those renewables for the local grid, you would turn that into hydrogen and send it to Europe so Europe can feel like they’ve decarbonized. At the end of the day, it’s all about the entire world decarbonizing. And it’s really not that important if it’s, which part of the world is decarbonized? There’s no gold medal for decarbonizing only your country. And this leads to other sort of extrapolations as well. We’re perfectly clean, but then we send all of our dirty work to China. The products that we get back have that carbon footprint and they have whatever environmental damage goes with it. It’s really the responsibility of the West to have had those products manufactured in locations that have sometimes had lower standards for the environment. So it is hard actually to do the accounting for all this. And I think one of the reasons that Europe sort of threw out the additionality– but the reason for the additionality was exactly what you say. They didn’t want current green resources to be used to make hydrogen. Because they want to continue having as green a grid as they can have and even more so, so adding more offshore. Everyone would like to have their grid be greener, but you do need to have both. And I think the best answer is, if the need for renewables is located next to where you can build renewables, then you should be using that first. But it is actually quite hard to get a lot of permitting and approvals from governments to go any distance in Europe or Australia or the US. I mean, you’ll be shocked that it can take 10 years to get approvals to just put up an AC line to get from one place to another. So I think that what will really help electrification is going to be a much more flexible and streamlined permitting process.
Stone: You just talked a lot about different geographies and kind of the geographic issues here. And I want to look at one slightly different aspect of this. You’ve mentioned that the quality of resource is overwhelmingly important in these projects. That’s why you’re in Australia and the Arabian Peninsula where there are good wind and solar resources. So does that mean that on the supply side, certain geographies that we’re already familiar with in the Middle East that dominate the oil market might, for a different set of reasons, also dominate the global hydrogen trade?
Eastman: Yeah, I think there’ll be some overlap. You’re going to see a lot of new players. No one’s gotten into it yet, but Mauritania is an incredible resource. That’s obviously going to take a World Bank and a lot of different entities to get involved to make investors comfortable with that. But the resource is there and they certainly have not been selling anything to the market so far. So I think you have opportunities in places like Chile. You have opportunities where there isn’t oil and gas. You do have some overlap, especially with Saudi. And they did just get a bit lucky there twice. But I think you’re still going to have a lot more opportunity in there to diversify. It’s not going to be as concentrated in one or two places. And even if Saudi wants to be the largest green hydrogen producer– and that’s a great goal– it’s not going to be the same as when you look at the– if you’ve ever seen the visual capitalist description of oil companies around the world, and it’s in the form of a soccer ball and you see Aramco, that’s like almost the entire soccer ball and then the rest of the world are these teeny, tiny little pieces of it. That won’t be the case, I don’t think, with hydrogen. I think hydrogen will be much more distributed around the world. You’re going to have projects like ours that are really large and will be very inexpensive, and those will be super useful for things like shipping that are global and they need to be able to refuel around the world. But you’re also going to have smaller projects where the resource quality doesn’t have to be as high because you don’t have to do the transportation. I think it’s just an opportunity for a lot more in places to avoid fossil fuels. Like islands, people who are right now using generators with diesel, most of them will have an opportunity to use hydrogen or to use renewables plus hydrogen so that they have some kind of firming factor for their microgrid or grid. So I think there’s actually much more opportunities that are much more widely distributed than in just a couple hands.
Stone: I believe that your company or that you are looking at some potential developments in the United States as well. And it’s a very interesting time here. The bipartisan infrastructure bill supports clean hydrogen hubs and there are four states, East Coast states, New York, Connecticut, Massachusetts, and New Jersey that have entered into an agreement to develop a green hydrogen hub that would be powered by offshore wind farms. I think California’s looking into something similar as well. I want to get your view generally on the outlook for hydrogen development, green hydrogen development in the United States. Does the U.S. have any particular competitive advantage in the area? And what role will the recent legislation out of Washington to move the industry forward?
Eastman: Well, I think obviously subsidies help. So all of the incentives that are in this new era– which I’m now calling it– are very helpful for the U.S. to sort of get up to speed. The fact is that producing green hydrogen using offshore resources on the East Coast or West Coast is still going to be much more expensive than the projects that I’m working on. Because, A, your capacity factor is reduced to the offshore wind only. They’re not combining it with solar, which means you’re talking about nearly 50% instead of 70%, 75% capacity factors. That makes a big difference. Also, offshore is much more expensive than onshore. It’s just more expensive. So it’s going to cost them more to produce, but of course, you have a subsidy in place so that could be quite helpful. I think that Seattle and Washington also, they would like to have a hub and they could potentially be a hub for shipping as well. The part that I’m the most interested in, or I think will make the most impact, is the support for all of the supply chain technologies. I mean, just having more electrolyzer opportunities, a lot more funding for different types of new technologies that could really make a difference. And in transport or in production of hydrogen or ammonia, like cracking technologies, if you want to use ammonia in order to ship but then you want to crack it back to hydrogen to use it. There are technologies and they are improving. But I think that this bill offers a lot of incentives to get moving on different possibilities.
And then in terms of solar, which is really just so necessary for almost all of the projects, 90% of that is coming out of China right now. So having the U.S., having India, Saudi, a lot of different locations that are right now subsidizing polysilicon and providing a lot of incentives to build solar panels locally, I think that’s going to have a huge impact. It might not take the pricing down that much since it is quite inexpensive, but it’ll really help in terms of having more choices. And generally speaking, even for the minerals that are required, just having more options for electrolyzers. Like last year, people only talked about Alkaline and PEM, but now they talk about AEM, they talk about E-TAC, they talk about SOEC, they talk about all these different options. And a lot of these options don’t require a membrane, which means they don’t require the platinum. There are a lot of different ways to do things that don’t require all the same minerals. And that diversification is going to be super helpful too, because obviously we don’t want to have to go to Congo and have that be the only place that we can get any type of mineral. So countries are really focusing also on that, on the mining side, and different solutions that can use different possibly less rare materials are really positive for the whole world. It will have a positive impact for everyone.
Stone: Alicia, thanks for talking.
Eastman: Thank you so much for having me on your show.
Stone: Today’s guest has been Alicia Eastman, President of Intercontinental Energy. Check out the Kleinman Center for Energy Policy website for more podcasts, research, and upcoming events. To keep up with the center, subscribe to our monthly newsletter on our website or follow us on Twitter. Our handle is @KleinmanEnergy. Thanks for listening to Energy Policy Now, and have a great day.