41 - Green hydrogen in a net zero future with Will Rowe (CEO & Founder @ Octopus Hydrogen)

First and foremost, decarbonization of hydrogen production is a problem. To move into the world of hydrogen being an opportunity for decarbonization, you've got to first understand that, at the moment, it is a big problem for us.

So, we forget hydrogen planes and heating and all these other wacky things, just the amount of hydrogen that we use right now for ammonia production and in the hydrocarbons in oil and gas, the production of that hydrogen needs to be decarbonized.

Hello, everybody, Quentin here. It's another special episode. And you'll have to forgive us, but we're playing with the format a little bit, and we're going to talk about something that's not really battery related. So, this is a conversation between me and Will from Octopus Hydrogen, and we're going to talk about the hydrogen economy and what all this means. It's hydrogen, it's an element, it's not new, but this new hydrogen economy and everything that's going on around it is fascinating, and there are a load of business models that are being set up to capture it.

And I think those of you who know me will know I'm a little bit skeptical--

I'm very skeptical of a lot of the use cases for hydrogen. But what I found really interesting about this conversation is Will and the Octopus Hydrogen team, I think, are taking a pretty pragmatic approach, and I think their business model is interesting. They're trying to solve some big problems. You'll notice in the conversation that we didn't necessarily agree on everything, and that's OK.

But I do believe that we tackled this issue with intellectual honesty. But that's not for me to decide, that's up for you and all the listeners to decide.

So, I really want to know what you think about this in comments, or do send an email, or let us know. A tricky topic to cover. Yeah, this is probably going to get some conversations going. So, let us know what you think, and I hope you enjoy it.

[MUSIC PLAYING]

Hydrogen.

Today is all about hydrogen. And for those guys listening, there's a lot of paper that you can hear because I've for once made notes and did a little research. And today we're going to go down some rabbit holes about the hydrogen economy, what to expect, what works and what doesn't, and see whether we can get some answers. So, Will, thank you very much for coming on the podcast. Hello and welcome.

Thanks for having me. I've been excited about coming on. I'm an avid listener.

Oh, incredible. Say it more, say it loud.

Yeah, we've got Will from Octopus Hydrogen, the CEO and founder of that business. And I guess before we get started, why are we talking about hydrogen on the MODO podcast?

I've got some quotes here, so excuse the rustling, but here we go. So, the German chancellor called hydrogen the gas of the future and promised a huge boom. Japan's prime minister has declared that shifting to and developing a hydrogen society is critical for achieving decarbonization. The EU executive vice president of the European Green Deal believes that hydrogen rocks, that's a big one. And Jacob Rees-Mogg said something, but we're not going to give him the airtime on this podcast.

And the money is flowing as well. So the EU has approved the first 13 billion euros of 430 billion euros promised under its 2020 hydrogen strategy.

They're now launching a hydrogen bank, and the US Inflation Reduction Act of the IRA produce--

there's a 10 year tax rebate per kilogram for green hydrogen of $3, which may be more than the cost of production. So this thing is happening, and that's huge. And we're seeing all of the consultancies. We're writing reports about it.

The experts are writing reports about it. The lobby is magnificent--

the hydrogen lobby and what it's achieving.

It's everywhere. And there's different colors. We've got green, gray, blue, every shade you can imagine. And we've got businesses of all shapes and sizes start up around this big huge thing that is hydrogen.

And so today, I guess the first thing to say is, I come from this as a little bit skeptical, actually.

Well, very skeptical of quite a lot of the use cases of hydrogen.

And I'm hoping, I've got an open mind, and I'm hoping by the end--

I'm willing to be convinced on lots of these. I just need to hear it from--

maybe I need to understand it more, I don't know. But I'm coming at this with an open mind.

And I'm really excited to have you on because you have done a lot of thinking about this. I respect your thinking. So, Will, where do we start?

The main thing, let's start with your business. What do you guys do, and then we'll talk about hydrogen use cases, and answer the key questions which are, what should we be using hydrogen for and what shouldn't we, and then once we've got that basis, how do we build businesses around that. So, yeah, what's Octopus Hydrogen doing, and what's the business model?

Yeah, thanks. So, I guess Octopus Hydrogen is effectively a developer platform. So what we intend to do is build electrolytic--

we can cover the colors in a minute--

but effective electrolysis based hydrogen projects co-located with renewables, but we don't want to own the wind or the solar asset. So, our view is that co-location with those assets is positive, especially at this phase in the market.

Just to be clear, so you turn electricity--

I know this isn't really chemistry, but you use electricity to create hydrogen, is that?

Yeah. Effectively, I want to see [INAUDIBLE]

off the shelf product, less quite off the shelf as you'd like at times, but--

Big shelf.

Yeah, it's a--

a 45 ISO container can contain about two MW worth of electrolysis, and you turn that into hydrogen oxygen, [? vent ?]

the oxygen.

So about the same MW terms, about the same size in a 40-foot container as a battery.

Yeah. Obviously, MW, not MWH.

Yeah.

Yeah, yeah.

OK, cool. And so are we going to call them OE, Octopus--

OE works for me. That's our internal lingo.

Oh, yes. So, just want to start at the start. How did you start this business? What's your background? And how did you end up in hydrogen, and what's the business model?

Yeah, so we--

myself and Julius left our jobs at OVO. So most of my formative years were OVO energy. You probably know OVO pretty well.

Yeah.

Yeah, so I was there for a long time. Did a lot of different things across kind of asset heavy businesses within that. So, smart metering and those kind of things. Consumer facing stuff, both like retail ops and, like, product. And then also a lot of the software side, so the Kaluza platform was something Ed Conley and I did a lot of work on when it first started there.

I left there back end of 2017, and Julius and I were kind of playing around with lots of different business ideas because we quit our jobs to start our business.

Very similar to your story, we ended up pivoting. What we did was we were looking at an energy retail business that was going to do behind the meter batteries for I&C customers.

I&C being?

Industrial and commercial. So, I guess the kind of non-SME space. Not small businesses, decent sized, but pretty big businesses.

Factories, that kind of stuff.

Yeah.

Companies that make stuff and use energy.

Yeah, or like big retail parks, or big office buildings, even potentially, but kind of where you've got a reasonably large supply going into that building. Our hypothesis was that they want 24/7 carbon free energy, and they want it to be cheaper.

And so we felt behind the meter batteries was kind of really cool play on that because we have a trading background as well. We kind of knew that you could stack the revenues and do something exciting. Then the targeted charging review came along, killed that business off. And so we're like, OK, we've spent the best part of nine months of our lives working on this and we've got literally nothing to show for it.

And that was where the way that charges for network costs were--

Well, the report came out and then nothing happened for ages. But essentially, the whole way that distribution network operators and transmission system and National Grid and DNOs recover the costs, all of that was being reviewed and changed and that affected the business case.

Yeah, so instead of everything being time-based, it went to being smeared over volume, regardless of when, effectively. And so the value stack of shifting load behind the meter went from being very valuable, because you missed [INAUDIBLE]

that kind of ones that go down through to not very much left. So, you literally just had pure price shifting was what was left kind of on a day-ahead basis.

So you built this business and then that came along--

We were close to launching and then we had to pull the pin on it.

OK, and then you moved into--

then you pivoted into, straight into this?

Yes, then we took the idea to Octopus Energy to start an incubator. So we were like, look, we really want to do something entrepreneurial, we've run out of ideas. How about you guys help us think of some stuff that's kind of complementary to the group.

And then one of the businesses we incubated was Octopus Hydrogen, and then we're both like, oh, this is great, we're going to go all in on it. So we've kind of shut down the incubator now, and this is the first one we did. So, it's quite a nice--

What a journey.

Yeah, you'd argue it was successful, because I guess we incubated an idea that we're now working on, so that's nice. I guess the idea was we're going to do more, but, hey, hydrogen is a big problem so it's quite fun to be on something.

Awesome. And so how long has Octopus Hydrogen been going? How many people are involved in the company? Let's get some scale to start with, and then we'll talk about what you do.

Yeah, so two years in April this year. So started April 2021, yeah.

We're about 25 people. Roughly, say a third software development, a third kind of like commercially your deal kind of structure team, and then a third kind of physical engineering roughly, so building the projects and making sure we can deliver on timelines, et cetera from our side of things.

OK, and what's the vision?

Well, our vision is we believe in 100% decarbonized society of the future. And what was apparent to us when we started the business was that we're going to electrify everything we possibly can, but we didn't believe that on its own electrification could get us there. And it was like we were looking at what was left. And we're like, well, we can't start an EV business because there's loads of good businesses in EVs.

We can't start like a load shifting business because there's businesses that do that. And I'm like, OK, but there's not a lot of stuff that kind of links together renewable generation assets and the kind of stuff that isn't going to get decarbonized through electrification, i.e. the molecule based bit. So that's kind of why we started the hydrogen bit, because it felt like a good gap, because it was like there's lots of people talking about hydrogen, but not a lot of them come from a power background. A lot of them come from oil and gas, or physical stuff.

We think power ultimately is what's going to make it cheaper.

Part of the big problem here. Folks used to building pumps and compressors delving into the world where the power side is the main input cost and the main--

that's the main driver of all of this.

And the thing is with power, it's time-based. The value of it changes over time.

Something like natural gas, it's not time-based. The value doesn't shift. I mean, maybe just seasonally, but for a given period, it doesn't shift in value. You just have lots of it, and then you've got to decide. So you can live with losses, you can live with running your plant at 24/7, because you don't care about when you run it relative to other assets, right?

So what does Octopus Hydrogen do?

So we kind of got to two bits of our business. So the first bit is, as I said, we're a developer platform. So, effectively, what we do is we go from--

we try to work with builders of wind and solar assets and say, would hydrogen add value to your either in-build or to be-built renewable asset.

People who are building--

is this one wind turbine? Is it a whole wind farm? Is it an offshore wind farm? You know, what scale are we talking about here?

Yeah.

Well, the sweet spot at the moment is where we can build between 5 and 20 MW of electrolysis, which is about needing 50 to 100 MW of renewable asset, depending on what that is. If it's solar, you need a bit more. If it's wind, a bit less. I think anything less than that, you get into too smaller scale on the hydrogen side to warrant the economics of running it and maintaining it and operating it.

And anything bigger than that, realistically there isn't many onshore assets being built of that scale. So, therefore, you, by definition, you're going offshore, and therefore you're kind of getting into substation level stuff. And I think that will be where we'll go in the future. But for now, I don't think we really bring enough to the kind of, yeah, we're going to do a gigawatt.

We'll let that be a 2025 problem.

So, I've got some numbers now. So we're looking about 5 to 20 MW and size renewable generator.

100 MW renewables, 5 to 20 on the electrolyzer. And you're looking for those sites and developers and saying, we can build electrolysis on site or near or something like that. So that's one half of the business.

Basically, almost all developer planning permissions now go in with a square drawn on that and only for batteries. Because hydrogen is effectively a similar footprint, you can swap battery for a hydrogen asset. So it's quite easy from that perspective. I'm not saying--

there's a different permitting process, but most developers we talk to are kind of like, cool, well, we're interested in moving into something new as well and we've already got enough of a kind of concept from a space perspective to accommodate what you're trying to do, so it kind of works quite well.

OK, cool. And then that's the development side of the business, where you're going to build electrolysers is that, right?

Yeah.

Develop and build electrolyzers.

You could argue we take on a lot. We do kind of like the EPC side of it as well. So we do the design of it.

I mean, you an early business, you do everything, right? In an early market with an early technology, so, of course, you're just going to do everything and see what sticks.

Yeah. What we definitely try not to do, though, is we don't get involved with the renewable, right?

Yes.

That's a solved problem. There's good businesses in that space. They've got low cost of capital. We don't want to, like, yeah, we'll actually build a wind turbine.

We'll leave that to people who do a good job. And so we'll do the bits that we kind of think are not solved problems.

OK, so one side of the business will build electrolysers, and fund them, too? Do you fund them on a balance sheet?

The best ones are often they're on balance sheet.

On Octopus Energy's balance--

Octopus Energy--

Octopus Hydrogen's balance sheet.

Octopus Hydrogen.

Yes, we don't put them in to, say, energy, or renewables. At the moment, we use our equity capital to own our assets.

Wow, and is Octopus Hydrogen fully owned by Octopus Energy?

It is--

I'll just go straight in--

it's 70-30. So, 30% is owned by Hydrogen employees, and 70% is owned by OE.

OK, cool, great. All right, so we've got Octopus Energy owns--

oh, no, less than the majority of Octopus Hydrogen.

There is a majority, but not the controlling majority, I suppose.

OK, cool. And then Octopus Hydrogen is going to build these electrolyzers. And then what does the other bit of the business do?

Yeah, and then so our other bit of the business, which is kind of like our other bet on this market is we're starting a SaaS platform.

No surprises there, I guess given the background of a lot of the team, i.e. involved with Kaluza, OE's background with Kraken. You know, like, it was always going to have a kind of tech play in there somewhere. So, we're effectively building the Kraken for electrolysis. So, i.e.

You are building a renewable--

you're building a hydrogen project that's electrolytic. So it's using renewable power to do it, and you're not going to run that 24/7, because you're never going to have 24/7 green cheap electrons. Therefore, you have to change when you run given that kind of truth, and we're building the platform that controls that from a kind of a cost perspective, a greenness report perspective, and all the operating constraints that are hydrogen specific, because it's not like a big battery.

So if I've got this right, the hypothesis is that octopus hydrogen will build and operate or build whatever--

someone will operate them--

these electrolysis plants that will be renewable energy powered. And then the other bit of Octopus Hydrogen will write software that will control these assets, and at times vary their outputs because the cost base the electricity price will be too high for them to run.

Yeah.

So it's a bit like demand side response with electrolysis.

Yeah, exactly.

OK.

And so the reason why we think there's a gap for the software side of things is--

say, unlike a battery where you go in and out. There's a power and an energy capacity, and there's a lot of other problems you've got to solve like thermally, et cetera. But effectively, you've got the BMS that handles a lot of that, and then ultimately it's power and energy is the two things are solvable. With hydrogen, you've effectively got indefinite depth, right?

Depending on your offtake. So how much hydrogen and where it's going.

With hydrogen, you've got indefinite depth. What does that mean?

It's not just a case of saying, I want to produce x amount of hydrogen, because it depends, well, how much can you store? How much can you store based on how much is going to be used? So this kind of downstream dynamics that link the power to what you're doing with the hydrogen. So the optimization problem becomes more complex than simply what is the cheapest bit of power today.

It's, what's the cheapest bit of power relative to when I can actually produce hydrogen and store it? And then what about if I have to buy more expensive power because I'm short on hydrogen?

OK.

So there's a kind of a more, I won't say more complex on batteries because I don't know enough about how batteries are optimized, but it's a different set of optimization kind of constraints that need to be considered very specifically is our belief.

So one of the interesting things about this discussion so far I think for me is the assumption that electrolysis plants won't run baseload. They might need a varied output to match price signals in the electricity market, which I think is a key assumption. I believe in huge volatility in electricity prices in the next decade or so. Hence why I'm so bullish on batteries.

And I guess we want to say--

100% hypothesis. Same hypothesis. And there's a lot of talk about our hydrogen assets being expensive CapEx things that need to run 24/7.

Well, it's just not--

they are expensive CapEx things but they don't need to run 24/7. Because if you look at it, 70% of the cost of a green hydrogen molecule is the cost of the power.

By definition, the CapEx isn't the most important thing you're solving for. You're solving for finding cheaper power.

It needs to be green to qualify for any subsidies and to actually add value to our net zero economy. So going for cheap green power is the trick, not optimizing your CapEx. Like, CapEx is important, but it's nowhere near as important as power, which is why we saw a gap in the market for a power pedigree kind of set of founders.

Yes. And if you rather than just getting a supply agreement with a supplier, if you can start hedging that power, and you can also--

The optimization problem is very similar to a battery, right?

And there is an asset that you can run--

I guess you could--

I guess in an ideal world, the electrolyzer would run baseload, right? You'd want it to run all the time provided--

If you had 24/7 42 MWH power, you would run it on that basis. I don't believe that will exist in Western Europe.

OK, all right, let's talk about colors of hydrogen for a second. Because, if we can, I'd like this podcast episode to start at the basics in all their elements.

And I've got a bit confused with the color of hydrogen. I've been doing some research and I can't work it all out. So, could you explain how that works?

There's like this thing that--

the hydrogen rain barrier. I think, the way I like break it down in my mind is, OK, so--

And just to give you a bit of background on it, so Bayes in the UK are saying very clearly like, we don't want a rainbow of hydrogen colors. We just want to a low carbon hydrogen standard that defines the amount of CO2 per kilogram of hydrogen.

Bayes, so just for anyone listening, so Bayes is the Department for Business energy and industrial strategies. They're the government and they are saying this thing.

Yeah, they're saying rather than having colors, let's just have a standard that defines a carbon intensity. And that's typically being agreed across the US, not everyone's agreeing the same standard, but everyone's agreeing that measuring the CO2 per kilo is a better way than kind of having labels.

I agree.

I would agree too. That said, I like labels for simplicity purposes, which is there's green, which is you have to use renewable power, and for me, you have to temporally correlate with a renewable asset to demonstrate that. That's green. And then you have--

Oh, mate, there's so many shades of green. We're going to come back to this, yeah.

Well, the point being that if you take grid average power, it will not be lower carbon than fossil derived hydrogen at times. So it's really important to demonstrate and have that pedigree that you can demonstrate your actual CO2 intensity. Because if you don't, electrolysis is not very efficient. So if you use fossil fuels anywhere in that mix, you will very quickly tip over--

from the power generation sites, you will tip over the CO2.

Which is, so it's very--

you've got to be cautious about this. Effectively, the other two major ones are gray or black, which effectively is fossil fuel derived hydrogen, whether that be from coal or natural gas doesn't really matter. Most of it's from natural gas.

So green is hydrogen from renewable generators, so from wind and solar plants, for example, or nuclear. It all depends where you are.

Some people call nuclear a pink, but I mean, ultimately--

I'm a big nuclear guy. I think it's green, but whatever.

It would tick the box on the low carbon hydrogen standard. So for me nuclear is probably going to be pink-green mix.

Brilliant, that's another one. I didn't see pink out there. And then there's gray and blue, and gray and blue--

No, so let's say there's gray and black.

Gray and black, sorry.

Effectively they get bundled together as they are either from coal or natural gas. It's very, very carbon intensive.

So if it looks like smoke like gray or black, it's probably got some fossil fuels in it.

Yeah, basically.

What's the difference between gray and black? What are the gray come from?

I think black comes from coal, and gray is natural gas derived. Effectively, though, with natural gas.

So most of the hydrogen the world that's used today is used for kind of two key things. One is refineries and default authorization in refineries. So effectively what you do is, you've got your crude, you do your chemistry, you do crack in, and you put hydrogen in it and that helps get your kerosenes and your petrols and remove sulfur, et cetera. Most of the world's hydrogen is used for that, and it's almost always from steam methane reforming of natural gas.

Let's slow this down a little bit.

So most of the world's hydrogen at the moment is used for separating hydrocarbons into--

it's like the distillation column stuff, cracking it, and separating it into the different types of hydrocarbons. And you put hydrogen in and that sort of happens and will allow the chemists to decide. But that's what happens today.

Yeah, and then the other use case for hydrogen today is ammonia production.

Ammonia.

Ammonia is NH3, so effectively it's nitrogen plus 3 hydrogen atoms, and most of that is made, I think, the process called the Harbor Bosh process. I'm not an expert on that kind of thing. We don't look at ammonia, particularly, but effectively it's gray hydrogen again, which is combined with nitrogen.

And what's the ammonia used for?

Typically, I mean a lot of use for fertilizers from what I understand. I'm sure there's other applications for ammonia, but really for feeding the world. So whether we should be using, let's say fertilizer is a separate problem, but--

Oh, yeah.

Yeah.

Leave that one.

Yeah. So, 99% of the world's hydrogen is gray, let's say, it comes from natural gas.

Create burning stuff, to create hydrogen, to do stuff with.

Steam methane reforming, not burning.

Steam me--

Oh, no, sorry. I'm thinking to get the--

Oh, OK.

Because if you burnt it, it would turn into CO2 and whatever else you get. Water and heat.

OK.

You blast hot water on it, which separates the SiH4 methane into H.

So this is a different type of making hydrogen, right? This isn't what you guys are doing, which is getting renewable energy electricity and turning and making hydrogen. This is the other way which happens at refineries or nearby.

Yeah.

And you're creating the hydrogen by this other way that doesn't use electricity, it's a chemical process.

Exactly.

But of course it's going to be quite energy intensive.

And it's really CO2 intensive.

OK.

Yeah, so like first and foremost, decarbonization of hydrogen production is a problem. So to move into the world of hydrogen being an opportunity for decarbonization, you've got to first to understand at the moment, it is a big problem from a sup--

If we forget hydrogen planes and heating and all these other wacky things, just the amount of hydrogen that we use right now for ammonia production and in the hydrocarbons in oil and gas, the production of that hydrogen needs to be decarbonized.

Exactly.

And that's a big problem in itself.

Now there's, how much hydrogen will be needed in a net zero world when refining is lower.

Yes.

But we still need plastics and things that come from oils that I don't think we have--

biological. So there will still be a--

Look, I don't think we're at peak use of things like kerosene and stuff for aviation in the developing world, et cetera. So, I think ultimately that is a problem that needs to be solved rather than one that was dismissed and say, oh, well, in a net zero world it won't be here so let's ignore it. We have a big problem.

So that's problem number one. And then there's the--

let's come back to the colors.

So blue hydrogen is the one that's--

Blue.

So blue effective is saying, take the gray, all the stuff we talked about and capture the CO2 using--

Carbon capture and storage.

Exactly.

OK, so I'm going to repeat this back to you, and hopefully I've learned something. The black and the gray that is not using electricity to make hydrogen and that's its other thing, steam reforming--

Steam methane reforming.

Steam methane reforming, that's used to load at the moment in the hydrocarbons industry, and we need to solve that problem. Then there's the blue, which is the same as the black and gray but then you capture the carbon from it and you store it somewhere in a salt cavern or something like that.

And then there's the green way, which is we're going to create hydrogen with electricity, and we're going to get that electricity from renewable sources like wind or solar or something like that. OK, I think I understand that--

For me, that's where you kind of end. All the other shades, whether it's pure solar or whether it's pure wind doesn't really matter. Whether it's a blend of wind and solar, all of those kind of things--

if it's hydro--

I'm like, look, ultimately, it's either in the broadly green bucket.

Yeah.

The broadly not good bucket of gray, or it's in the blue where it's gray plus CCUS. The thing to note with the CCUS is, though--

CCUS being?

Carbon capture utilization and storage.

It's not a thing that we do today particularly well. Like, the most effective carbon capture processes we have now are roughly say 50% to 60%, and for that natural gas derived hydrogen to be at the kind of low carbon hydrogen standard definitions, we're talking it needs to be like 80-90% and with very low fugitive methane emissions. So the whole idea of blue hydrogen being this kind of panacea that comes along because actually it's almost as good as green is like, there's a lot of burdens of proof around that.

That said, I do have some sympathy fo--

Well, we already use loads of natural gas. We're adding more coal.

That's a basic, or whatever, yeah.

Yeah.

But it's like the equivalent--

that's like sticking with the current process of black and gray and then putting like a vacuum cleaner around the top and sucking out the CO2 and sticking it somewhere.

Yeah, and to be fair, if we did that I'd be less offended by blue hydrogen. The problem is, most of the blue hydrogen projects that are being kind of peddled at the moment are new build. So we're going, hold on a minute, let's leave all that stuff going and what we're going to do instead is build a brand new purpose built blue hydrogen production facility and that's going to decarbonize all these things down there. And my argument is, well, why don't we just add CCUS on to all the existing gray hydrogen stuff, because it's already there and it's unlikely to be replaced with green anytime soon, so let's just get on with that. That's my skepticism of blue at times.

OK. And so, yeah, how do you guys make money?

We are pre-profit

Pre-profit, yeah, I guess. How are you going to make money?

That's a better question. Yeah, so I guess we see two things. So, ultimately, the replacing gray hydrogen with green hydrogen we believe is viable. So we've looked at where natural gas prices are today, we can compete with green hydrogen with gray hydrogen from a cost perspective.

So in principle, we're talking about--

we can't go to a refinery do it at that scale today, but there's lots of applications that are the scale we would be able to solve for today, whereby we can replace their gray source with a green source.

So this is problem number one that we talked about before. This is the existing hydrogen world, get rid of the gray and replace it with green. That sounds good to me.

Exactly, yeah.

We're really pleased with that. It's good. Partly because of where natural gas prices are. When natural gas prices are 50P a therm, it's not parity.

So you mean because natural gas prices are high right now--

Yeah.

Especially, because we don't use grid power. Admittedly, we have to do some clever power purchasing in the background, but, yes, because we use green electrons, which if you are not paying wholesale market spot price for, you can get at a sensible price per MW hour, we can compete with gray hydrogen on price. So your value proposition there is, hey, guys, you already make gray hydrogen, let us install this plant. You can do it in a green way, and it'll cost you less.

Or more specifically we say, we're building our own plants and we will deliver you the hydrogen.

That's i.e, we don't ask them to build it on their site. We're like, well, we can get you the hydrogen at a price that you're at equivalent to what you're already paying. So that's all kind of ground one. We are cost parity, therefore we can make a margin on the hydrogen.

OK, cool. And that's how the company's going to make money. And then on top of that, there's a lot of optimization and software around that you guys are going to build.

Yeah, I see this hydrogen side as low margin, business as high margin. We need to prove both of those.

OK, yeah, yeah. And you need one without the otherr--

You can't do one without the other, right?

You kind of need to create the market.

This is the funny thing about the hydrogen industry, right? There's so much market creation happening because people need it for the next step, but in a normal--

gonna get wrapped up in my own words here--

If we weren't in a climate emergency and everyone wasn't in a rush, normal capitalism would mean that some folks create markets and the market doesn't exist, or some people--

and all sorts of happened because there's so much money coming in and subsidy washing everywhere. It's very difficult to work out which markets in a normal world would make sense. That's one of the concerns. Coming back to Green hydrogen, how do you make sure that the electricity is green.

Yeah, so this is actually like a hot topic in the hydrogen industry full stop at the moment. So you've got kind of different definitions floating around in the US, EU, UK.

I'll give you my interpretation of what I think it needs to be. So, my view is if you just do like, we go back, so I use certificates of origin backed, it's not enough, because you've not got any temporal--

I'm so glad you've said that.

Yeah, so for us the definition of green is relatively rich. We go for additional renewables, temporally correlated with the certificate as well.

What does that--

say that again--

Can you explain that in simpler words?

The renewables that we buy from need to be renewables that aren't existing ideally beforehand so we're not cannibalizing electrons that were already on the grid.

OK.

We want to match when those renewables that we are directly contracted with--

or we could argue we can do some virtual sleeping, but let's say the renewables that we're actually working with we have to produce when they're generating. We can't produce--

So when the wind blows at that wind turbine, that's when we're going to run the electrolysers, and that's the green bit, right?

Exactly.

Now, time matched, actual MW matched--

And we also buy the [? rigo ?]

for 5 pounds a MW.

OK. All right.

So that's what we do. Now, there's a lot of people lobbying for, no, no, let's do annual reconciliations with some egos and that would be fine. And we're like, well, you'll end up with grid average power, which isn't that green.

Which is the same problem with all these little start up--

Well, not necessarily startup. Everyone was doing it. Everyone is doing it, right? Which is electricity suppliers saying they're green and it's not green power.

Yeah, I mean, unfortunately a lot of ones are--

Well, let's not, I won't throw stones.

Yeah.

But, yes, it's been a big frustration of mine and Julius's for a long time. You buy a few egos and you cast yourself as a green tariff, and it's not green at all.

By the way, if you're listening to this and you don't know what a REGO is, we did have an episode on this.

Do check back and we'll put it in the show notes on how REGOS work. Very interesting. It's very easy to throw stones and you can see what a market exists and a lot of sensible decisions got us here, but very odd situation with REGOS and how that works. OK, so I think we're on the same page with what green electricity looks like, which is good.

Now let's talk about hydrogen use cases. So we talked about replacing gray and black hydrogen with green hydrogen. That sounds--

I think that's the way we look at like leverage ladder or talk to the hydrogen science coalition or. That is universally accepted as a sensible use case. No one is ever kind of, ugh. It's universally agreed upon, I think.

What's your opinion on the Liebrich ladder, right? Because we're a big Michael fans here and think he's doing some incredible work, and the ladder really we'll put again a link to the show notes, but this is the European way of determining whether houses or washing machines or whatever are carbon efficient from A to F I think it is. That same ladder with a different colors on it, Michael put together with hydrogen use cases. And it created a massive storm, right? What's your view on that and the use cases and where do you guys fit in?

You've got to be rightly kind of thinking, OK, so I think people use the cake analogy now, right? Hydrogen can't be cheaper than the ingredients that go into the cake.

Hydrogen can't be cheaper than the ingredients that go into the cake. Yes. There's a lot of input costs. Some that are priced well and some that are zero price.

And there's this thing floating around of like, so we can use hydrogen for everything, right? We can run economies that build stuff by importing hydrogen from somewhere and they're going to produce power and then they're going to produce products and it's all going to be really cheap in the future. Like, how can that be so?

I think what Michael's ladder is really useful to do is kind of demonstrate where that's pretty infeasible based on the applications, and also starts to demonstrate that we need to be therefore thinking about where we put public support for these things. Yeah, I think he goes from uncompetitive to sort of like inevitable or something along those lines.

Yeah, so the top of the ladder, A, is unavoidable. And bottom and a ladder, G, that's green. And the bottom of the ladder, which is the red bit, more colors, everybody, is uncompetitive.

And essentially he's saying that top of the ladder is things like fertilizers which we've talked about, hydrocracking, you've talked about. It's basically we're going to do this.

We're going to have to green up these hydrogen. There's some other bits in there, methanol, you know, hydrogenation. Chemists will love this. And then it moves down the ladder at the top, there's the shipping but via ammonia and E fuels rather than gas, liquid, hydrogen gas. There's still long term storage off road vehicles, they're near the top.

In the middle, you've got a load of stuff.

I love the way he's got vintage vehicles in there as well. That's a lovely one.

Yeah, it's a niche category.

It's a niche category, but props to him for that. And then there's aviation in there. So long haul's is more likely to happen with hydrogen, or some sort of E-fuel. And then short haul, he reckons will be batteries. We've got trucks in there. The longer distance trucks, which is a small amount of the trucks, would probably be some element of e-fuels or hydrogen.

And then further down the ladder, essentially batteries will do stuff instead. And then right at the bottom we've got, which he says will be uncompetitive, metro trains and buses, hydrogen cars, urban delivery, two wheelers, e-fuel, power system, balancing. And domestic heating is right near the bottom. So quite controversial. What's going on there?

Well, a high level I agree with the fundamentals of the analysis. Look at a net zero system that's been heavily electrified with lots of renewables in it, those should be cheaper, and therefore electrification makes sense for everything that you can do. So, for me, it makes complete sense to look at it like that. The only lens I add to it really and the thought we have is, OK, but you've got a lot of things where electrification is more challenging, say, from a non-academic perspective, from a practical perspective.

So as, you know, as is a theme on your podcast generally, good connections are difficult. Grid issues are difficult. So, for example, if you simplistically the UK, right? We have two key areas where heavy goods get brought into the country.

The Midlands is where a lot of sorting gets done and kind of Milton Keynes area. That's where there's loads of distribution warehouses.

Those are, by definition, going to be net energy imported areas. There are no renewables built there.

So, we can either try and get it in transmission wise, power wise, and then fill up trucks with batteries and we're looking at heat pumps or AC and the large residential loads there. There's a lot of power demand there.

My hypothesis has always been, and my belief from working with operators, et cetera, is that I just don't think if we wait for electrification or that we'll actually get there. I think there's other things needed. So what we find, for example, is operators on a three year lease of their building, there's a truck operator. And so, yes--

So there's no grid connection available. If there is, it's 20-30 available--

Let's do an example. This is like Amazon warehouse.

Yeah. Got 200 HGVs there.

200 heavy goods vehicles. Big artic load. Arctic law is not in the Arctic, Arctic lorries.

Yeah.

And they're moving stuff around--

Half a MW battery each they'd need, let's say.

Yeah.

So that's 100 MW if you charge them quickly. But let's say, you're looking at 20-30 mega grid connections to support that for a warehouse that's got a one MW grid connection currently. And there's 15 warehouses like that in the same area.

So is the argument that in--

let's talk about trucks, this is an interesting one. So the trade off, I think if I understand, is that the charging infrastructure relies on grid, and grid is so slow that we're not going to get the charging infrastructure in time. Therefore, we need to do something else. Therefore, we'll do hydrogen trucks instead.

Therefore, a percentage of the trucks will go hydrogen because they will be viable as hydrogen trucks indefinitely, and some may go hydrogen, may go electric.

Ultimately, we need them to do something, and it will depend on the economics of where they land is the way I view it. So I don't see it as we will not have 100% hydrogen trucks, but I also don't think we'll have 100% electric trucks. Now whether hydrogen is 10%, 15%, 20%, 30% will come down to speed of grid connections, payloads of trucks, driver hours, all those factors.

So that's my only piece, which is that is great as an academic exercise, and I think policy should reflect what makes sense academically. But you also then have to make sure that you're not dismissing the practical implications of it.

The co-location of assets makes sense, but look at an island where you have separate metering arrangements when you've got two assets on the same field. It's a bit of a--

regulation gets in the way of what you want to happen.

Yea, 100%. What's interesting about this discussion, and I think I disagree with you on the trucks thing, but we'll come back to it in a minute. And that's OK, we can disagree.

What's interesting about this discussion is the stuff at the top, if we go back to that, the stuff that's up the ladder, that's definitely going to happen. So at the bottom of the ladder that probably is going to be uncompetitive. And then there's the stuff in the middle where I believe, and we probably share this view, that eventually economics will win in the end, right? The lowest cost solution will win as long as we don't have some really weird subsidies that come in.

Yeah, as long as you don't distort the market.

As long as they don't distort the market, yeah. So the race is on and good luck to everybody. The good thing is we're all heading--

I think we're all trying to head in the same direction, which is the end goal of decarbonization, which is great. But then the funny thing with hydrogen versus electrification which is a lot of this middle stuff is it's not just that economics will win in the end, physics will win in the end, right? And that's a lot of the problem with the aviation thing. We talked about it just outside the room.

But there's the thing that if you fly in New York to London, you need a plane for hydrogen then you need two planes to refuel the plane. And that's an example of where the lightness of hydrogen doesn't really work, but that's just aviation.

In the trucking side, I just can't--

I don't want to bet against Elon. You've got these 500 kilometer trucks. It's less than 2 kilowatt hours a mile, I think they were saying in one of these article.

I struggle to believe that, because I've got an Audi E-tron and I get 2 miles per kilowatt hour.

2 miles per kilowatt.

My car weighs two tons.

So how would a 40 ton truck get anywhere near as competitive? I'm like, unless it's magical. Like, I know a Tesla Model 3 is about 3.5-4. So say a car that's a bit lighter is twice as good as my Audi.

Hold on, so--

I'm like, my truck's nowhere near as good as--

What's a--

A normal electric car, let's say a 100 kilowatt hour battery and it can do 200.

Model 3, probably 300.

So that's a 1/3 of a kilowatt hour per mile.

And he's saying that Tesla trucks can do it in, here we go. So 1.7 kilowatt hours a mile. So that is 1,2,3,4,5, and a bit. Five times.

Maybe. That makes sense.

Yeah, yeah, yeah. Well, typical truck does 10 miles per gallon, typical car does 40 miles per gallon.

Yeah, yeah, yeah.

It's not unreasonable.

That sounds about right. But, yeah, I just I just don't know whether I'd bet against that. But the cool thing about this thing with trucks is the physics does make sense.

You can get a long distance truck, or even a medium distance truck powered by hydrogen on the roads and it will work. It's not like some of these other crazy use cases that just the physics won't work.

Yeah. And it's a whole combination of things, right? So you've got--

The key thing in trucking is miles you can do in a shift, payload, and then being within the length and the height and the weight regs of the vehicle. Like, so not just the carrying payload, but the total gross weight of the vehicle, because you can't rock out with a 45-ton gross vehicle in the UK. The limit is 44.

We've got enough potholes as it is. No, thank you.

Yeah, and what's interesting is in Europe, for example, it's 48 tons. So that four tons just gives them an extra load of decarbonization options, because they've got four more tons they can play with. So there's a whole like set--

In the US, I think it's 58 tons is the limit.

Trucking in the US is crazy.

Yeah, so there's like this whole set of things that kind of create a kind of complex web of problems, because a lot of the arguments are, great, so we're going to have half MW battery trucks driving around, and then every four hours, the drivers got to stop anyway legally.

Yeah.

But I mean--

And then the water truck goes, let's say a truck does 50 miles an hour--

let's say it's a fast trip, whatever. 70 miles an hour. That means before they come to charge, but they need to find a fast charger, before they come to charge, they can do 200--

come on, maths--

200 miles. 200 miles. But then so then they're going to need to get say 400 kilowatts into that battery in a 40 minute stop.

Yeah, a 40 kilowatt charger. Yeah. So you need a good infrastructure for that.

So we need the same infrastructure that grids are put in a big service station. And as an EV driver, I know that we need all of those on every day.

It's crazy, isn't it? Beautiful.

I just think if it happens and it's good, then, great, we have a good decarbonization option. But that's my reticent. I don't want us to go all in on one thing and not actually get it to happen. Like, my view, what we need to not have is everyone in 15 years time still be using diesel trucks.

Yes. And the thing is, don't we kind of--

I get that argument, but it also, don't we need to go all in on one because it's going to be so much work and so much infrastructure to put in, we've got to go one or the other.

It depends what command and control we are, though. Like, I guess we just don't do that like typically. Like, the only real thing that we do proper centralized planning around is things like National Grid, like the transmission lines, the transmission gas networks, maybe nuclear bill. I mean, like, look at EV rollout.

You know, like EVs are cheaper than ice cars now. They are very popular. They outsell them. We still leave it to the market to solve the problem.

And they're great.

They're fun to drive.

Yeah.

Yeah, I don't know--

We are leaving it to the market. We're not centrally planning it. That's my reti--

like, anything that requires a big degree of sense of planning is--

But let's do the maths on this for a second. So say Elon's truck, let's say he's got a bit of Elon magic in it. Let's say it's not 1.7 kilowatt hours a mile.

Let's say it's 2 kilowatt hours a mile. That will cost, so a kilowatt hour costs you--

You're putting it in at that speed, it's going to cost you a bit more.

It's going to cost you a bit more. Let's say it costs him a quid.

A kilowatt hour, yeah.

A kilowatt hour. So he's got to spend 2 pounds a mile and moving that truck around the place.

But if you do hydrogen, you've got to pay for the electricity and then you've got to pay for the conversion cost. How efficient is it?

Let's say, yeah, so that's why I think sourcing power cheaper is the trick to hydrogen being viable. So, let's say we target CFD level power prices, 50 pounds a MW hour-ish

And that's sort of the CFD reference for this podcast, but that's what the government essentially has promised to pay wind power producers and they promised to pay the government the difference. So, yeah, wind in the UK a lot of it is 50 quid-ish.

Yeah, so say, I mean, it probably could be done by force if you actually had some offshore approvals. Let's say so we do 50, let's say we assume that's a baseline. Then it costs us 50 kilowatt hours, per kilogram of hydrogen. It costs us 2.50

to make a kilo of hydrogen just from the power cost. OK, infrastructure adds 50 P for the plant as I said about 70%. So it's 3 pounds at our wholesale cost to produce our hydrogen, then we've got to get it to a truck, get it in the truck, the costs a bit more CapEx wise. So, we've got leeway to get to that pound, but we're not, because we've got, in theory, what we got here we're at now 30p kilowatt hour.

Well, all that matters is the premium for fast charging battery electric vehicles, the premium that so you pay a quid at grid survival for a big truck, is that premium compared to the wholesale price, which we are they're saying is quite a lot, is that premium more or less than the premium you have to pay to convert it into hydrogen, do the hydrogen, get into the truck, and and also the additional Capex of the truck because hydrogen trucks have got more stuff on them.

Yeah, you've got more parts.

More tanks.

At the moment, it's pretty close TCO-wise from an OpEx.

What's TCO?

Total cost of ownership on a hydrogen truck versus in a battery electric truck. The cost of the fuel, so i.e. Hydrogen versus electric, once you consider fast charging versus getting hydrogen to a depot is pretty similar. The problem is a hydrogen truck is twice as expensive as a battery electric truck.

Yeah.

'Cause of the CapEx on the additional stuff in the vehicle. But then the learning curve of hydrogen is probably 15 years behind the learning curve of battery electric vehicles. So there's an argument to say the CapEx will come out. That's why I don't--

100% will not be 100% hydrogen truck in the future.

Yeah.

I also struggle to think that we'll have 100% half MW to 1 MW battery up to 1 MW hour to half MW hour battery electric trucks is the only solution. I just cannot see it.

By the way, these hydrogen trucks I've never seen, like, do they make a noise? What's the noise like?

So, well, you'll like this bit. So, a fuel cell takes in hydrogen combines with atmospheric oxygen. It's a roughly say 60-70% efficient. The other chunk of stuff that comes out is heat.

So main thing you hear is heat discharge i.e. steam being produced and--

Oh, so it's like going back hundreds years with like chugging steam engines everywhere.

You get the whir of the e-axle, and then it's just heat dissipation.

Why are we talking about trucks? You guys have got trucks reporting to your business, right? It's come all the way back full circle.

Trucks is not like the key--

You guys are truckers, right? You got trucker hats. Yeah, you got the boo-boop thing.

No, but when we started we were definitely very keen on road based transport i.e. trucks. And I think as we've looked at it--

Look, we're still keen on it. We think there'll be a large amount of hydrogen in there, but we also think it will be a percentage, not the total. Whereas we are very clear that gray hydrogen replacement the total will be green.

And so I see the ladder as more like, you probably have one hydrogen car in 2050 is my guess. But you'll have 100% green hydrogen for refined or ammonia production. And I just think between it, it will be percentages of, you know, there'll be some bus fleets running on hydrogen very viably in cities. Most will be--

Well, let's see.

Yeah, but most will be electric. But then it depends on the city, right? Because if the city is a long way from the nearest renewable energy source, like some of our cities where they're in energy poor areas.

Well, yeah, that's a key bit. So how do you move the hydrogen around? So, yeah, I'm going to build a wind farm in a windy place, I hope, otherwise I'm an idiot. And so that windy place might be quite remote.

And then you guys stick an electrolyzer on it. OK, so let's say we've created--

we've got like a 20 gigawatt of power.

20 MW. I wish it did 20.

Let's do 10. So I've got 10 MW wind farm. How much--

No, 10 MW electrolyzer, so you've got a 50 MW, 30 MW wind farm.

Yeah, but let's say input power is 10 MW. And then the electrolyzer, what's the efficiency on turning that into hydrogen?

About 50 kilowatt hours per kilogram. So, given the capacity factor of the wind and how we'd optimize it, we'll produce about a ton of hydrogen from that.

What is it in kilowatt hours? So let's say I've got 10 kilowatt hours of power produced for my wind farm, once I've turn it into hydrogen, how much kilowatt hours equivalent is that in hydrogen, do you know?

You get 33 kilowatt hours per kilogram of hydrogen. You produce about 33 MW hours of usable hydrogen a day. With no losses on that.

So what's the efficiency of a electrolyzer?

You have to do it reverse, right? So the theoretical efficiency of converting water to hydrogen and oxygen is 39.4

kilowatt hours I think, and we can do it about 50-52 kilowatt hours. Whatever that is. 39 over 52, 1 over that.

About 80%ish.

Let's say 70.

Let's say you lose 30% you power, turn it into hydrogen. And you've got your hydrogen which you store in tanks. And then how do you get that to--

where do you--

So we, at the moment, focus on road based distribution of that hydrogen rather than put it into the gas grid. I mean, pipes are much cheaper, but, yeah, there's no hydrogen pipes.

So you put one on like artcic lorries.

Yeah. So you can get about 10 mega electrolysers worth of hydrogen would be one lorries worth a day in terms of weight.

Yeah, OK.

That one lorrie has 33 MW hours in its payload is what it's driving off.

Wow, that's a lot. It's like driving around a bomb.

It's a lot better than a battery in that sense.

Yeah.

Yeah.

It's one of those things--

Yeah, it's the gravity density of it. I don't know my chemist, or even a physicist, but how much it weighs, it's really efficient but how much volume it takes up is really inefficient, right?

Yeah, it's the most energy dense, outside of some nuclear things, but it's the most energy dense weight wise. But then people, yeah.

So with my 10 MW hour--

So, yeah, we've got 100% of our power. We lose 30% of that power to turn it into hydrogen. So we've got 70% of the power left. And then we have to put it on road transport, which was going to cost us some power to get it there.

I don't know what that works out. And then we have to convert it back to something else to use it later.

Exactly.

And do we lose 30% converting it back?

Roughly. Some people say it's like a bit more, but, yeah, you're probably looking at getting 30% to 40% of the energy back out the other end of it.

So we need to get comfortable with, if we're going to use this hydrogen this way, for every spin of that wind turbine, in very simple terms, you only get a third of the spin at the end.

Which, by the way, is exactly why we should electrify as many things as we can. But equally, our whole fossil fuel economy is built on--

low base transport is built on 25% efficiency of diesel engines.

Yeah.

So where we can electrify, we can go from being 25% efficient to 90% efficient. But where we can't, we're not competing with the world of perfect efficiency today, we're competing with we are more efficient than the world that exist today in fossil fuels. It's just not as good electrification. It's really important to kind of that pragmatism, I think, because we're not trying to--

Electrification will be cheaper because it's efficient.

And with a battery, there's a whole lifecycle cost of a battery that doesn't really get talked about that much. But with the battery, say it's 90% roundtrip efficiency, you lose five in 5 hour if you only stay in DC. That's like 90% of the power that comes from--

90% of the spin of a wind turbine in the wheels compared to if you--

As AC.

As AC, Yeah.

But on that, 'cause it's a useful segue, so there's different types of hydrogen projects the way I see it. If I was categorize them, so you've got, OK, two broad buckets. You've got ones that are export focused on ones that are co-located with the application. So i.e. you build your hydrogen production where you need the hydrogen, and you've got ones where you build hydrogen production where the renewables are cheap and then export it.

It's the hydrogen hubs thing, which is quite popular, being talked about a lot.

Yeah, and then the big question is scale.

So, let me touch on the feasibility of them. So the smallest scale projects are, I want to produce some hydrogen, say a MW worth allocation to put into some vehicles.

I think that's the least competitive type of hydrogen production. Because you've got all the problems of grid distribution, but you save yourself moving hydrogen around.

So you get effectively all the negatives of constrained electricity systems, but with very small volumes of hydrogen at the end. I don't think that's a viable strategy.

Where I do think it makes sense is to have offshore large transmission connected hydrogen production at things like ports and stuff into the hundreds and hundreds of MW per gigawatt scale. That kind of makes sense to me, because you kind of say I don't need the renewables to be cheap here, I'm going to transmission it in and I've got a lot of uses in one place. So the hub model or the ports model kind of thing works to me. Then the opposite side is export based hydrogen focused, which is what we do at a regional scale. I.e. We build where we have renewable assets that are being built, so curtailed wind in Scotland, or solar in England, and we'll take the hydrogen to where it's needed. Or you build where it's very, very high capacity factors and low of wind and solar and then try and export it elsewhere.

Now there's skepticism around those type of projects, because in theory, yeah, great, we've got a combined capacity factor of 90%, and therefore--

There's a whole transmission problem to solve, right?

Exactly. So, we think we're kind of in a pragmatic regional scale at the moment, and I can see moving to the kind of gigawatt scale with transmission connected where the offshore wind piece is. The other two I'm a bit skeptical on. I'm not saying they're not viable, but I wouldn't be putting my money into a 50 gigawatt in x geography that needs to be based on a world's globally traded hydrogen economy, and I also wouldn't be building very small Hydrow production because you've got all the problems of grid then you're not mitigating any of it. So for me I think those two reasonably sized kind 100 MW gigawatt scale hydrogen hubs or regional distributed hydrogen models with co-located renewables is where it makes sense, and the other two I'm a bit more like, uh, maybe let's see where the market goes.

Another interesting thing about this whole conversation is there is no, is hydrogen good, is hydrogen bad, right? And what I've really liked about this conversation with you is if I said--

Here's a test, right? Hydrogen for domestic heat, thoughts?

Yeah, so I mean, I've recently hired somebody awesome called Daniel and she keeps telling me I need to not get drawn into this debate, but in my view is like heat pumps are more efficient, incredibly more efficient. They are like one of our secret sources against climate change. What other things can you put one in and you get four out? They are awesome, and they are also very popular in cold climates.

You gotta speak to the Scandies. They can't believe we still burn gas.

Yeah, so I'm very long heat pumps and really struggle to see how hydrogen will play a role in domestic heat in terms of--

both in terms of lowering costs for domestic customers or not materially increasing costs for domestic customers and also just the pure volume of hydrogen need.

And I don't buy the argument of choice, because I think if you give people a choice to pay for times of energy, they're not going to choose it.

And the poor quality of housing stock is not the point. That needs to be fixed anyway. So, I just don't think ultimately hydrogen to the gas network, whether it be on a blended or a pure basis, is going to be a viable strategy.

That's my position. I think we probably need to jump up and down slightly less about it, but, yes, that's my position.

But it's funny, like, if you're in the hydrogen economy, like your business, you're flanked by some pretty crazy ideas and interests. And what's been good about this conversation, I think, is you guys are forging your own path, but in a pragmatic way, which I think is--

We do have some disagreements, and I'd love to have you back on the podcast in a year or two's time and we can talk about where it's going. And I hope you're successful. And I hope it's the best way I hope it's the best solution what you guys are following. And certainly solving problem one, we talked about before, sounds like a great opportunity.

I was going to say the thing that we focus on though, so by working with renewable projects our view is that the trick to making hydrogen affordable is shaping when you produce it. So our view is that if you envisage a world with an overbuild of renewables, which we do, in order to hit our needs of power and not have to have handle the big, what's it called that German word for no wind,

Yeah, something.

-

Yeah.

I don't want to say. I'd just offend any--

It's in the show notes.

Yeah, German speaking listeners, apologies.

But the point being, I think we are going to have a world with lots of additional electrons that are green at times, and we see hydrogen production kind of going after that gap. So where batteries are going after the 1-2 maybe 6 hour mark, there's batteries in here, hydrogen adds value by shaping our overall renewable output. And whether it goes into long duration storage, whether it goes into refineries, ammonia production, HGVs, these are all potential avenues for it. But what we're not saying is let's double down on building dedicated hydrogen infrastructure to do things like domestic heat, because I think that's a poor use of society's capital.

So it's kind of like--

That's the big thing, right? We've got limited resource, limited people.

I like that. Society's capital. What's the best, most efficient way to distribute it at--

We'll get to distribution another podcast, but--

Well, we've got projects in Scotland where we are literally taking a wind farm that's, I think it's 70 Meg, but it was a third constrained on its export. So we literally take the third out of that and a bit more, so net net, you've now got a 70 Meg windfarm that's more viable than it was, because we're producing hydrogen from it. Like, it's a win across the board. Now, obviously, as you build--

It should be good if there was a hydrogen sit--

some of them needed hydrogen near that.

I mean, so that's the only sympathy I've got sometimes when people talk about, if we could put it into the gas grid and it come out somewhere else, it would be super helpful. But then you get into, can you extract hydrogen from the methane? Is it creating a longer term dependency? I don't want to get into that. So hence why I think keeping it pure as hydrogen and distributing it is probably a cleaner strategy for us right now.

Awesome. So, I mean, look, before we finish, I just want to say thanks for a sensible conversation where we respectfully disagreed on a few things, but we got there. And I what you guys are doing is really, really interesting. And it will have its mark, right? Especially if you can solve problem one and have its mark, and we'll see what happens with problem 2,3,4,5.

I wanna give you the chance. What you haven't talked about that you want to raise, or talk about, or plug.

Yes, I suppose the only thing I would plug is I know you've got a large renewable developer listener base. And for real, it's all about saying, look, we think hydrogen's complementary to building new build renewables, and so yeah, get in touch everyone to chat about it.

OK, yeah. So, we'll put your contact details everywhere. They'll be plastered everywhere and people can get in touch. So, thank you very much for coming on, and we will have you back some time in the future and we'll see how this thing is growing.

Yeah, it'd be exciting.

Thanks very much.