Why do investors display such eagerness to invest in green Hydrogen but are so disinclined to spend on carbon capture projects? In this thought-provoking article, Adrian Mason addresses this question.

Adrian

Question. Why do investors display such eagerness to invest in green Hydrogen but are so disinclined to spend on carbon capture projects?
The technology is unproven and is way too expensive at present to any kind of make economic sense, but enough about Hydrogen. Carbon capture has been working effectively for fifty years or more yet still it has not seen a wider take up. Why is that?
Carbon capture, utilisation and storage (CCUS) will need to form a key pillar of efforts to put the world on the path to net-zero emissions, so say the IEA. If it is good enough for the IEA to claim it needs to be an integral part of the decarbonisation mix, then why not for investors? Carbon capture currently only represents 0.2% of energy related CO2 emissions, yet all technology, theoretically at least, has a role to play in cutting emissions.
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Then what are the driving causes of the imbalance? Simply put, Hydrogen has an obvious user base. Essentially anybody who wants a clean burning fuel or to reduce their hydrocarbon consumption would gladly look at solutions involved this highly combustible gas. However, who is the client for carbon capture? Who benefits? That, I feel, is the real heart of the question.
From a purely economic perspective carbon capture makes little sense. Spend an inordinate amount of money to produce a substance that you are going to do little more with than shove back down into the ground. It starts to look more attractive when the government gives subsidies of up to $180 a ton, as is being proposed in the US 45Q tax credit.
What about EOR I hear you say? Yes, it can be used to drive some more hydrocarbons out of the ground, which does account for over a third of captured CO2 use at present. The problem with this is the same as the problem with Blue Hydrogen. It is tainted by the whiff of hydrocarbon use, not something any shareholder or investor wants to be associated with.
CCS then is simply a product without a customer. Big money will not be invested if the only real return is dependent on carbon pricing or government subsidy. This kind of risk is not something you base a long-term multimillion dollar investment around unless you have a crystal ball. It appears then that for the time being at least, carbon capture is simply not the equal of hydrogen.
Energy Voices is a democratic space presenting the thoughts and opinions of leading Energy &amp; Sustainability writers, their opinions do not necessarily represent those of illuminem.

Why Carbon Capture is not the equal of Hydrogen

Who is really going to pay for the energy transition and how much it will impact the price of a barrel of oil? How is green hydrogen going to be financed? 

I have a dream. I dream that zero carbon Green Hydrogen will become the primary power source in my country. Not only that, I want the Oil &amp; Gas industry to pay for it. Is that too much to ask?
Not really. A term I have been hearing more of recently is the Transition Premium? I expect you will be hearing a lot more of it soon because it will impact your energy bill for the foreseeable future. You think that energy is becoming more expensive? You are right. It is. That’s the transition premium and that is exactly how we are going to pay for Green Hydrogen.
Let us not be in any doubt, hydrocarbons are here for the foreseeable future. If you look at the global Power mix out to 2030 then you get the distinct impression that the extractive industries will still be in rude health for a few years yet. Do you think that crude oil production is declining in the UK North Sea? No sir. There will in all likelihood be a slight increase over the next five years based on 2020 production.
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Earnings for ExxonMobil in Q1 were $2.7 billion and for Q2 $4.7 billion. To put those numbers into context that comes after 4 straight quarter losses. What might those profits look like when Brent hits $100, or $120? If you are looking at historical trends to guide you all price corrections have seen a sustained period of growth in the subsequent years. Plenty of miles in the tank yet in more ways than one.
So back to Green Hydrogen. The energy transition has been estimated to cost $73 trillion out to 2050. That’s a whole lot of dollars. If it is going to be paid for by major oil then they will need the Brent price to keep on rising. If that is the case, then how long before the oil price hits $200? We will be looking back at 2021 as the good old days of cheap fuel. As COP 26 motors on and we decide who is going to find all those trillions maybe we should reflect on the fact that perhaps the answer really is to plant more trees.
Energy Voices is a democratic space presenting the thoughts and opinions of leading Energy &amp; Sustainability writers, their opinions do not necessarily represent those of illuminem.

Green Hydrogen, the Transition Premium and $200 Oil

Why is taking such an age for Blue Hydrogen projects to get off the ground?
When you think about it, it is the obvious next step. We are going through an Energy Transition not an Energy Step Change. This means an incremental movement towards our common goal not a total ground shift overnight. We need a bridging technology and blue hydrogen ticks every box





<h1>Why is it taking such an age for Blue Hydrogen projects to get off the ground?</h1>
When you think about it, it is the obvious next step. We are going through an Energy Transition not an Energy Step Change. This means an incremental movement towards our common goal not a total ground shift overnight. We need a bridging technology and blue hydrogen ticks every box.
Global corporations with vast hydrocarbon reserves are being driven by legislation and shareholder opinion to decarbonise at an eye-watering rate. This will take money, lots of it. So, what would be the ideal way of generating the funds to mobilise this transition?
Surely a preferential route would be to utilise the vast gas resources in your portfolio at a gas price that is the highest since 2018. On top of that let us make sure to utilise our current midstream infrastructure and at the same time fill in a few depleted wells with CO2 and become part of the blue hydrogen economy. Win-Win.
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<h1>Or so you would think…</h1>
So where are all the Blue Hydrogen projects? They should be popping up all over the place given the backdrop of incentives. But they are not. In fact only 9% of announced Hydrogen projects globally are Blue in colour. Why is that? One theory is that perhaps true CCS, that really works, is simply too costly. In fact, how many active projects are even out there?
Maybe we need to face the fact that Blue is simply not the right shade of Green and activist shareholders don’t want to hear about it. Once they understand that Blue Hydrogen is sourced from natural gas who cares if it captures over 90% of emitted carbon.
Or it could just be that the IOC’s are simply thinking longer term. It will be at least 10 or 15 years before there is enough renewable energy in Europe to fully drive the Green Hydrogen economy so why not just wait until then? At that point the technology would surely have improved enough to make production somewhat economic. Then over to the acquisitions team.
Hence for the time being we will all need to wait. Blue is not the colour that matters in a Green Energy world. Could it be that you are concerned about counting the overall carbon cost in using renewable power sources to generate Green Hydrogen? It seems prudent to be so but alas, that’s another story entirely.
Energy Voices is a democratic space presenting the thoughts and opinions of leading Energy &amp; Sustainability writers, their opinions do not necessarily represent those of illuminem.

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Adrian Mason

Adrian Mason

Why Carbon Capture is not the equal of Hydrogen

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