Policy Support - Is It Coming ??
Policy support and investment of at least US$600 billion is required.
- Policy support is a starting point, but having a legislative support is just not enough, unless followed through with a regulatory framework .
- Key learning: Market forces alone will not bring the investments, unless barriers to new entrants and entrepreneurs are removed with prudent policies and workable policy frameworks.
2- Demand Creation follows sound policy support and frameworks. We have seen that in Europe with Wind And Solar. Policies and frameworks, create demand and markets. But time and pace is of essence. Getting in emerging market too early may results in inadequate returns - too late and market is saturated. PV solar market is an excellent example where early market entrants reaped the benefits, and major oil companies are now finding it difficult to enter.
- Key Learning: Don't wait for demand to be created. Create hydrogen markets. Expectation from big oil companies is not simply decarbonize their own production, but leverage their technology, experience and supply chains to to create new markets.
3. Investment Influx: Once barriers to entry are removed, demand and markets will emerge. The pipeline of projects and investment will soon follow. Best example is pipeline of offshore wind projects and investments and more recently pipeline of projects in CCS.
- Key Learning: Map out the path to decarbonization. Each company may have its own competitive advantage. Choose a path that meets customer demand while meeting Paris climate target yet be profitable. Use Use Defensive & offensive M&A to position in he market to achieve net-zero.
GREEN HYDROGEN
- Currently demand with electrolyzers is only one mtpa, in a market of 100 mtpa, a very small share.
- It is expected to grow 223 mtpa by 2050.
- Another example is hydrogen, where 18 countries have provided policy support for Green Hydrogen in various sectors. Transport, Electrolyser refueling stations are the top policy focus and not surprising most demand is emerging in these areas.
- As manufacturing scales and becomes automated, electrolyser capex will fall 35-65% in the next decade, making sub US$2/kg green hydrogen achievable in most markets by 2040. Chile and Brazil lead at sub-US$1/kg with strong load factors and access to cheap
- Substantial investments are required to accommodate the anticipated growth up to 2050. Developers will need to invest around US$100 billion to support supply growth up to 2030 and an additional US$500 billion by 2050.
BOTTOMLINE
Hydrogen must be a a critical element in energy transition strategy to Net-Zero. Super-majors (IOC) and National Oil Companies (NOC) have big role to play in investments and need to step up from R&D domain to actual investments. Hydrogen is stated objective of many oil companies, However, invested capital (%) remains small. In short to medium terms; Need to see more investments in transportation (Medium to heavy vehicles), refueling stations, electrolyses, blending and use in existing natural gas network. In longer term investments are needed in Industrial and power generation.