Turning Challenges into Opportunities
The Road to a Low-Carbon Society
The news over the past few weeks has not been encouraging for the outlook of sustainability and energy transition projects in New Zealand and Australia. Fortescue announced they are pushing back their target to produce 15 million tonnes of clean H2 annually by 2030. Similarly, Air New Zealand have similarly announced it is reducing its 2030 carbon intensity targets to something it views as more achievable due to industry challenges.
At first glance, these announcements may seem like proof that sustainability and the energy transition are unattainable. However, those within the industry were not surprised.
Many people are familiar with the Gartner hype cycle, which describes the maturity, adoption, and social application of specific technologies. Over the past few years, there has been a period of high expectations regarding the ease of transitioning to a low-carbon society. Now, as projects face difficulties and broader economic factors come into play, announcements by Fortescue and Air New Zealand might indicate that we are encountering a phase where reality tempers those initial high hopes in the energy transition.
What challenges do we face? – Electricity Prices and Supply Chain
Fortescue remains steadfast in its commitment to green hydrogen while ensuring projects are economically viable. For the hydrogen industry, this means electricity prices must be around USD$30/MWh to produce a Levelised Cost of Hydrogen (LCOH) where electricity accounts for 50% of the cost. In New Zealand, our wholesale electricity prices in July 2024 ranged from USD$200/MWh up to $500/MWh, higher than what is considered economically feasible.
Air New Zealand has stated that global manufacturing and supply chain issues and alternative jet fuel are the reason for delaying their sustainability targets. The clean hydrogen industry faces similar supply chain and manufacturing challenges. Globally four times more electrolysers were produced in 2023 than the past 100 years, and we need to scale that by another 20 times by 2030. For Catalyst Coated Membranes (CCMs), which Bspkl produces, this means increasing production from around 200,000 units per year to millions of units per month as quickly as possible. Applying that same manufacturing and supply chain challenge across every component in an electrolyser helps explain why the industry is struggling with supply and price increases.
With Challenges comes Opportunity
Fortescue is finding opportunity by vertically integrating its hydrogen projects with renewable energy installations, such as the 300MW Holmaneste project in Norway, and taking advantage of government tax credits for green hydrogen.
For Bspkl, the opportunity lies in reducing the impact of electricity prices on the cost of hydrogen. We are developing the next generation of catalyst coated membranes (CCM) with ultra-low levels of expensive catalyst materials, innovating in manufacturing to accelerate production and working towards achieving performance targets like the USA Hydrogen Moon Shot Hydrogen target of US$1/kg of Hydrogen.
Bspkls efforts to optimize the efficiency and performance of CCMs contributes to reducing the overall cost of hydrogen production, making green hydrogen a more competitive alternative to traditional fossil fuels. Through these innovations, Bspkl is not only addressing current supply chain and economic challenges but also paving the way for a sustainable energy future.
Change is never easy, and rarely ever cheap
The hurdles faced today are part of a larger historical context where traditional energy sources like oil, gas and coal have had over a century of development. Achieving cost parity for clean hydrogen and other sustainable energy technologies within the urgent time frame of current climate goals can make setbacks seem like signs of failure.
While this current phase may seem discouraging, it is a necessary part of the innovation and development cycle. With continued investment in R&D, scaling production capabilities, and continued government policy support the industry can move past the Trough of Disillusionment towards more stable and sustainable growth.