Will 2023 be hydrogen’s year?

GUEST COLUMN

Scott Nyquist debates both sides of the hydrogen argument in this week’s ECHTX Voices of Energy guest column. Photo courtesy of Aramco.

Yes and no.

Yes, because there is real money, and action, behind it.

Globally, there are 600 projects on the books to build electrolyzers, which separate the oxygen and hydrogen in water, and are critical to creating low-emissions “green hydrogen.” That investment could drive down the cost of low-emissions hydrogen, making it cost competitive with conventional fuels—a major obstacle to its development so far.

In addition, oil companies are interested, too. The industry already uses hydrogen for refining; many see hydrogen as supplemental to their existing operations and perhaps, eventually, supplanting them. In the meantime, it helps them to decarbonize their refining and petrochemical operations, which most of the majors have committed to doing.

Indeed, hydrocarbon-based companies and economies could have a big opportunity in “blue hydrogen,” which uses fossil fuels for production, but then captures and stores emissions. (“Green hydrogen” uses renewables; because it is expensive to produce, it is more distant than blue. “Gray hydrogen” uses fossil fuels, without carbon capture; this accounts for most current production and use.) Oil and gas companies have a head start on related infrastructure, such as pipelines and carbon capture, and also see new business opportunities, such as low-carbon ammonia.

Houston, for example, which likes to call itself the "energy capital of the world,” is going big on hydrogen. The region is well suited to this. It has an extensive pipeline infrastructure, an excellent port system, a pro-business culture, and experience. The Greater Houston Partnership and McKinsey—both of whom I am associated with—estimate that demand for hydrogen will grow 6 to 8 percent a year from 2030 to 2050. No wonder Houston wants a piece of that action.

There are promising, near-term applications for hydrogen, such as ammonia, cement, and steel production, shipping, long-term energy storage, long-haul trucking, and aviation. These bits and pieces add up: steel alone accounts for about 8 percent of global carbon-dioxide emissions. Late last year, Airbus announced it is developing a hydrogen-powered fuel cell engine as part of its effort to build zero-emission aircraft. And Cummins, a US-based engine company, is investing serious money in hydrogen for trains and commercial and industrial vehicles, where batteries are less effective; it already has more than 500 electrolyzers at work.

Then there is recent US legislation. The Infrastructure, Investment and Jobs Act (IIJA) of 2021 allocated $9.5 billion funding for hydrogen. Much more important, though, was last year’s Inflation Reduction Act, which contains generous tax credits to promote hydrogen production. The idea is to narrow the price gap between clean hydrogen and other, more emissions-intensive technologies; in effect, the law seeks to fundamentally change the economics of hydrogen and could be a true game-changer.

This is not without controversy: some Europeans think this money constitutes subsidies that are not allowed under trade rules. For its part, Europe has the hydrogen bug, too. Its REPowerEU plan is based on the idea of “hydrogen-ready infrastructure,” so that natural gas projects can be converted to hydrogen when the technology and economics make sense.

So there is a lot of momentum behind hydrogen, bolstered by the ambitious goals agreed to at the most recent climate conference in Egypt. McKinsey estimates that hydrogen demand could reach 660 million tons by 2050, which could abate 20 percent of total emissions. Total planned production for lower-emission green and blue hydrogen through 2030 has reached more than 26 million metric tons annually—quadruple that of 2020.

No, because major issues have not been figured out.

The plans in the works, while ambitious, are murky. A European official, asked about the REPowerEU strategy, admitted that “it’s not clear how it will work.” The same can be said of the United States. The hydrogen value chain, particularly for green hydrogen, requires a lot of electricity, and that calls for flexible grids and much greater capacity. For the United States to reach its climate goals, the grid needs to grow an estimated 60 percent by 2030.That is not easy: just try siting new transmission lines and watch the NIMBY monsters emerge.

Permitting can be a nightmare, often requiring separate approvals from local, state, interstate, and federal authorities, and from different authorities for each (air, land, water, endangered species, and on and on); money does not solve this. Even a state like Texas, which isn’t allergic to fossil fuels and has a relatively light regulatory touch, can get stuck in permitting limbo. Bill Gates recently noted that “over 1,000 gigawatts worth of potential clean energy projects [in the United States] are waiting for approval—about the current size of the entire U.S. grid—and the primary reason for the bottleneck is the lack of transmission.”

Then there is the matter of moving hydrogen from production site to market. Pipeline networks are not yet in place and shifting natural gas pipelines to hydrogen is a long way off. Liquifying hydrogen and transporting is expensive. In general, because hydrogen is still a new industry, it faces “chicken or egg” problems that are typical of the difficulties big innovations face, such as connecting hydrogen buyers to hydrogen producers and connecting carbon emitters to places to store the carbon dioxide. These challenges add to the complexity of getting projects financed.

Finally, there is money. McKinsey estimates that getting on track to that 600 million tons would require investment of $950 billion by 2030; so far, $240 billion has been announced.

Where I stand: in the middle.

I believe in hydrogen’s potential. More than 3 years ago, I wrote about hydrogen, arguing that while there had been real progress, “many things need to happen, in terms of policy, finance, and infrastructure, before it becomes even a medium-sized deal.” Now, some of those things are happening.

So, I guess I land somewhere in the middle. I think 2023 will see real progress, in decarbonizing refining and petrochemicals operations and producing ammonia, specifically. I am also optimistic that a number of low-emissions electrolysis projects will move ahead. And while such advances might seem less than transformative, they are critical: hydrogen, whether blue or green, needs to prove itself, and 2023 could be the year it does.

Because I take hydrogen’s potential seriously, though, I also see the barriers. If it is to become the big deal its supporters believe it could be, that requires big money, strong engineering and construction project management, sustained commitment, and community support. It’s easy to proclaim the wonders of the hydrogen economy; it’s much more difficult to devise sensible business models, standardized contracts, consistent incentives, and a regulatory system that doesn’t drive producers crazy. But all this matters—a lot.

My conclusion: there will be significant steps forward in 2023—but take-off is still years away.

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Scott Nyquist is a senior advisor at McKinsey & Company and vice chairman, Houston Energy Transition Initiative of the Greater Houston Partnership. The views expressed herein are Nyquist's own and not those of McKinsey & Company or of the Greater Houston Partnership. This article originally ran on LinkedIn.

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Oxy inks long-term agreements for 2M tons of CO2 capture, transport

carbon contracts

Houston-based Occidental has made two long-term agreements that will expand its carbon management business in the Delaware Basin and the Permian Basin.

Oxy announced Nov. 9 that it has signed agreements with two unnamed project developers to capture and transport approximately 2 million metric tons of CO2 from their existing and new natural gas processing facilities in the Delaware Basin in West Texas annually. The CO2 will be transported for use in Oxy's enhanced oil recovery (EOR) operations in the Permian Basin.

“Securing reliable, long-term sources of CO2 supports Occidental’s advanced recovery strategy to extend the productive life of existing fields and enhance recovery across our conventional and unconventional resource base,” Vishal Gupta, president and general manager of EOR Ventures at Occidental, said in a news release. “The projects, once operational, will help diversify our CO2 supply, improve access to cost-effective resources and create infrastructure that can connect additional carbon capture projects over time. Federal 45Q incentives are an important support for these investments.”

According to the release, the projects have the potential to expand to handle up to 4 million metric tons of C02 per year combined. The first shipments to Oxy are expected in 2029. The unnamed developers will fund and build the infrastructure to capture, transport and deliver the CO2 to Oxy, the company shared in the release.

Additionally, the agreement stipulates that the projects will also include the build-out of nearly 100 miles of new CO2 pipeline infrastructure. The new pipeline is planned to connect with the existing CO2 pipeline network in the Permian Basin. Oxy adds that the pipelines are being designed to handle additional future capacity to "support future conventional and unconventional recovery opportunities" of CO2.

Oxy uses the EOR process to inject stored CO2 back into a producing oil fields to boost the site's performance. The recycled CO2 displaces trapped oil and gas and is then secured in the reservoir. Oxy says that EOR combined with Direct Air Capture (DAC) technology "remove[s] an amount of CO2 equivalent to that emitted during the production and consumption of [its] products."

Oxy subsidiary 1PointFive is developing a $1.3 billion DAC project in the Midland-Odessa area that is slated to be the largest facility of its kind in the world. Known as STRATOS, it's designed to capture up to 500,000 metric tons of CO2 per year. After a component delay, 1PointFive shared in May that it would ramp up operations at the project throughout 2026.

Houston researchers win prestigious DOE early career awards

Researchers at Rice University, the University of Houston and other Texas universities have been awarded the Department of Energy’s Early Career Award for their work in quantum science, AI and more.

Each professor who received the honor will be awarded $875,000 over five years to continue their work.

The Houston-area recipients include:

  • James Shee, assistant professor of chemistry at Rice University
  • Tony Geng, assistant professor of electrical and computer engineering at Rice
  • Naihao Chiang, assistant professor in the department of chemistry at the University of Houston

For Shee, the award will support his work to advance a “first principles platform to simulate the quantum dynamics of chemical systems of relevance to sustainable energy consumption and generation,” according to a news release from Rice.

“Support from the Department of Energy will enable my group to pursue the ambitious quantum chemistry development required to simulate the dynamics of transition metal-based molecular computing paradigms and multi-excitonic processes in a purely ab initio manner,” Shee said in the release.

Geng is developing next-generation AI for real-time digital twins for scientific systems. Geng and his team will make microchips that function as trainable electronic dynamical systems computing through natural, continuous evolution rather than digital instructions, according to the university.

Chiang’s work at UH addresses the DOE’s Quantum Information Science priority. Chiang leads a team that develops and applies “plasmonic-enhanced near-field optical techniques” to investigate fundamental light-matter interactions at the quantum limit before applying them to emerging technologies. In addition, the team will use AI to help with data acquisition and will utilize STEM workforce development.

Dr. Joshua Burby, an assistant professor in the Department of Physics at the University of Texas at Austin, and Junyeong Ahn, who is part of the University’s Texas Quantum Institute, also received early career awards for their work in superconducting and fusion technologies. See the full list of recipients from around the country here.

“The energy and creativity of early-career scientists is crucial for propelling scientific discovery forward. The Department of Energy is committed to nurturing this talent through programs like the Early Career Research Program,” Darío Gil, DOE under secretary for science, added in a release. “These awards provide essential resources and opportunities for collaboration, enabling these researchers to explore novel concepts and accelerate the development of solutions for our nation’s energy and scientific landscape.”

The DOE has also doled out funding to Houston researchers and companies in recent months through its Genesis Mission and geothermal initiatives.

Researchers from Rice, UH and Halliburton were named in July among the nearly 300 projects selected under the Trump administration's Genesis Mission, which aims to address some of the largest science and technology challenges in the country

In September, three Houston companies also received more than $45 million in funding from the DOE's Next-Generation Geothermal Field Tests and Geothermal Resource Characterization and Confirmation initiative to advance geothermal technologies and field tests. The projects were among 21 selected from around the country to receive a total of $99 million. Read more here.

Elon Musk's Tesla to cease cybertruck production in 2027

Tesla Talk

Tesla’s Cybertruck, the hulking, stainless-steel pickup that inspired devotion and derision with its science-fiction looks, will cease production next year.

CEO Elon Musk announced the model’s demise Friday, November 6, with a curt post on X, his social media site, simply noting production of the vehicle “will be winding down” around the middle of 2027 at its facility outside Austin, Texas. Musk said the move was to allow increased production of its Cybercab robotaxi.

For the Cybertruck, a pet project of Musk who insisted it was Tesla’s best product, it marks an unceremonious end to one of the auto industry’s most ballyhooed debuts.

“Few vehicles in history have generated as much attention,” said Armen Hareyan, whose Torque News site covers autos. “The Cybertruck became a cultural symbol – loved, mocked and impossible to ignore.”

The Cybertruck rolled onto the scene in a dramatic unveiling in 2019, when a Tesla designer hurled a metal ball at the vehicle to demonstrate its supposedly unbreakable glass, only to see it shatter. He repeated the stunt on another window of the truck only to shatter that one, too.

Even as some critics scoffed, Musk was steadfast.

“I just wanted to make a futuristic battle tank — something that looks like it could come out of ‘Blade Runner’ or ‘Aliens’ or something like that but was also highly functional,” he told Automotive News. He called it “a better sports car than a Porsche 911” and “a better truck than an F-150.”

It struck some as the perfect vehicular reflection of the brash, convention-busting Musk.

“A really controversial vehicle unveiled by a controversial individual into a market where none of the electric trucks have been able to really capture demand,” said Spencer Penn, a former Tesla executive who left the company before the Cybertruck’s launch and now heads software developer LightSource.

Penn remembered watching the unveiling and feeling initially revolted by the sight of the Cybertruck, calling its appearance “madness.” But the more he looked at it, the more his opinion changed. He signed up for a pre-sale reservation, though ended up not getting a Cybertruck when Musk’s promises of a price tag under $40,000 went unmet and the first trucks sold for double or more. Penn called the Cybertruck part of Tesla’s adventurous spirit that drives innovation.

“Some of these bets work and some of these bets don’t,” he said.

While the decision to end Cybertruck production may be driven by sales realities, it's also a reflection of Tesla’s shift to autonomous vehicles, on which Musk is betting the company’s future.

Musk once forecast he’d make 250,000 Cybertrucks a year. Kelley Blue Book estimated Tesla sold just 20,237 of the vehicles last year, down about half from the year prior. Sales through the end of September this year were down another 28%, according to Kelley Blue Book.

If the imposing, sharp-angled, dystopian appearance of the Cybertruck weren’t enough to turn many potential buyers away, Musk did so himself by allying with a panoply of right-wing figures, most notably U.S. President Donald Trump. He alienated some customers as his image morphed from eccentric innovator to polarizing force trading his billions for political influence.

Once-passionate Tesla drivers rushed to sell off their cars, or slapped stickers on the bumper declaring, “I bought this before Elon went crazy.” Organizers staged demonstrations outside Tesla showrooms and urged investors to dump shares of the company’s stock. Anger spilled into violence, with Molotov cocktails hurled at Tesla vehicles, charging stations set ablaze, and dealerships covered in graffiti.

Lovers of the Cybertruck became targets, too, subjected to shouts of “Nazi!” and extended middle fingers.

Ross Blankenship is one of them. When he first laid eyes on the Cybertruck, he felt transported to a world from his childhood, when he would play “Halo,” the sci-fi video game. He had to have it.

“I had that sort of child in me wanting to be part of something cool that would change the future of automotive,” Blankenship said in a call from his Cybertruck as he drove through Sunnyside, Colorado. Even as Blankenship found he agreed with Musk on politics, he hated seeing a vehicle he loved turned into a political symbol. “I never bought it for any other reason than the fascination with the future technology of trucks … so that was a little heartbreaking.”

He would buy another Cybertruck again in a heartbeat, calling its end “a sad moment.”