For this episode we had Mr. Massimiliano Cervo,MSc. Chem, FMVA. Director of Business Development at H2helium and Regional Fellow for the World Energy Council. Massimiliano has been working for the past 5 years in the Hydrogen Industry, especifically in Project Finance and Due Diligence, lecturing now the Hydrogen Diploma at the National University of Technology in Buenos Aires, Argentina.Massimiliano is a certified Financial Modeling & Valuation Analyst, and in his opinion the cost of green hydrogen is getting closer to the fossil fuel price parity, and there are three drivers for the levelized cost of hydrogen. Cost of electricity, with about 20 $/MWh being a benchmark for making green hydrogen viable. Another factor is the adoption of hybrid schemes of hydrogen production using combined renewable sources, and CAPEX being the third main driver for dropping green hydrogen prices.
Governments are doing a lot at the moment to build momentum for hydrogen, and Massimiliano sees Australia, Canada, and the USA as being the key exporters due to their extremely attractive levelized costs of electricity and rich histories of producing blue and green hydrogen. The key consumers are going to be Asia Pacific countries such as Japan, China, and South Korea, especially for industrial hydrogen, though not necessarily for mobility where Europe is going to be the biggest consumer due to the greater deployment of EVs that has been achieved over the past decade.
Mr. Cervo notes that ammonia is going to be a leading consumer of hydrogen, with a slightly larger demand than hydrogen use for refineries. Ammonia is also going to be a very attractive carrier for hydrogen, as its consumption and demand will increase with population growth. On the other hand, refineries might keep using blue over green hydrogen because adopting carbon capture will be easier for the oil and gas industry than having to invest in electrolyzers and bring electricities and developing value chains.
Massimiliano predicts that heavy industry and e-products becoming emerging markets that are going to increase their share in the next 10-15 years. The mining and metallurgy industries can use natural gas to produce hydrogen, and also as a source of heat.
E-products is another emerging sector according to Mr. Cervo, with such applications for green hydrogen as establishing short term on-site green production facilities for products such as green pharmaceuticals and carbon-free foods, which have a strong potential to see rising consumer demand in the coming future.
He believes that transporting pure hydrogen via ship is a bit of a challenge, but it is not a case for ammonia, for which there is already existing technology today. He sees ammonia becoming a principal energy carrier for hydrogen during in the short and medium-term. On land, pipelines make sense but for longer distances up to 1400km compressed hydrogen (transporting it in vessels or cylinders) can be a more attractive solution.
Hydrogen financing is following the same route that solar energy did in the beginning, with project financing relying on increasing debt as much as possible and ensuring cash flow. On this basis, the key factor to getting successful project financing is long-term contracts with 20-30 years of operation.
For hydrogen projects to become bankable today it is not about the technology, it is all about the off-take and purely creating scale and demand where production nowadays is not an issue.