Some progress on emissions is happening

 From The Guardian

There is something of a reality check under way on the response to the climate crisis. It’s no secret that countries and corporations are far from living up to the goals set by international leaders at the landmark 2015 Paris agreement.

Unless there is a significant course correction, the ramifications will be far-reaching and often destructive. The second coming of Donald Trump and growing global instability has made a top-down injection of urgency at the pace needed harder to imagine. Optimism is harder to come by.

But that doesn’t mean nothing is happening.

It’s worth pointing this out because a narrative has started to take hold that renewable energy and other clean solutions have made little to no headway in displacing fossil fuels, and therefore are pointless. Fuelled by Tony Blair and the former US government adviser Daniel Yergin, and embraced by the fossil fuel industry and its lapdogs in the commentariat, it is used to attack zero emissions targets as a fool’s dream. In Australia, it is part of the backdrop as the Albanese government is lobbied over whether to set an ambitious emissions reduction target for 2035.

The reality, though, is more complicated. Here are some things worth considering if you hear climate action is pointless.

Clean energy is coming for fossil fuels

 

One line that has gained some traction this year is that the proportion of global energy supply from fossil fuels has barely moved over the past 35 years. The claim – bubbling away in The Australian, on Sky News [right-wing Murdoch media] and on social media – goes that dirty fuels provided 85% of energy in 1990, and still provide 80% today.

So much for progress, right?

But the Bloomberg New Energy Finance [BNEF]founder and self-declared conservative Michael Liebreich points out that this ignores an important factor.

The percentages referred to by fossil fuel advocates are for primary energy – that is, raw coal, crude oil, gas, wood, sun or wind. They do not refer to useful energy – energy that has been converted into a transportable form, such as electricity or refined petroleum, delivered to a consumer and then used to light their house or move their car.

This useful energy is the more relevant measure. And the process of processing raw fossil fuels into useful energy is, in many cases, not particular efficient. More energy is lost in generating at a remote coal-fired power plant and transmitting it to a home than if solar, wind or hydro was used. Petrol cars require much more energy to travel a kilometre than an electric vehicle does.

If we acknowledge this and consider useful energy alone, Liebreich says the amount of energy provided by fossil fuels is not 80%, but about 68%.

This is obviously still too high. But it won’t stay at this level. Despite all the talk of new coal plants still being built, they are playing in the margins. The International Energy Agency (IEA) forecasts that solar and wind will meet more than 90% of the global increase in electricity demand this year. Global generation from solar and wind energy is expected to increase by about 25%, from 4,000 terawatt-hours to more than 5,000. Next year it is expected to jump another 20%, past 6,000TWh.

The IEA projects that global renewable energy output – including solar, wind and hydro – will surpass coal output in either 2025 or 2026. For the first time in a century, the share of electricity coming from coal will have fallen to less than 33%.

Solar and wind will together be nearly 20% – up from 4% a decade ago.

A key question is if this growth in renewable energy will eventually reduce global fossil fuel use – as is necessary – or mostly just meet growing energy demand. Liebreich argues compellingly that fossil fuel use is set to fall. Using a simple model, he suggests it is likely to start falling in the 2040s and could be squeezed out of the system by about 2065.

That is not near fast enough to deliver the trajectory scientists say is needed to limit global heating since pre-industrialisation to 1.5C. But it is a well argued rejection of claims that a global transition isn’t possible.

China? It’s moving

 

With a population of 1.4 billion and having taken on a huge proportion of the world’s manufacturing, China is easily the world’s biggest direct national climate polluter, pumping out more than twice as much CO2 as the second-placed US.

Its story is mixed, as always. But the data show it is changing. An analysis for Carbon Brief by China experts Qi Qin and Lauri Myllyvirta found that coal’s share of the country’s power generation fell from 73% in 2016 to 51% in June this year. This happened as it continued to build new coal plants for a simple reason – it doesn’t run them at anything like capacity.

A significant moment came earlier this year when China’s national emissions fell for the first time, dropping 1% in the first quarter compared with a year earlier. Beijing needs to do much more if it is to meet its commitment under the Paris deal. Its next five-year plan for economic development, due this year, will be crucial.

Source: Carbon Brief
Note how renewable electricity generation has, for the first time since the deep 2009 recession, grown by more than the growth in electricity demand, even though demand growth has been strong.

Dirty car sales are down

 

According to Our World in Data, global sales of internal combustion engine cars – which run solely on petrol or diesel – peaked in 2016 at 80.47m. Electric and plug-in hybrid car sales in that year were just 780,000.

Last year, sales of dirty cars were 62.05m, a 23% fall. Electric and plug-in hybrid car sales had increased to 17.5m.

Put another way, nearly a decade ago only one in every 100 cars sold across the globe was electric. Now it is more than one in five. Elon Musk’s extraordinary self-own in damaging Tesla’s reputation may dent the pace of growth but it won’t stop it. China has little time or need for Teslas and is home to more than 60% of global EV sales.

Still a mountain to climb

None of this is to understate the scale of the problem. This column has reported before on the big step-up in global heating since June 2023. Averaged across the globe, every day in 2024 was at least 1.25C hotter than preindustrial levels, and three-quarters were 1.5C hotter.

Extreme weather events are becoming more damaging. Feedback loops (melting permafrost and huge wildfires) are releasing large additional amounts of CO2, accelerating the problem. Governments have barely started to acknowledge the expected increase in economic, societal and environmental costs that will hit productivity – the current focus of the Australian political class – and so much else.

It’s hard to overstate how much there is to be done. But don’t believe self-interested arguments that action is impossible, or will be for nothing.

 

50 years of green hydrogen failure

 From Michael Liebreich.

It is over fifty years since Japan's "Sunshine Project" started governments pouring money into green hydrogen as a replacement for fossil fuels. How is it going? TLDR: not well.  That’s why it’s called the #HydrogenSoufflé.

I don’t even need to write a commentary - I’ll just leave you with five charts:

• We’re not producing green hydrogen (despite the investment
• We’re not buying hydrogen vehicles (despite the hype)
• We’re not buying hydrogen fork lift trucks (despite the rumours)
• We’re not buying hydrogen trucks (despite the hopes)
• We’re not buying hydrogen boilers (despite the grift)

Hydrogen is hard to store, because its small molecules can escape through metal and plastic molecules of its container.  It makes pipes brittle.  It needs to be chilled and compressed for storage, so there are energy costs/losses.  And in most cases, alternative technologies are cheaper and more effective.  For example, the round-trip efficiency of lithium-ion batteries for storage is much higher than electrolysing water and then using the hydrogen in a fuel cell.  For aircraft, the hydrogen has to be kept at  -253 C as a liquid or at 5,000 to 10,000 pounds/per square inch (350 - 700 bar, 1 bar equals one atmosphere).  Tricky.  It can be used to smelt steel, but that works best if the hydrolyser is close to the steel mill.  And as I've mentioned often before, if it is converted to methane by the Sabatier process, it can be used for long-duration storage for balancing the grid.

In my opinion, and obviously also Liebreich's, green hydrogen is mostly hype.  Green methane, maybe.  And as the first chart shows,  only 0.1% of hydrogen produced is in fact green.

Biggest drop in battery-pack prices in 7 years

 

From BNEF

Battery prices saw their biggest annual drop since 2017. Lithium-ion battery pack prices dropped 20% from 2023 to a record low of $115 per kilowatt-hour, according to analysis by research provider BloombergNEF (BNEF). Factors driving the decline include cell manufacturing overcapacity, economies of scale, low metal and component prices, adoption of lower-cost lithium-iron-phosphate (LFP) batteries, and a slowdown in electric vehicle sales growth. This figure represents a global average, with prices varying widely across different countries and application areas.

Over the past two years, battery manufacturers have aggressively expanded production capacity in anticipation of surging demand for batteries in the EV and stationary storage sectors. Currently, overcapacity is rife, with 3.1 terawatt-hours of fully commissioned battery-cell manufacturing capacity globally. That is more than 2.5 times annual demand for lithium-ion batteries in 2024, according to BNEF. While demand across all sectors saw year-on-year growth, the EV market – the biggest demand driver for batteries – grew more slowly than in recent years. Meanwhile, stationary storage markets have taken off, with strong competition across cell and system providers, especially in China.

Evelina Stoikou, the head of BNEF’s battery technology team and lead author of the report, said: “The price drop for battery cells this year was greater compared with that seen in battery metal prices, indicating that margins for battery manufacturers are being squeezed. Smaller manufacturers face particular pressure to lower cell prices to fight for market share.”

 

The figures represent an average across multiple battery end-uses, including different types of electric vehicles, buses and stationary storage projects. Prices for battery electric vehicles (BEVs) came in at $97/kWh, crossing below the $100/kWh threshold for the first time. While EVs have reached price parity in China, they are still more expensive than comparable combustion cars in many markets. BNEF expects more segments to reach price parity in the years ahead as lower-cost batteries become more widely available outside of China.

On a regional basis, average battery pack prices were lowest in China, at $94/kWh. Packs in the US and Europe were 31% and 48% higher, reflecting the relative immaturity of these markets, as well as higher production costs and lower volumes. The price differences for North America and Europe compared to China were higher than in other years, implying the drop in prices was more accentuated in China. Companies in China faced fierce competition this year. These conditions resulted in falling battery prices and lower battery margins, forcing many battery manufacturers to enter new markets, including energy storage, while also eyeing overseas markets willing to pay more for batteries.

The industry has also benefitted from low raw material prices. These could rise in the next few years, as geopolitical tensions, tariffs on battery metals and low prices stall new mining and refining projects.

Yayoi Sekine, head of energy storage at BNEF, said: “One thing we’re watching is how new tariffs on finished battery products may lead to distortionary pricing dynamics and slow end-product demand. Regardless, higher adoption of LFP chemistries, continued market competition, improvements in technology, material processing and manufacturing will exert downward pressure on battery prices.”

BNEF expects pack prices to decrease by $3/kWh in 2025, based on its near-term outlook. Looking ahead, continued investment in R&D, manufacturing process improvements, and capacity expansion across the supply chain will help improve battery technology and further reduce prices over the next decade. In addition, next-generation technologies, such as silicon and lithium metal anodes, solid-state electrolytes, new cathode material, and new cell-manufacturing processes will play an important role in enabling further price reductions in the coming decade.

We have to draw a distinction between battery cell prices and battery pack prices.   The cells are only part of a battery pack.  Battery pack prices are very different in different economies.  They are by far the cheapest in China, at $94/kWh, compared with the US at $123/kWh, and Europe at $139.   Without tariffs, battery cell prices would converge on the lowest price, which is currently around $53/kWh in China.  And there are sodium-ion batteries which will soon have a cell cost below $35/kWh, and a pack cost (my estimate) of $60/kWh.  

BNEF forecasts a fall of just $3 in pack prices during 2025.  I've used that in my chart below (which goes further back than 2013, as I have been collecting the data for longer), but I suspect that's far too conservative.   With huge oversupply of battery production in China, price pressure is going to remain.  And the pressure on China's battery manufacturers and EV makers to survive will drive exports, if not to Europe and the USA, at least to the rest of the world. 

This affects both stationary storage (for the grid) and for EVs.  Legacy carmakers refused to take EVs seriously until too late, which is why their battery pack prices are so high.  They are way behind the curve.  China has the capacity to build 40 million cars a year, and is only building 3/4 of that number.  China's car, and battery, exports are going to explode.  Whatever Trump does.

Should we all just drive a plug-in hybrid and be happy?

M20A-FXS 2.0-liter in-line 4-cylinder engine and Plug-in Hybrid set up in right-hand drive orientation. (Photo supplied by Toyota Motors Corp., Japan)

From Steve Hanley at CleanTechnica

I have been writing about the EV revolution for well over a decade now. When I started, battery-electric cars were few and far between. The BMW i3 was the eighth wonder of the modern world, and the Nissan LEAF was just beginning to attract buyers. In 2008, the Chevy Volt plug-in hybrid appeared and ignited the debate about which was better, a fully electric car or one that had both an engine and a battery? The Volt seemed the perfect answer for a time when there were few if any public chargers available. No charger? No problem. Let the gasoline engine do the work until you could plug in somewhere, usually at home.

Then along came the Tesla Model 3 and later the Model Y. Coupled with the outstanding Tesla Supercharger network, drivers of electric cars could now go pretty much anywhere they wanted without worrying about running out of battery power. Volkswagen pivoted from a purveyor of diesel dreams to an electric car proponent. Soon it was joined by Mercedes, BMW, Ford, GM, a reluctant Stellantis, and the Hyundai Motor Group, all promising they would build massive new factories to supply the world with battery-electric cars. The Volt was taken out of production and replaced by the fully electric Bolt and it seemed the sun had set on plug-in hybrid cars.

There are two kinds of PHEVS, series and parallel, and most consumers have little idea what the difference is between the two. In a parallel hybrid, both the battery and the engine power the wheels. Think of the standard Toyota Prius. The engine in that car runs almost constantly to move the car forward from a stop, to climb hills, or to pass another car. In a series hybrid, the engine is simply a generator to keep the battery charged or to power the electric motor. When you mash the throttle, the engine doesn’t leap into action. The car operates very much like a true battery-electric car until the battery is depleted, and then the engine turns on to supply electricity to the electric motor.

Driving in a parallel plug-in hybrid feels very similar to driving in a conventional car. There is the same engine sound much of the time and the same gear changes from the transmission. It’s not uncommon for people to wonder what all the extra hybrid bits and pieces are for. It drives like a normal car, it shifts like a normal car, and it brakes like a normal car. The only difference is an increase in fuel economy in city driving.

Driving a series plug-in hybrid, which some call an extended range hybrid, feels like driving an electric car most of the time. There is the same seamless acceleration, the same regenerative braking, and the same lack of a transmission always hunting for the correct gear. For those who don’t drive long distances every day and plug in each night, it is exactly like driving a battery powered car except any lingering concerns about range anxiety are eliminated.

Just under a third of plug-in hybrid sales in China last year were extended range plug-in hybrid vehicles, similar to the original Chevy Volt. They had an average range of 127 kilometers last year and the trend in China is for longer ranges with each new model year. Chinese customers simply won’t tolerate plug-in hybrids that can only travel 50 km or less on batteries alone, which is the norm for plug-in offerings in Europe and North America. BYD recently touted a new plug-in hybrid model it says can drive for a total of 2100 km on a combination of battery power and onboard range extender engine.

Globally, the plug-in hybrid sector has enjoyed the highest compound annual growth rate — +65% — over the last five years, according to Bloomberg. Sales in China are primarily responsible for that increase. The CAGR for battery-electric cars during the same period was +57% and for conventional hybrids +18%. While total sales of battery-electric cars globally are more than double those of plug-in hybrid vehicles, PHEV sales were almost as high as conventional hybrids last year.

One big improvement in plug-in hybrid offerings, especially in China, is the ability to use DC fast chargers to replenish the batteries, which are getting larger in order to increase how far the cars can drive on battery power alone. Previously, plug-in hybrids like the Chevy Volt were normally charged by plugging into a conventional wall outlet and waiting hours for the process to finish. Now many plug-in hybrid drivers are able to take advantage of fast chargers so they will spend more time driving on electrons and less time driving on molecules.

When it comes to prices, there is China and then there is the rest of the world. Bloomberg says the average prices of a plug-in hybrid in China have fallen steadily in the last five years, taking them from the most expensive option to being fully cost competitive with gasoline and battery-electric models. In the US, by comparison, they are now the most expensive drivetrain option, costing around $20,000 more than the models available in China.

Why there would be such a disparity between prices in China and prices in North America is unclear, but volume undoubtedly has something to do with it. American manufacturers are offering few plug-in hybrid models, although General Motors claims it will have several new PHEV models for sale in a few years. The new US tariffs on Chinese-made vehicles may do a wonderful job of insulating American automakers from competition by Chinese companies, but they also mean American consumers will face higher prices for electric and plug-in hybrid cars for years to come. Tariffs, in most cases, are a double-edged sword.

Bloomberg suggests the surge in interest about plug-in hybrid technology may be here to stay, or a blip on the radar screen. The determining factor will be how often they are driven in electric-only mode. BNEF analyzed all the research available on this topic over the last decade and the results are mixed. For private owners, studies found between 26% and 54% of all kilometers driven in PHEVs were done in electric mode. Some of the largest studies, involving millions of cars in China, were toward the higher end of that range.

For company cars, which are a common business perk for executives in Europe, the story is much different. In that situation, BNEF found the electric motor was used exclusively just 11% to 24% of the time. That is mostly because many of the drivers of company cars do not pay the fuel costs for their vehicles, which means they have little incentive to plug those cars in at the end of the day. That’s where policies in one area — company cars — may have negative effects in another area — reducing emissions from transportation.

Bloomberg says it is not clear what cars the buyers of plug-in hybrid vehicles would have bought if they had not purchased a PHEV. The EV purist view is that every plug-in hybrid purchased is a missed opportunity from an emissions and oil demand-reduction point of view. But if those buyers were never going to purchase a battery-electric car anyway, then buying a plug-in hybrid is a net positive from an emissions point of view. The latest trend suggests that as plug-in hybrid technology improves, more consumers are considering a PHEV.


Most CleanTechnica readers believe a plug-in hybrid is a poor choice. Studies show they have the highest number of vehicle fires and mechanical issues, largely because they have two powertrains for things to go wrong with. They also are costly in North America and Europe, which begs the question of whether more people would consider purchasing one if they cost the same as a normal car, as is the case in China. For those of you who still support the EV revolution, there is a ray of sunshine in the latest BNEF report.

It finds that battery-electric cars will continue to increase their market share to around 33% globally by 2030 and nearly 60% by 2035, so the trend is up strongly despite distractions like hybrids, plug-in hybrids, tariffs, and the like. It estimates plug-in hybrid sales may get to about 10% of the new car market before falling out of favor as battery prices decline, making battery-electric cars more affordable. Are the folks at Bloomberg on target? “We’ll see,” said the Zen master.

Plug-in hybrids eliminate range anxiety, and (if they're properly used) cut emissions significantly.  On the other hand, they have two engines.  As more and more EV chargers get installed, the demand for plug-in hybrids will prolly decline.

EVs really are cleaner than petrol cars

 From BNEF, by Corey Cantor

 

As electric vehicles become a bigger part of the global car fleet, a contrarian take seems to surface every few months: are electric vehicles really that clean?

When it comes to lifecycle emissions, the answer is a resounding yes. According to a new report by BloombergNEF, in all analyzed cases, EVs have lower lifecycle emissions than gas cars. Just how much lower depends on how far they are driven, and the cleanliness of the grid where they charge.

At the beginning of their lives, battery-electric vehicles, or BEVs, are emissions-intensive, thanks in large part to their battery-manufacturing needs. But once on the road, internal combustion engine vehicles (ICEs) quickly speed past BEVS – in terms of CO2 emissions, at least – because of the heavy emissions that gas-guzzling cars spew.

To determine the breakeven point, BloombergNEF looked at five different regions: the US, China, Germany, the UK and Japan. In any of these markets, the lifecycle CO2 emissions of a medium-sized BEV manufactured today and driven for 250,000 kilometers (155,000 miles) would be
27-71% lower than those of equivalent ICE vehicles.

A driver in the US would reach the breakeven point at 41,000 km – or in around two years of driving, assuming an average annual distance traveled of around 19,000 km. In China, meanwhile, the breakeven distance would fall at 118,000 km, or after roughly 10 years, due to the region’s fossil-fuel-heavy grid.

With zero-emission generation on the rise worldwide, that breakeven point could come a lot sooner by the end of the decade.

Across the five markets surveyed, the lifecycle breakeven falls to between one and four years for a BEV manufactured in 2030. A driver in the US will only need to travel about 21,000 kilometers, or around a year’s worth of driving, for a BEV to be cleaner than an ICE. A driver in China would still need longer than drivers in other areas surveyed, but it would take them only 53,000 km – or slightly over four years – to reach the breakeven point.

BNEF’s analysis assumes an average emissions intensity for each region per year. But in reality, EV charging emissions intensity will vary depending on the regional energy mix – and even the time of day charging takes place.

For instance, an EV driver in California who charges during daytime hours will be produce half as many grams of CO2 per kilowatt-hour charged as a driver who charges at night. The gap between daytime and nighttime charging grows even wider by the end of the decade.

Utilities currently offer tariffs to encourage overnight charging, but in the future they may get a better “green bang for their buck” by incentivizing charging at peak renewable hours.

Improvements to the EV manufacturing process could make electric vehicles even greener. Recycling batteries could help reduce the lifecycle emissions of new EVs, while on-shoring or near-shoring the full battery manufacturing process – which laws like the US’s Inflation Reduction Act have encouraged – could reduce emissions associated with global transport.

BNEF clients can access the full report here.

BMW says ICEVs have peaked

From Bloomberg

BMW AG says demand for its luxury cars powered by gasoline reached its highest point last year and expects all-electric models to lead future growth.

The German premium-car maker has well-filled order books for battery cars with a target of half a million vehicle sales this year, roughly a fifth of total deliveries, Chief Financial Officer Walter Mertl said. BMW group EV sales jumped 75% last year, driven by models like the i4 sedan and as overall sales growth has slowed in the US and some European countries.

“The tipping point for combustion engines was last year,” Mertl, 49, said on a call with journalists, with regulation to cut carbon dioxide emissions capping any expansion. “Future volume growth will primarily come from battery electric vehicles.”

BMW saw strong EV orders during November and December, said Mertl, with demand in Europe set to keep growing. The manufacturer hasn’t seen any pullback, and expects the new i5 sedan and additional Mini brand EVs to boost sales, he said.

“The current sales plateau of combustion cars will continue and then fall off slightly,” he said.

By the end of the decade, BMW’s EVs will have higher returns than its combustion-engine cars, Mertl said.

Solar installations up 2/3rds this year

 From PV Magazine

BloombergNEF has released its updated solar market outlook for 2023, projecting that 413 GW of module capacity will be installed this year. This capacity will mostly be driven by China’s contribution of 240 GW, along with strong growth in many other global regions.

The quarterly update was provided via Bloomberg’s podcast “Switched On” in the episode, “Solar supply glut crushes margins but buildout booming.”

From BNEF (listen to the podcast, it's fascinating):

It’s a good news, bad news situation for solar right now. On the one hand, annual installations are continuing to break records, with China set to build almost as much solar this year as the entire world rolled out in 2022. But on the other hand, the industry is suffering from a supply glut, weighing on the prices and margins of module makers.

The reason why the forecast doesn't show a continuation of the exponential growth in new installations since 2010 is the difficulty of integrating lots of solar into the grid:  electricity prices get driven down to zero on sunny days, but zoom as night approaches.   The solution is twofold:  first, require solar farms to have 4 hours of storage; and second, to encourage wind and also CSP (concentrated solar power), which has 12 hours of storage.  That still leaves rooftop solar, and in this case, it would make sense for governments to subsidise not the solar panels but to encourage attached behind-the-meter storage. 

It's worth pointing out that China's new solar this year is almost as much as the whole world's installations last year.

Battery pack prices hit record low

From BNEF

Following unprecedented price increases in 2022, battery prices are falling again this year. The price of lithium-ion battery packs has dropped 14% to a record low of $139/kWh, according to analysis by research provider BloombergNEF (BNEF). This was driven by raw material and component prices falling as production capacity increased across all parts of the battery value chain, while demand growth fell short of some industry expectations.

The analysis indicates that battery demand across electric vehicles and stationary energy storage is still on track to grow at a remarkable pace of 53% year-on-year, reaching 950 gigawatt-hours in 2023. Despite this growth, major battery manufacturers reported lower utilization rates for their plants, while demand and revenue fell short of many companies’ expectations. As a result, many EV and battery makers revisited their production targets, which in turn impacted battery prices. Lithium prices reached a high point at the end of 2022, but fears that prices would remain high have largely subsided since then and prices are now falling again.

Evelina Stoikou, energy storage senior associate at BNEF and lead author of the report, said: “It is another year where battery prices closely followed raw material prices. In the many years that we’ve been doing this survey, falling prices have been driven by scale learnings and technological innovation, but that dynamic has changed. The drop in prices this year was attributed to significant growth in production capacity across the value chain in combination with weaker-than-expected demand.”

The figures represent an average across multiple battery end-uses, including different types of electric vehicles, buses and stationary storage projects. For battery electric vehicle (BEV) packs, prices were $128/kWh on a volume-weighted average basis in 2023. At the cell level, average prices for BEVs were just $89/kWh. This indicates that on average, cells account for 78% of the total pack price. Over the last four years, the cell-to-pack cost ratio has risen from the traditional 70:30 split. This is partially due to changes to pack design, such as the introduction of cell-to-pack approaches, which have helped reduce costs.

On a regional basis, average battery pack prices were lowest in China, at $126/kWh. Packs in the US and Europe were 11% and 20% higher, respectively. Higher prices reflect the relative immaturity of these markets, higher production costs, lower volumes, and the diverse range of applications. There was also intense price competition domestically in China this year as battery manufacturers ramped up production capacity aiming to grab a share of the growing battery demand.

The industry continues to switch to the low-cost cathode chemistry known as lithium iron phosphate (LFP). These packs and cells had the lowest global weighted-average prices, at $130/kWh and $95/kWh, respectively. This is the first year that BNEF’s analysis found LFP average cell prices falling below $100/kWh. On average, LFP cells were 32% cheaper than lithium nickel manganese cobalt oxide (NMC) cells in 2023.

Miners and metals traders surveyed expect prices for key battery metals like lithium, nickel and cobalt to ease further in 2024. Given this, BNEF expects average battery pack prices to drop again next year, reaching $133/kWh (in real 2023 dollars). Technological innovation and manufacturing improvement should drive further declines in battery pack prices in the coming years, to $113/kWh in 2025 and $80/kWh in 2030.

Average battery pack prices have been falling by ~15% per annum, compound, since 2009.  It's been said by experts, for a while, that a battery pack price of $100/kWh would make EV "sticker" prices comparable to petrol/diesel car prices.   Adjusting for inflation, that number would today be ~$120/kWh.   If BNEF's forecast battery pack prices are correct, that mean that parity will be reached in 2025---less than 2 years from now.  Which means, in turn, that the percentage of EVs in total car and light truck sales will continue to rise rapidly.  It also means that the cost of storage for the grid will fall, reducing even more the cost of switching to renewables. 

Opinions about solar --- Jenny Chase

From a toot thread by Jenny Chase (who works for BNEF)  My comments are inside square brackets, like this: [...].

Time to make 2023 updates to my annual “opinions about solar” thread.

If you like these, the second edition of my book, Solar Power Finance Without The Jargon, comes out very soon (just sent final proofs to publisher!)

https://www.worldscientific.com/worldscibooks/10.1142/q0437#t=aboutBook

https://www.amazon.co.uk/Solar-Power-Finan

It's the book I should have read before trying to get a job in renewable energy. Edition 1 was “too valuable, and entertaining, to be ignored” according to PV Magazine. I rewrote Edition 2 quite a bit after the 2022 energy crisis, and included a lot more batteries and hydrogen.

I did this thread once a year on X, now branching out. You can view the 2022 thread below, and from there it links to 2021, 2019, 2018 and 2017.

https://twitter.com/solar_chase/status

1. To opinions! Solar is the cheapest source of bulk electricity in many countries, and the quickest to deploy, and now you couldn't stop it being built if you wanted to.

The limits to PV build in most places are grid access, permitting, and sometimes installation labour.

2. We don’t need a solar technology breakthrough. Today, solar developers just need a grid connection and permission to sell electricity, and then they’ll be off building solar plants whether it’s a good idea or not.

3. Right now the price of solar modules hits a new record low every week (currently $0.136/W) due to oversupply. Some manufacturers will exit in the next two years.

This is quite normal in this industry, and nobody will learn any lessons from it. Good for buyers, though.

4. Incremental improvements in solar modules continue. 2023 was the move from PERC cell tech (module efficiency ~21.3%) being the standard design, to TOPCon (~22.3%). The average solar module in 2023 was about 21.6% efficient, up from 15.4% (a now-obsolete multicrystalline design) in 2012.

5. In October 2021, when the standard mono module price was 27.3 US cents per W, I said it would "come back down over 1-2 years" (referring to all-time low of 19 cents in summer 2020). Since it’s now 13.6 US cents in normal markets (ie not the US or India), I’m going to say that wasn’t too bad a prediction.

6. India and the US have solar import tariffs, so modules are pricier there (~23 and ~33 cents/W respectively). Both countries are subsidizing local manufacturing capacity. This is a perfectly good strategy as long as it doesn’t slow down their energy transition.

7. Thank goodness we’ve collectively stopped the nonsense of boasting about "lowest ever solar auction prices", most of which were Middle East opaque transfer prices or had other features. PV power prices below $25/MWh unsubsidised are still too low. Solar still does cost money.

8. After grid and land, the next big challenge for PV will be power price cannibalization. Basically, PV plants in one area all generate at the same time. This means that they reduce the price of power at that time, “cannibalizing” their own revenues.

9. High PV build resulting in power price cannibalization also affects other power plants, but not as much as it affects solar, because solar plants generate most at times when solar is pushing the price down most. This will hold back more solar.

10. By 2030 most countries will have spot power prices of zero for a few hours every sunny day. This will be passed on to end consumers, to encourage them to shift power demand to sunny periods by electric vehicle and battery charging, preheating, precooling, etc.

11. It may well be that "negative power prices for a few hours every sunny day, followed by high evening power prices when the sun goes down" is a problem solved by capitalism and batteries.  [In other words, utilities/generators will make money by topping up the batteries at midday and discharging at the evening peak.  This may apply to EV owners too]

12. Utility-scale batteries became a thing much faster than I expected. BNEF's Energy Storage team recorded 16.8GW/32.9GWh of gross energy storage capacity additions worldwide in 2022, and expect 41.9GW/98.6GWh in 2023.

13. Small-scale batteries are a thing too, even though the economics don’t always make much sense. 2023 battery attachment rates – proportion of residential PV buyers who get a battery too – are >70% in Germany and Italy, >50% in Switzerland, >30% in the UK. [Depends of the difference between retail and wholesale electricity prices. For example, I'm paying 50 cents/kWh for electricity from 3 pm to 10 pm, while my feed-in tariff is just 11 cents/kWh]

14. I'm more worried about seasonal intermittency than daily, because there is no way we can build a big enough battery to shift energy from summer to winter. The economics of battery storage are impossible at one cycle a year.  [See my pieces on seasonal storage]

15. We oughtta be building more wind. Seriously, PV will get built anyway, but wind needs help, and wind blows in the dark and in the winter. It doesn’t help that solar pushes down power prices and generates renewable energy credits, which hurts wind farm economics.

16. To put it another way: when you tell an energy future model to optimise a power portfolio for clean power adequacy, it will give you more wind and less solar than when you tell it to optimise a least-cost electricity sector development.

17. BNEF's mid cumulative solar forecast is 5.8TW by 2030, above the 5.3TW that BNEF models that we need to be on a global net-zero-by-2050 high-renewables path. Wind is 1.9TW forecast and 3.6TW net-zero pathway, so a big miss.

18. Hydrogen made with renewable electricity will be used for steel and fertiliser manufacture. Some may be made into ammonia for shipping and aviation fuel. Some may even be burned for power in weeks of low renewables, which is one way to shift energy from summer to winter. [Hydrogen is hard to store and transport---converting H2 to methane via the Sabatier process is prolly a better way to go]

19. ...but sometimes net-zero electricity models want to put in hydrogen to cover weeks of low renewables just because the model isn’t given any other option. Deep decarbonisation models do weird things. It may turn out there are easier pathways in practice.

20. Electrification of transport is far better than biofuels; for example, as Dan Lashof says on this podcast with @drvolts , it would take about 300 acres of farmland to run a petrol car on corn ethanol, vs an electric car running on about one acre of photovoltaics.

https://www.volts.wtf/p/whats-going-on-wit


21. Decarbonizing aviation is hard. The CEO of Lufthansa said in September that running its fleet on sustainable aviation fuel made from electricity would take half Germany’s current electricity demand. BNEF thinks this an underestimate.

22. However, BNEF research did track orders for 989 electric aircraft (mostly small ones) as of early 2022. Fingers crossed.

(Paywall source for the 989: https://www.bnef.com/insights/30267 )

 

23. Heatpumps are better for heating homes than hydrogen, but in seasonal climates like northern Europe will exacerbate the seasonal demand and supply mismatch for solar. [Use green methane]

We need to build wind and probably nuclear as well.  [Yes, nuclear in high latitudes may be necessary]

24. Nuclear is safer than coal and climate change, and better than gas unless the gas plants are running very rarely. Batteries should help with the unfavourable ramping economics of nuclear (you *can* turn nuclear plants up and down, but you really don’t want to).  [Nuscale maintains that their SMRs can be easily ramped up and down] 

25. We’re finally getting serious about net zero carbon. Getting that last 10-30% of carbon out will be hard, and require some expensive solutions. The first 70-90% is easy-ish but we're getting on with it.

26. You can be cynical about government and corporate net zero emissions targets if you like, but they're a lot better than no net zero emissions targets.

27. Ordinary people have no idea how much progress we’ve made. Tell people at parties that in 2022 renewables produced 47% of Germany’s electricity. [South Australia 68% in 2022; should reach ~90% by 2026]

28. The 2022 energy crisis should put most concerns about cost of renewables subsidies to rest; renewable energy saved Europe billions of euros in imported gas, and reduced purchases from Russia. Turns out fossil fuels also cost money, and sometimes, unexpectedly, a lot.

29. Sorry for the German, but this chart is “the development of renewable energies in primary energy consumption in Germany” and it shows a. overall primary energy consumption (not just electricity) falling and b. renewables rising. This pattern is seen in many developed economies.

https://www.bdew.de/service/daten-und-graf

30. …It would still really help if rich people would stop pissing away carbon for no reason. [Yes]

31. The US Inflation Reduction Act includes a licence to print money for solar manufacturers and hydrogen firms.
It’s good for clean energy, but it's also like hitting the accelerator on a car with the handbrake on. The handbrake is trade barriers, grid and permitting issues.

32. US trade barriers on Chinese solar are great for First Solar, which also receives 17 cents/W for its US manufacturing, and also for southeast Asian firms like Boviet and VSUN, and Indian firms like Waaree and Adani.

33. The supply chain for solar manufacturing should probably be more transparent.

This sentence is also true without the word “solar”.

34. While moving to a circular economy with 100% recycling rates is essential in the long run, it’s not a challenge for PV in particular; few PV panels have been recycled to date only because the vast majority are still in use. It can be done.

35. For 5 years I have been refusing to get excited about perovskites until a perovskite company can disclose a commercial partnership with a named major module manufacturer. They have now. Still not excited. Just big manufacturers trying to look like they have an edge, I reckon.

36. Europe will support its solar manufacturing industry with grants, but not with trade barriers. This makes sense. The grant-backed factories are small, but are insurance against a huge disruption to the international supply chain.

37. Solar manufacturing is a horrible business to be in. Competition is vicious, the newest factories have the best tech. Older manufacturers carry heavy debt for factories rapidly becoming obsolete.

38. Floating solar is a thing, but it’s not a new tech. It’s solar onna boat.

It’s mostly about having a place to put the modules and, when it’s on a hydro dam reservoir, a grid connection right there. Grid connections are like gold dust.

39. Agrivoltaics, likewise, is solar onna field.

PV only has synergies with some crops. Competition for light and restricted mechanical access to crops are often problems. Study is needed to avoid just subsidised bad PV and bad farming in the same place. 

40. Batteries for residential solar systems are becoming standard offers. Frankly some of the sales claims are of indifferent veracity and the current software isn’t up to economically optimising when batteries charge and discharge. Buyer, be aware you may not save a lot of money.

41. Also get your rooftop solar system built when you have scaffolding up for something else, 'cos scaffolding is expensive. Ideally build it when you’re building the roof, there will never be a better time. Rooftop solar mandates are good and should be more common.  [We don't use scaffolding in Oz]

42. Anyone buying a new internal combustion car now is pretty silly. EVs aren’t the answer to everything – especially congestion of cities – but they do use much less energy and, with flexibility, can support the grid.

43. If you get a battery and a solar system, pay attention to when it charges and discharges and what power costs at those times! Everyone needs a hobby.

(We need better control software for residential solar and storage to use consumer flexibility to support the grid. Norway has it already, houses pay a price linked to the current spot price of electricity and you can set an app to charge your electric car when it expects to be cheapest in the next x hours!)

44. Very few people who are not solar project financiers understand tax treatment for solar projects (I don’t) and it’s important enough to make most calculated LCOEs irrelevant to power purchase prices.

45. Solar thermal tower and heliostat designs, especially with molten salt storage, are still not working very well. We might even end up using molten salt for multi-day and seasonal storage... but heat it with PV.  [Vast Solar in South Australia may be different]

46. Solar plant operation and maintenance in desert environments will prove more challenging than PV project stakeholders currently expect. Climate risk from hurricanes, hailstorms, fire and floods is on the rise for solar as for everything else.

47. Traded electricity wholesale markets are the worst way of deciding how to dispatch energy resources, except for all the others that have been tried.

48. Many solar project developers complaining their problem is 'finance' are being disingenuous. Their problem is, their project is rubbish and they cannot convince anyone otherwise. This is not just a solar thing.

49. Auctions for renewable power are getting a lot more complex, and that’s good. India’s 24/7 auctions and China’s energy megabases are a fascinating way to try to solve grid issues by co-locating solar, wind, storage and even fossil plants.

50. South Africa will hopefully be a case study of a major market where solar helped to solve a crippling power crisis. About 5GW of solar will be installed this year, much of it on homes and businesses. [The Zimbabwe model is worth looking at]

51. Watch Nigeria, which recently removed subsidies on gasoline and hence made the country’s ~50GW of private generators much more expensive, for how cheap solar and batteries could play out in other African countries. Could they really leapfrog straight to clean power?

52. There is enough land for lots of solar. There are enough golf courses in the U.S. for about 370GW, ffs. There’s also loads and loads of roofs, so let’s see those who oppose ground-mounted solar support higher-cost roof-mounted solar. [Over the last 12 months, rooftop solar has provided 20% of South Australia's electricity, and utility-scale solar just 6%]

(sorry going off on a slightly tangential rant about how hard my job is)

53. Forecasting solar build is hard when people actually pay for the results and therefore want them country by country. It’s easy when you just extrapolate a global line, but that is not terribly useful for setting corporate strategy, and makes your clients yell at you.

54. You want to forecast a terawatt-per-year solar market by 2030, you go for it! (We have 707GW/year in 2030). Fair warning, you’ll have to forecast solar build in markets that currently have no plausible plans, and where country experts will tell you it will never happen.

55. In 2017, my analysis team covered 42 countries which were significant solar markets. Now we attempt to cover 146, which is a pain, and we keep finding ones we have missed.

56. Also have I mentioned how bad the data is?! Increasingly nobody knows where the bloomin’ solar panels are being installed. We have Customs data on how much is leaving China, and it’s a *lot*, but it is often unclear where it went.

57. While in theory you can see said solar panels from SPACE, in practice it is far harder to count them by machine learning than you might think. You can waste a lot of time preparing training data and get clearly inaccurate results for area covered. I am told.

58. If you record PV capacity and only have room for one figure, record MW(DC), the module capacity. It tells you more about what the project will produce, how much land it needs, and what it will cost than MW(AC), which is just the size of the wire.

I will die on this hill.

Also btw if you want to estimate a rough capacity factor for an entire country, just use an insolation map, not a really hyperspecific tool. PVGIS has some great ones. {Link here]

That's all, apologies for spamming Energy Mastodon.

If you would like a less flippant primer on solar and the future of decarbonization (though it still has jokes), do check out edition 2 of Solar Power Finance Without The Jargon. Also if you’re a journalist wanting to review an advance copy of edition 2, please let me know. Shouldn't be long now, I approved the final proof!

China: petrol demand has peaked

From New Atlas

China's extremely rapid adoption of EVs has forced oil giant Sinopec to adjust its forecasts, saying peak domestic gasoline demand has already passed and it's all downhill from here. The repercussions will be global; China has been the biggest growth market for refined oil products for more than 20 years.

According to CNEV Post, Chinese new car buyers are now choosing "new energy vehicles" (NEVs, meaning battery-electric and plug-in hybrid cars) at a rate of 37.8%, a percentage which has rocketed up from 30.0% in 2022, 15.5% in 2021 and just 5.4% in 2020.

While Scandinavian countries like Norway (87.8%), Iceland (56.1%) and Sweden (56.1%) led the world for EV adoption in 2022, China sells somewhere around 10 times more EVs than all those three combined, and there's a lot more room for growth in the world's second-most populous country, since as of 2022, less than 5% of cars on Chinese roads were NEVs.

So China's largest oil company Sinopec is already seeing a drop in demand, from which it doesn't expect to recover. Previous predictions placed peak demand somewhere in 2025, but at a conference in Zhengzhou in August, Bloomberg reported that one Zhou Yan, from Sinpoec's retail sales division, said EVs were already displacing some 15 million tons of Chinese oil product sales in 2023, and that the company is forecasting that 2024 and subsequent years will see declining demand.

According to the International Energy Agency, Chinese demand accounted for more than 70% of global oil market growth in 2023, so while global oil product sales are at record highs of around 102.2 million barrels per day in 2023 (up around 2.2 million barrels per day over figures from 2022), and gasoline for passenger cars is only a percentage of total oil product demand, it'll be interesting to see how China's rapid EV uptake affects predictions for global peak oil demand.

The IEA released its forecast in June, estimating that peak global oil use for transport will arrive around 2026, but strong demand from the petrochemical and aviation sectors would continue to support overall market growth, albeit at slower rates, at least as far out as 2028.

A global oil demand peak, then, could arrive before the end of the decade. And unexpectedly rapid transitions to cleaner vehicles like what we're seeing in China, as well as continued increases in fuel economy for new fossil burners, could bring that date closer.

From  Bloomberg

Fuel demand in two and three-wheeled vehicles is already in structural decline, with BNEF estimating that 70% of total kilometers traveled by these vehicles already switched over to electric. Fuel demand for cars will be the next to turn, since well over 5% of the passenger-vehicle fleet is now either battery-electric or plug-in hybrid. The internal combustion vehicle fleet is also becoming more efficient due to rising fuel-economy targets.

Diesel demand for heavier vehicles will keep growing for a bit longer, but even there a seismic shift is underway. Electric, fuel cell and battery-swapping options have quickly climbed to 12% of light commercial vehicle sales and 4% to 5% of medium and heavy commercial vehicle sales. That heavy-duty figure is likely to climb to over 10% by 2025.

Combine all those segments, and BNEF expects total oil demand for road transport in China to peak late next year. Demand won’t drop off a cliff anytime soon — fleet turnover in the trucking segment in particular will take time — but it still marks a major shift for global oil demand patterns. It also has big implications for refiners that need to quickly adjust the mix of products they produce.

Li-ion battery costs rise for 1st time

From BloombergNEF (BNEF)

Rising raw material and battery component prices and soaring inflation have led to the first ever increase in lithium-ion battery pack prices since BloombergNEF (BNEF) began tracking the market in 2010. After more than a decade of declines, volume-weighted average prices for lithium-ion battery packs across all sectors have increased to $151/kWh in 2022, a 7% rise from last year in real terms. The upward cost pressure on batteries outpaced the higher adoption of lower cost chemistries like lithium iron phosphate (LFP). BloombergNEF expects prices to stay at similar levels next year, further defying historical trends.

The above figures represent an average across multiple battery end-uses, including different types of electric vehicles, buses and stationary storage projects. For battery electric vehicle (BEV) packs in particular, prices were $138/kWh on a volume-weighted average basis in 2022. At the cell level, average BEV prices were just $115/kWh. This indicates that on average, cells account for 83% of the total pack price. Over the last three years, the cell-to-pack cost ratio has diverged from the traditional 70:30 split. This is partially due to changes to pack design, such as the introduction of cell-to-pack approaches, which have helped reduce costs.

On a regional basis, battery pack prices were cheapest in China, at $127/kWh. Packs in the US and Europe were 24% and 33% higher, respectively. Higher prices reflect the relative immaturity of these markets, the higher production costs, the diverse range of applications and battery imports. For the higher end of the range, low volume and bespoke orders push prices up.

Prices could have risen further in 2022 had it not been for the higher adoption of the low-cost cathode chemistry known as LFP, and the continued reduction of expensive cobalt in nickel-base cathodes. On average, LFP cells were 20% cheaper than lithium nickel manganese cobalt oxide (NMC) cells in 2022. However, even low-cost chemistries like LFP, which is particularly exposed to lithium carbonate prices, have felt the bite of rising costs throughout the supply chain. LFP battery pack prices rose 27% in 2022, compared to 2021.[The lithium carbonate price rose 5-fold in 2022, but has since halved again]

Evelina Stoikou, an energy storage associate at BNEF and lead author of the report, said: “Raw material and component price increases have been the biggest contributors to the higher cell prices observed in 2022. Amidst these price increases for battery metals, large battery manufacturers and automakers have turned to more aggressive strategies to hedge against volatility, including direct investments in mining and refining projects.”

While prices for key battery metals like lithium, nickel and cobalt have moderated slightly in recent months, BNEF expects average battery pack prices to remain elevated in 2023 at $152/kWh (in real 2022 dollars).

BNEF expects battery price to start dropping again in 2024, when lithium prices are expected to ease as more extraction and refining capacity comes online. Based on the updated observed learning rate, BNEF’s 2022 Battery Price Survey predicts that average pack prices should fall below $100/kWh by 2026. This is two years later than previously expected and will negatively impact the ability for automakers to produce and sell mass-market EVs in areas without subsidies or other forms of support. Higher battery prices could also hurt the economics of energy storage projects.

Yayoi Sekine, head of energy storage at BNEF, said: “Despite a setback on price declines, battery demand is still reaching new records each year. Demand will reach 603GWh in 2022, which is almost double that in 2021. Scaling up supply at that rate of growth is a real challenge for the industry, but investment in the sector is also rising rapidly and technology innovation is not slowing down.”

Kwasi Ampofo, head of metals and mining at BloombergNEF, added: “Lithium prices remain high due to persistent supply chain constraints and the slow ramp up in new production capacity. Additional lithium supply could ease the pressure on prices in 2024, while geo-politics and trade tension remain the biggest uncertainties for other key battery metal prices in the short-term. Resolving these tensions could help calm prices in 2023 and beyond.”

Continued investment in R&D, manufacturing process improvements, and capacity expansion across the supply chain will help to improve battery technology and reduce costs over the next decade. BloombergNEF expects next-generation technologies, such as silicon and lithium metal anodes, solid-state electrolytes and new cathode material and cell manufacturing processes, to play an important role in enabling further price reductions.

The new sodium-ion batteries that BYD is putting in its cheaper cars (at 160 Wh per kilo, they have a lower energy density than li-ion's 180 Wh/kg) cost US$77/ kWh, or half the cost of li-ion, and are expected to drop to $40/kWh as mass production starts.   Even if li-ion battery pack prices only fall slowly from now on, that won't slow down the EV boom.  Cars will just have sodium-ion or perhaps a mixture of li-ion and sodium-ion batteries.  This means that average battery pack prices will fall below $100/kWh this year.  And that is the point at which EVs have the same sticker price as petrol/diesel cars.  They are already cheaper to run, because they're much more efficient and require far less servicing than ICEVs. Now they'll be cheaper to buy, too.

Welcome to the EV revolution.

The hydrogen furphy

I've been suspicious about the hydrogen mania for a while now.   Michael Liebreich does a much better demolition job than I could.   But his recommendation to use green ammonia, made from green hydrogen, for long-term storage in electricity generation is very interesting.   And I don't share his doubts about using e-fuels for jets.  If e-fuels cost twice as much as jetfuel, so be it.  We survived without intercontinental jet flights before, and we could again.

[From BNEF]

By Michael Liebreich

Senior Contributor
BloombergNEF

Injecting some reality

Two years ago, BloombergNEF published my two-part primer on hydrogen, Separating Hype from Hydrogen. On the supply side, I was optimistic: green hydrogen (produced from renewable energy) would over time become cheaper than blue hydrogen (produced from natural gas but with carbon captured) and eventually cheaper than gray hydrogen (produced form natural gas without carbon capture).

On the demand side I was more skeptical. While clean hydrogen will be needed to decarbonize a number of use cases in industry, and perhaps for long-duration storage, I found it hard to identify any role for it in applications like land transportation or space heating. Since then, as I have done more work on industrial heat, I have even come to believe it has a limited role even there.

If my intention at the time was to inject some reality into discussions about hydrogen, I clearly failed. Rhetoric around hydrogen has become ever more overblown.

According to lobbying group the Hydrogen Council, citing a series of reports commissioned from McKinsey over the past three years, hydrogen can be expected to contribute more than 20 percent of emissions reductions needed for the world to reach net-zero emissions – a figure repeated by politicians and journalists seemingly without the slightest critical examination.

German Chancellor Olaf Scholz has called hydrogen “the gas of the future” and promised “a huge boom.” Japan’s Prime Minister Fumio Kishida has declared that “shifting to and developing a hydrogen society is critical for achieving decarbonization.” Frans Timmermans, the EU Executive Vice-President for the European Green Deal believes that “hydrogen rocks.” Jacob Rees Mogg, briefly UK Secretary of State for Energy this year, called hydrogen “the silver bullet”.

Public money is starting to flow. The EU has approved the first 13 billion euros ($13.7 billion) of the 430 billion euros ($450 billion) promised under its 2020 Hydrogen Strategy and is now working to launch a “Hydrogen Bank”. The US Inflation Reduction Act (IRA) provides a ten-year tax rebate per kilogram of green hydrogen worth $3, which will soon be more than the production cost itself. Free hydrogen anyone?

Of supreme import

In October this year the Hydrogen Council and McKinsey released another report entitled Global Hydrogen Flows, predicting long-distance transport of 400 million tonnes of clean hydrogen and its derivatives (calculated on a hydrogen-content basis) by 2050, out of total global production of 660 million tonnes of hydrogen. It is worth bearing in mind that today, 94 million tonnes of hydrogen are used annually, virtually all of it made from fossil fuels, creating 2.3% of global emissions. The vast bulk of today’s hydrogen never leaves the compound on which it is made, let alone cross an international border.

The idea of hydrogen imports as a way of decarbonizing major industrialized economies is enormously seductive – so much so that Germany and Japan have made it central to their decarbonization strategies. Here’s Japanese PM Kishida again: “Japan aims to commercialize an international hydrogen supply chain by producing hydrogen in bulk at low cost in countries blessed with bountiful renewable energy resources coupled with marine transport infrastructure.”

Chancellor Scholz is promoting hydrogen imports not just as a way of decarbonizing the German economy, but as a replacement for Russian gas. In August he and Canadian Prime Minister Justin Trudeau flew to Newfoundland and Labrador to sign an agreement to “create a transatlantic supply chain for hydrogen well before 2030, with first deliveries aiming for 2025”. As I write this, German Economy Minister Robert Habeck is on a five-day trip to Namibia and South Africa to secure hydrogen supplies.

The problem with this vision of large-scale imports of hydrogen is that the physics of hydrogen is unlikely to play ball.

The unbearable lightness of hydrogen

In February this year, Kawasaki Heavy Industries’ Suiso Frontier arrived in Kobe, Japan carrying the world’s first ever cargo of liquid hydrogen from Australia. Did this momentous occasion herald the start of a brave new world of trade in liquid hydrogen, as the press coverage suggested? In a word, no.

Set aside the A$500 million ($334 million) cost of the project; set aside the fact that most of the hydrogen on board the Suiso Frontier was made from coal; and set aside the fire that broke out on board while loading. The 1,250 cubic metres of hydrogen carried by the Suiso Frontier contained just 0.2% of the energy content of a single large LNG carrier. Okay, the first ever LNG cargo, carried 63 years ago from the Calcasieu River on the Louisiana Gulf to the UK, consisted of a similarly picayune 2,475 tonnes. Surely liquid hydrogen can be scaled up in the same way as LNG has been? Kawasaki Heavy Industries, builder of the Suiso Frontier claims it has already lined up the first order for a much larger, 160,000 m3 carrier from Nippon Kaiji Kyokai.

This is where the physics of liquid hydrogen step in. Although the scaled-up vessel would carry 60% of the volume of an LNG Q-Max, it would carry only 22% of the energy.

Hydrogen has very good gravimetric energy density – the amount of energy carried per unit weight. On this measure, hydrogen beats diesel, petrol and jetfuel by a factor of around three, and LNG by a factor of 2.7 – which is why it makes a great rocket fuel. However, it has very poor volumetric energy density – the amount of energy carried per unit volume. It’s worth remembering that while a cubic meter of water weighs 1,000 kilograms; a cubic meter of hydrogen weighs only 71 kilograms.

On a volumetric basis, hydrogen’s energy density is a quarter that of jet fuel, and only 40% of that of LNG. Since ships are volume constrained (think Suez Canal, Panama Canal, etc.), this inevitably means more trips. Even if Kawasaki Heavy Industries was to scale its hydrogen carrier to the same size as a Q-Max, it would need to make 2.5 deliveries to carry the same amount of energy as one cargo of LNG. You don’t need to know anything at all about shipping to know that 2.5 times the trips are going to cost you 2.5 times as much.

But this is only the start. A liquid hydrogen carrier will inevitably be more expensive than an LNG carrier. Its load will be at -253C instead of -162C, and all pipes, valves, pumps and tanks have to resist hydrogen embrittlement. And because liquid hydrogen is both colder and lighter than LNG, the liquid hydrogen ship would have up to nine times more boil-off en route (these ships let some of the load boil off as heat enters the tanks, and then use that as fuel for their engines), unless you add either much more insulation or a complex cryogenic recycling system.

Overall, you would be wise to assume that the seaborne segment of your hydrogen trade will cost around four times the cost of LNG per unit energy.

It’s the physics, stupid

But that only deals with the seaborne segment. We still have to talk about liquefaction and regasification.

Liquefying hydrogen is a is a hugely energy-hungry process, made complex by the quirks of hydrogen physics – things like its negative Joule-Thomson Effect (unlike most gases, hydrogen gets warm when it expands and cold when compressed) and ortho-para isomer conversion (without which liquid hydrogen re-evaporates, irrespective of insulation). Liquefaction of hydrogen currently consumes 30-40% of its energy content, versus no more than 10% for LNG. Ways to improve this are being researched, but nothing can change the fact that liquefying hydrogen is, quite simply, a bear.

As for regasification, again the plants will be more expensive than for LNG. They need to operate at lower temperatures; all valves, pumps, pipes and tanks have to resist embrittlement; and compressors have to be of larger capacity because pressurizing hydrogen gas requires more work than pressurizing natural gas. European politicians, scrambling to build new terminals to receive LNG in replacement of Russian gas, are suggesting that these terminals will be repurposed to receive hydrogen or its derivatives. This is nonsense. You can re-use the docks and infrastructure, and any distribution pipelines can be upgraded, but 70% of everything else has to be scrapped.

In summary, while LNG approximately doubles the cost of gas delivered by pipeline, shipping liquid hydrogen will cost four to six times more than LNG. In other words, you can’t power an economy on imported liquid hydrogen, and that is not because of things that can be fixed – scale, technology, cost of capital and so on – but because of the underlying physics: volumetric density, liquefaction temperature and interactions with other materials.

It’s a gas, gas, gas!

If importing hydrogen in liquid form is out, what about importing hydrogen as a gas?

Here, things look much better. Gaseous hydrogen is already transported by pipeline – all the pipes, pumps, valves and tanks need to be appropriately engineered, but the economics are not terrible. Just as well, given the volume of hydrogen we are going to need at industrial “hydrogen hubs” for industrial uses and to provide long-duration back-up power.

Just replacing the current production of gray and black hydrogen would create demand for 94 million tonnes of clean hydrogen. Pipeline imports are well-placed to meet a decent proportion of this.

There is, however, a caveat. The longest natural gas pipeline in the world (excluding side branches) is Brazil’s National Unification Gas Pipeline (GASUN), just under 5,000 kilometers long. In their report on hydrogen trade, McKinsey and the Hydrogen Council predict 40 hydrogen “trade routes” connecting the globe. Those serving Europe by pipeline from Norway, North Africa and the Gulf are certainly feasible (the one from Russia is clearly off the cards for decades). However, none of the longer trade routes linking the US West Coast with Asia, the US East Coast with Europe, or the Gulf, Africa or Australia with Asia are likely to carry a single cubic meter of gaseous hydrogen.

There are a few companies proposing to carry compressed hydrogen gas by ship. This would allow them to avoid the cost and complexity of liquefaction but would expose them to the same problems of lower volumetric energy density, only more so. Provaris Energy has designed a ship carrying hydrogen gas at 250 bar. But this translates to just 25 kilograms of hydrogen per cubic meter – just over a third of the very poor volumetric density of liquid hydrogen. Scaled up to the size of a Q-Max, their ship would carry around one seventh of the energy. Seven ships to do the work of one, you can imagine what that does to costs.

There may be some niche applications for shipping gaseous hydrogen, for instance moving stranded supplies between islands, but it is not going to happen in more than homeopathic quantities.

The exotics

There are other ways of transporting hydrogen beyond liquid and gas. We’ll get on to derivatives of hydrogen in a moment, but first I want to deal with the exotics – liquid organic hydrogen carriers (LOHCs) and metal hydrides. Here the goal is to load hydrogen into a chemical or metal carrier, which allows it to be transported at ambient temperatures and pressures. On arrival the hydrogen is released and the carrier returned to the point of origin.

One promising LOHC is benzyl toluene, being marketed as a solution for hydrogen shipping by a company called Hydrogenious. But again it has a volumetric density problem. One cubic meter of benzyl toluene can only be loaded with 54 kilograms of hydrogen – which means four times as many trips for each energy cargo as you would have with LNG. In addition, loading hydrogen into the organic solvent is an exothermic process, generating heat where you don’t need it, and then you need to add energy at 300C at the arrival location to extract it – using up around 30% of the delivered energy.

That’s not to say LOHCs are not interesting: they could perhaps find a role in long-duration stationary storage – not everywhere has the salt caverns or depleted gas fields required to store gaseous hydrogen, but any tanker farm would be able to handle benzyl toluene and there may be options to store and reapply the process heat between cycles. There may even be a modest import market for LOHCs, to replenish long-duration storage tanks.

Metal hydrides offer the hope of transporting up to twice as much fuel per cubic meter as liquid hydrogen – but each family of hydrides studied so far has shown disadvantages: cost, gravimetric density, time to charge, absorptive capacity, heat required to release the hydrogen and so on. It would be a brave investor who thought we were going to move hydrogen at scale this way, when 50 years of research has not yielded as single commercial application.

First derivatives

Next up, hydrogen derivatives – e-methane, e-methanol. These are certainly easier to transport – drop-in replacements for their fossil equivalents. Their problem is high production cost. For each of them you need a source of clean hydrogen – whether blue, green, pink or red (from nuclear power, whichever color code you use) or whatever – plus a source of carbon nearby, and then you need to combine them into molecules of varying degrees of complexity.

The cheapest source of carbon would be captured from the combustion of fossil fuels – but that would make no sense as it would not be compatible with net zero. The only thing that could possibly make sense would be to use direct air capture (DAC) or secure carbon from a bio-based source, so that when it is burned it just returns to the atmosphere.

A bit of systems thinking, however, shows that even this makes no sense. Take e-methane. By the time you have gone to the cost of securing your carbon, why not just sequester it, instead of incurring further costs in producing hydrogen and combining them into your derivative. You could then just deliver plain old fossil gas to the importing country – along with a carbon credit if needed. That would be identical from a climate perspective and vastly cheaper.

Methanol can and must be made in future using clean hydrogen. Some of it will be made where hydrogen is cheap and exported, but only for use cases where it will be consumed as methanol. In 2022, global production of methanol was 110 million tonnes – but adjusting for molar weights, that is equivalent to just 14 million tonnes of hydrogen. Should demand double and a third of that get traded internationally, only a 9 million-tonne import market by hydrogen mass would be created. That barely scratches the surface of the Hydrogen Council’s 400 million tonnes.

E-methanol also represents a potential pathway to decarbonize shipping – but ammonia and waste-based biofuels both look like being cheaper. Even using nuclear power for the world’s largest ships would most likely be cheaper than e-methanol. Global shipping fuel demand today is around 300 million tonnes per year; let’s suppose, optimistically, that demand increases by 50% by 2050, that 20% is replaced by methanol, and a third of that methanol is traded internationally. Once you adjust for the molar mass and energy content of methanol, that would only create annual demand for another 8 million tonnes of hydrogen imports.

e-Fuels

Some continue to promote e-fuels as the solution for land transportation, particularly in Germany and Japan. They point to the fact such fuels require no changes in consumer behavior, highlight the millions of jobs that depend on the internal combustion engine and claim that scrapping 1.4 billion internal combustion vehicles on the world’s roads would be unaffordable.

Their arguments have no merit. First, those 1.4 billion vehicles will be scrapped anyway before whichever year countries select for net zero. In most cases, electric vehicles are already competitive on a total-cost-of-ownership basis with petrol and diesel. E-fuels, by contrast, will still be three to five times as expensive in 2050, driven by their production complexity and the efficiency losses at each production stage. Yes, Porsche is building a pilot project in Chile to produce e-fuels, but theirs is not exactly a cost-conscious customer base.

The fact is that those jobs associated with internal combustion engine manufacturing will be disappearing anyway, the only question is whether they are lost to other technologies or to China. As for behavioral change, most EV users like the fact that they can charge anywhere, rather than having to visit a gas station every week.

Flights of fancy

Time for a deep dive into hydrogen’s potential use in aviation. Airbus has said that it “considers hydrogen to be an important technology pathway to achieve our ambition of bringing a zero-emission commercial aircraft to market by 2035,” and this month, Rolls-Royce and EasyJet made the news by testing a turboprop engine on pure hydrogen.

It turns out that running an aircraft engine on hydrogen is not the difficult bit – the Soviet Union did it back in 1988, not on a test bench but in the air. The real problems are caused, once again, by the physics of hydrogen.

With just 25% of the energy density of kerosene, replacing the maximum take-off fuel load for a long-haul aircraft would require more space than the entire swept volume of its fuselage – a non-starter. For short-haul flights, the focus of Easyjet’s interest, the fuel tank would take up around a third of the fuselage. That means ticket prices 50% higher than now, even before paying for the higher costs of the plane, the cost of the liquid hydrogen, and cost of its ground handling equipment. In total, expect a doubling or tripling of prices.

The real show-stopper, however, is getting the fuel to the airport. Liquid hydrogen transfer lines exist, but there is no way to keep miles of pipeline at -253C and handle the safety issues of any potential leaks. That leaves road tankers or gas pipelines.

Let’s do a thought experiment: try to replace all 20,000 tonnes of jet fuel delivered daily to Heathrow airport with 7,200 tonnes of liquid hydrogen. By tanker truck, that would mean 2,300 daily movements of liquid hydrogen in West London. The safety and traffic implications don’t bear thinking about. Now the only option is to bring the hydrogen in by gas pipeline, and liquefy it on site. But that would require 2.7GW of electrical power, according to engineer and Oxford University ammonia expert Dr. Mike Mason – approximately the output of a new nuclear power station the size of Hinkley C, plus a lot of pylons. And then you need to dump enough heat to raise the temperature of the Thames by 18 degrees C.

The bottom line is that liquid hydrogen could perhaps end up powering a few executive jets – startup ZeroAvia certainly hopes so – but not aviation as we know it. The only substantial role for hydrogen in aviation would be through the production of e-fuels. These are certainly technically feasible – UK company Zero Petroleum has already made some – but they look like being at least twice as expensive as sustainable aviation fuels (SAF) based on agricultural or forestry waste.

If potential volumes of SAF are limited by feedstock availability, then there is a market opportunity for hydrogen in aviation fuels, if not, there isn’t. Global aviation fuel demand was around 300 million tonnes in 2019, which translates to 46 million tonnes on a hydrogen mass basis. If demand grows by 50%, 25% is met by e-jetfuel and one third of that is shipped internationally, that only generates 6 million tonnes of traded hydrogen.

Moan, moan, ammonia

That brings us, finally, to ammonia – the last option for those hoping to develop substantial long-distance hydrogen imports.

Around 190 million tonnes of ammonia are produced each year, mainly for fertilizer and as a chemical feedstock, almost all of it from fossil feedstock. Around 10 percent of current production is already traded internationally but this only comes to around three million tonnes by hydrogen mass.

Switching to clean ammonia for fertilizer production will without doubt drive a big increase in traded hydrogen. Where there are pipelines, hydrogen can be made where renewable power is cheap and imported in place of natural gas and used to make ammonia at the destination. Where there are no pipelines, green ammonia or finished fertilizer will be produced and shipped instead.

Supposing the fertilizer market grows by half by 2050, all of it goes low-carbon and a third of it ends up being shipped internationally, that would increase ammonia trading from 18 to 95 million tonnes per year – a lot of ammonia. This will be a relief for those investing in ammonia projects in Chile, Canada, Namibia and South Africa: their output may not find much use in the energy sector, but at least they should have access to a very substantial market. It is, however, only 17 million tonnes on a hydrogen mass basis.

Back to shipping fuels. Since ammonia will be cheaper than methanol, as discussed, let’s be optimistic and say half of the volumes described above are replaced with ammonia, and a third of it is traded internationally. That would drive an additional 25 million tonnes of demand by hydrogen mass.

Japan’s big bet

Japan is betting that imported ammonia will be used to generate power. Its national decarbonization plan is based on retaining its coal-fired power stations, but fueling them with increasing proportions of ammonia – first 20%, then 50%, then 100% by 2050. So confident is it – and so keen to keep selling its technology internationally – that it is encouraging Vietnam and other South-East Asian countries to keep building coal-fired power stations. Will the bet pay off?

Let’s look first at ammonia made from green hydrogen. That means generating wind and solar power; using it to produce hydrogen (80% efficiency); making ammonia via the Haber-Bosch process (70% efficiency); liquefying it (90% efficiency); shipping it (90% efficiency); and burning it to generate power (45% efficiency). Your end-to-end efficiency will be an astonishingly poor 20%. Although it might be possible to improve the efficiency of each of stage, the tyranny of multiple process steps means your end-to-end efficiency is hard to budge.

What 20% end-to-end efficiency means is that the resulting power will cost five times as much as the original power – and that is before accounting for capital invested in all those process stages and maintenance. In addition, combustion of ammonia produces nitrous oxides – hazardous to health and powerful greenhouse gases in their own right.

Now, ammonia from blue hydrogen. You eliminate the electrolysis stage, so your end-to-end efficiency is a little higher at 26%, but you have the extra cost of carbon capture and sequestration, so the resulting power cost is going to be about the same. The real question, however, is why bother? Why not just ship the natural gas to Japan instead of ammonia – LNG has 1.7 times the volumetric energy density of ammonia, so you need fewer cargoes. Then you capture the CO2 at the other end, and either sequester or send it back to the point of origin on the same ships. You have the same climate impact, approximately the same cost of carbon capture and sequestration, but significantly greater efficiency and lower shipping costs.

The bottom line for ammonia as a fuel for power generation, whether co-fired or pure, is that no economy can be internationally competitive based on the resulting power prices. My estimates are in line with the more detailed modelling work undertaken by BloombergNEF: BloombergNEF found that 100% ammonia-fired power in Japan would cost around $260 per megawatt-hour in 2030 and $200 by 2050 – around double the cost of renewable energy.

The fact that Japan could generate large amounts of renewable energy – in particular, offshore wind – at much lower cost points to the role that clean ammonia could in fact play in the country’s power system: providing back-up. Bill Gates likes to quote Vaclav Smil on the three-day cyclones that hit Tokyo almost every year – which would shut down renewable generation and leave it short of 22GW of power. He laughs at the idea that batteries could fill the resulting gap, and he is correct to do so. However, the gap is only 1,600 GWh, which could be generated from a million cubic meters of ammonia – an amount that could be brought in on just four Q-Max-sized carriers.

So, while basing Japan’s economy on electricity generated from imported ammonia is an economic non-starter, storing a few million tonnes of ammonia and using it for long-duration storage looks a lot more realistic.

Conclusions and implications

This has been a long journey and we have covered a lot of ground. I want to leave you with a few conclusions by way of summary.

The only way to move hydrogen economically is as a gas, by pipeline. Forget liquid hydrogen: it will struggle to find any role in the future energy or transport systems because of its poor volumetric energy density and difficulties with handling. It will have no role at all as a traded commodity.

Ammonia will be traded and transported, primarily for use in fertilizer production, plus as a shipping fuel. It will not be imported to power bulk power generation, but will be imported and stored to deliver long-duration storage. Some LOHC might also be imported, but only where it is stored for resilience purposes.

Clean methanol will be made near to sources of cheap clean hydrogen and some of it will be shipped around the world for use as a chemical feedstock. E-fuels – whether methanol, petrol, diesel or kerosene equivalents – will not be shipped around the world in meaningful volumes because their cost will severely limit their uptake, with the possible exception of aviation.

Totting up the various future hydrogen trade flows covered here, it is clear that the Hydrogen Council/McKinsey figures of 660 million tonnes of clean hydrogen production and 400 million tonnes of long-distance transportation are out by a factor of at least three. In addition, given that China and India have only pledged net zero by 2060 and 2070 respectively, such flows that do materialize will take decades beyond 2050.

The implications reach far beyond the question of international trade in hydrogen and its derivatives. The prohibitive cost of long-distance imports means that energy-intensive industries will inevitably migrate to regions with cheap clean energy. It is inconceivable for any country to import iron ore from Australia or Brazil, hydrogen from Australia, the Gulf, Canada or Africa, and make steel at a globally competitive cost. Magical thinking will be no defense against de-industrialization.

Finally, it is worth noting that none of this calls into question the fact that clean hydrogen will be required to decarbonize certain sectors, which will eventually create more than 100 million tonnes per year of demand. Just as railway mania left the world with railways, electricity mania left the world with power networks, and the dot-com bubble left the world with broadband fiber, so hydrogen mania will leave the world with a lot of clean hydrogen.

The worry is that, along the way, we are going to waste huge amounts of money on the wrong use cases for hydrogen and the wrong infrastructure in the wrong places. Worse than wasting money, we will also be wasting time – and that is the one thing we don’t have. Let’s be smart.

Selah.

Michael Liebreich is the founder and senior contributor to BloombergNEF. He is also the CEO and chair of Liebreich Associates, founding managing partner of EcoPragma Capital and an advisor to the U.K. Board of Trade.

Source: BNEF