May 18, 2022
Hydrogen has long been hyped as a fuel of the future. It’s abundant and its waste product is water. But it’s only recently that the availability of cheap renewable energy has allowed hydrogen to be produced competitively without the use of fossil fuels.
Azeem Azhar speaks with Raffi Garabedian, co-founder and CEO of Electric Hydrogen, to explore the market opportunity and roadmap to wide adoption of “green hydrogen.”
They also discuss:
What the hydrogen industry can learn from scaling renewables like solar and wind.
Why hydrogen will be most effective in helping to decarbonize heavy industries.
The potential of using hydrogen to store and transport huge amounts of renewable energy between continents.
@azeem
@exponentialview
@garabedian
Further resources:
Venture Capital and Deep Decarbonisation with Shayle Kann (Exponential View Podcast 2022)
Could Europe replace Russian gas with green hydrogen? Let’s look at the numbers (Recharge 2022)
The Future of Hydrogen (International Energy Agency 2020)
AZEEM AZHAR: Hi, there. I’m Azeem Azhar, and this is the Exponential View podcast. Now, it was the first and it’s the most abundant essential to the existence of stars, planets, and life itself. Yet, hydrogen is not featured extensively in our human energy systems, despite many attempts over the decades. But today with the demands to decarbonize our energy system, as significant as they are, and with novel technologies driving down costs, it might be hydrogen’s moment. Can hydrogen – let’s face it so successful in our universe thus far – find its way into our homes, industries and the economy at large? Raffi Garabedian is the founder and CEO of electric hydrogen who set themselves the task of creating cost competitive hydrogen at scale. Now we do use a couple of technical terms. I want to spell them out. First is a BTU, which is a British thermal unit, the Imperial measure of thermal energy that is commonly used in the United States. Natural gas is often used as a comparison for hydrogen. Its energy is measured in millions of Btus. Finally, hydrogen is created by passing an electric current through water, splitting hydrogen, the H, from the oxygen, the O. This process is called electrolysis and like many companies, Electric Hydrogen uses a new technology called PEM electrolysis for its higher efficiency and ability to better cope with a variety of operating conditions. Well, that’s enough gassing for me. Let’s go on with the show. Raffi, welcome to Exponential View.
RAFFI GARABEDIAN: Thank you, Azeem. I never thought of hydrogen as a successful element, but that’s brilliant.
AZEEM AZHAR: Well, it’s got the highest market share. Has it not? By abundance. So I’m curious today, people are really getting excited about hydrogen. Last year, the UK government announced a hydrogen strategy saying this is going to unleash billions of pounds by 2030 and thousands of jobs. And you start to see hydrogens showing up in analyst reports and in the sort of discussions about what the energy mix looks like in the near future. Why now?
RAFFI GARABEDIAN: People have been talking about hydrogen as an energy vector, if I can use that phrase, for decades. It’s been on the roadmap. It’s been on people’s minds. It’s gone through a couple of hype cycles. If you think about it that way, right? Where there was just a lot of excitement around hydrogen, and then maybe not. Well from my point of view, it’s all about economics really. Now, economics underpinned with a reason to change, which is climate ultimately. It’s mitigation of climate effects of burning prolific amounts of fossil fuel.
AZEEM AZHAR: And the basic chemistry there for our listeners is just, we burn hydrogen H2. And the output, the waste product is just H2O, it’s water. It’s not a CO2 or a kind of a methane that is going to end up being a greenhouse gas.
RAFFI GARABEDIAN: That’s exactly right. In the simplest form, when you oxidize hydrogen, you get water and that’s a renewable cycle. If you can produce hydrogen from water, H2O, by breaking it into O2 and H2. Now that bond breaking takes a lot of energy, but that energy is carried in chemical form to another place, the location where combustion occurs, using O2 from the air to burn the hydrogen again, returning water into the atmosphere and releasing that energy, or at least most of that energy, back into our energy system. So, I’m really focused on fossil free hydrogen. Another way to think about that is renewable hydrogen. So, I just described the way hydrogen can be produced from water by adding energy in to crack the water bonds to break it apart into O2 and H2. That energy, if it comes from renewable resources like wind and solar and hydroelectricity, then the hydrogen that results can be called renewable hydrogen. That process of production is clean. It’s cyclic, it’s sustainable only if the power going in is renewable, but it has heretofore been very expensive. And there are really two elements to the cost of production of hydrogen by these means. The process is called electrolysis. The input electricity and the cost of the capital equipment, the kit, or the plant, if you will, that produces a hydrogen that does the conversion.
AZEEM AZHAR: And what we’ve seen over recent years has been a dramatic decline in the cost of renewable electricity from solar photovoltaic and from wind turbines onshore and offshore. Then that shift has happened really comparatively recently, 2016, 2017, 2018. So, that speaks to the first part of the challenge. And then I guess the second part is perhaps where you step in.
RAFFI GARABEDIAN: Yeah, that’s exactly right Azeem. So, renewable electricity is now the cheapest electric resource on the planet in many, many places. And that opens now the possibility of producing renewable hydrogen, fossil free hydrogen by electrolysis at a price point that is competitive with fossil produced hydrogen. That’s a game changer, right? Because in infrastructure industries, in commodities, price parity is what is absolutely required to incentivize a massive switch at a global scale.
AZEEM AZHAR: And people often use colors for hydrogen. Green, blue, and gray – green being the kind of hydrogen that you are producing, which is sort of end to end renewable energy; gray hydrogen being using fossil fuels to produce the hydrogen; and then blue hydrogen be a kind of a sort of a political compromise. The idea that you’d use fossil fuels to produce the hydrogen. And you might capture the carbon dioxide that’s emitted. But if we’re thinking about the energy transition from a kind of green perspective, a renewable perspective, a decarbonization perspective, the only thing that really matters is green hydrogen.
RAFFI GARABEDIAN: In the hydrogen geeky circles, I argue that the color codes are really obfuscating the facts underneath, and there’s a lot of nuance. But at a high level, in terms of facilitating an overall energy transition to renewables, green hydrogen’s the only thing that matters.
AZEEM AZHAR: I think it’s useful for us to understand how we envisage this hydrogen actually being used. I’m not particularly hot on hydrogen to power light passenger vehicles. I don’t think it’s the right use case for it. I’m much more interested in sort of carbonized industry that are really hard to reach by other methods like ammonia production or steel or fueling the really, really big, big things for which we currently have to use really dirty, heavy diesel substrates for. But how should we actually think about where the hydrogen is going to be used?
RAFFI GARABEDIAN: One of the complexities of hydrogen as a decarbonization pathway is that it’s a generic fuel that can be used in a variety of applications. So, I completely agree with you that vehicular electrification, particularly light duty vehicles, there’s so much momentum around battery powered electric vehicles that that seems to be the winning answer. Now, where does hydrogen fit? So, there are certain use cases where hydrogen is a chemical feed stock that’s extremely hard to replace. So, that’s ammonia production. Ammonia is fixed nitrogen source for most fertilizer that’s used in the world.
AZEEM AZHAR: Synthetic ammonia today is produced by a quintessential industrial age process, right? It’s a controlled explosion at several hundred atmospheres pressure, several hundred degrees Celsius/Fahrenheit, choose your measure over, a catalyst Haber-Bosch process. It’s an elegant-
RAFFI GARABEDIAN: It’s hell fire and damnation in a steel tube. It’s called the Haber-Bosch process. It’s done at massive industrial scale. And the way ammonia is produced today is by taking methane, cracking it into C, which actually becomes CO2 and is emitted into the atmosphere, releasing the hydrogen. The hydrogen goes into the Haber-Bosch reactor and is catalytically converted with nitrogen from the air into ammonia. That’s the conventional process. The hydrogen can come from electrolytic hydrogen, can come from green sources without the CO2 emission. And that’s a transition that’s being discussed in many parts of the world and is being pursued at pilot scale by the world’s largest industrial ammonia producers. But the other half of the use for hydrogen today is largely in hydrocracking, refining of petrochemicals.
AZEEM AZHAR: But there seemed to be a few other places that you could imagine using this. I mean, my kids were doing high school chemistry and there’s a reactivity ladder, and hydrogen is at a really helpful place. So, you could imagine using hydrogen in sort of purifying ores. So, you could use it potentially in steel making, if it was cheap enough.
RAFFI GARABEDIAN: What you just said is actually the key. Cheap enough in the context of a world that is valuing more and more decarbonization. It’s going to be extremely hard for renewable hydrogen to be as cheap as coal in the steel production process. But it can be potentially pretty soon as cheap as gray hydrogen. So yeah, hydrogen can be used in a number of applications as a chemical feed stock for the conversion to other materials.
AZEEM AZHAR: So, what’s fascinating about this is the key uses that we’ve come up with are not in fact energy thus far. There are hydrocracking, hydrogenation, ammonia, production, steel manufacturer, but not the thing that if you say hydrogen, people think you can burn this thing and you can combust it and you can create heat and you can drive things forward. It’s a really valid, vibrant discussion in the UK at the moment, when we think about 22 million homes using methane CH4 boilers and oven hobs thinking, how do we, without district heating, without electric heating, take that infrastructure and get it to burn something that is less noxious than CH4? So, does hydrogen have an even a medium-term role in any of those applications?
RAFFI GARABEDIAN: Brilliant framing of it, Azeem. So, we’ve been talking, as you said about the chemical use cases for hydrogen, which are clear and present. The gas is more valuable in those use cases than it is to burn for BTUs as a heat source. But having said that, the problem that it attacks when burned as a heat source is actually a really big problem. I spent over a decade in the solar industry, building technology for very, very large-scale solar power plants. And of course the issue with both solar and wind is that the resource is available when it’s available, not when we want it. So this soundbite or mantra that people like to long onto, electrify everything, it makes sense to us intuitively, but really electrifying everything only helps in terms of carbon emissions, if we can electrify everything with renewable energy.
AZEEM AZHAR: But even if you did, even if you were able to generate that through a combination of solar energy and wind and battery storage and high voltage direct cables, we’re potentially building one down to Morocco, which could sort of pipe renewable power up to us with minimal heat loss and energy loss as it travels. Even if we did all of that, my radiators are heated by water from a gas boiler that combusts methane. So, we then need to go through that whole process of rearchitecting 23 million homes. That’s just the UK. I think it’s clear that electrify everything doesn’t mean that’s the only end point of energy that we end up with.
RAFFI GARABEDIAN: Absolutely. We consume energy in gaseous and liquid form at a far higher rate than we consume electric energy today as a species on this plant. And it’s nice to think we can snap our fingers and transform all of that in five years to all electric. Well, we don’t have the batteries at a price point that makes any sense to shift the power from when it’s produced to when it’s needed. And we don’t have the infrastructure in place. We’re not going to stop burning things just because the mantra “electrify everything” sounds appealing. We’re going to keep on burning things. And the question is not how do we stop doing this? How do we do it in a clean, sustainable manner? Hydrogen provides that opportunity.
AZEEM AZHAR: So, what we’re suggesting is that you have a sort of starting input of clean electricity from geothermal and nuclear fission and maybe fusion and solar and wind and so on is a mix over the next thirty or forty years. And some cases we can store that in a battery. In other cases, we fire it through an electrolyzer and we produce some hydrogen. In other cases, we might then take that hydrogen and turn it into a synthetic fuel.
RAFFI GARABEDIAN: All of these use cases you’re describing, Azeem, are real and present use cases for renewable hydrogen that I believe we will see in the next decade.
AZEEM AZHAR: Let’s get to perhaps some basics before we run too far ahead of ourselves around how should we think about and understand hydrogen? I think that listeners will be familiar with what does a gallon of fuel do? What is a kilowatt hour?
RAFFI GARABEDIAN: Let me compare hydrogen to natural gas. MMBtu is the common measure of natural gas heat rate. We think about an MMBtu here in the US, maybe that’s worth around $4. The equivalent price for hydrogen is something around 70, 65 cents per kilogram. That’s about the conversion off the top of my head.
AZEEM AZHAR: So, you’d say the hydrogen is cheaper than natural gas? I didn’t quite understand that.
RAFFI GARABEDIAN: No, no, no. That’s the price at which hydrogen would become-
AZEEM AZHAR: Oh, I see.
RAFFI GARABEDIAN: Parity from a thermal basis. So this is the interesting thing about energy, both hydrogen natural gas and electricity’s value is locationally dependent. And actually that’s one of the towering strengths of fuels versus electric generation. Fuels can be stored and moved. So, we have a robust economy in many parts of the world exporting natural gas and other petrochemicals or fossil fuels to parts of the world where there’s population density, the need for energy and no indigenous resource. That’s very, very hard to achieve with wires. You mentioned undersea cables to access Moroccan sunshine as an energy source for Great Britain. That is a tremendously expensive proposition to undertake. And the capital cost of building those kinds of infrastructure is ultimately born by the consumers of that energy. How do we do it today? We liquefy natural gas, and we ship it all around the world. Or we take oil and ship it all around the world. Locational arbitrage of the fuel resource is an extremely difficult problem to solve other than providing an alternative fuel that can be transported and moved around. So, one of the really massive transformational use cases for renewable hydrogen is actually the intercontinental transport of energy. What it boils down to is accessing solar and wind and hydro, where they are abundant and moving that energy in a stored form chemically to places where it’s needed.
AZEEM AZHAR: And do you imagine that that storage form is liquid hydrogen, which is, I’m going to use Celsius, -252? That’s pretty cold. It’s much colder than electrifying natural gas. Or would you say that you ship this as a kind of liquified ammonia or do you create a kind of synthetic methane that is a kind of clean carbon cycled methane that you could then use the existing infrastructure?
RAFFI GARABEDIAN: So, liquefying hydrogen is extremely energy intensive, and much of that energy is lost in the process of liquefying it and then re-evaporating it into a useful gaseous form that can be burned or used. This is opinion because the techno-economics are actually not entirely clear. And there’s real debate in the engineering and scientific community as to which pathway ultimately is going to make the most sense. And frankly, we are going to experiment with multiple pathways to compete them against one another to see what really is the lowest cost best form of storage and transport. So, liquefaction is problematic. Storing liquid hydrogen at those extremely low temperatures is also difficult, primarily because it’s hard to keep cold. And when it warms up it evaporates and that evaporation is lost hydrogen or in other terms lost energy. So, inefficiency in the system. Now ammonia is a whole different thing. Ammonia is actually very easy and economic to produce, and it’s relatively easy to liquefy, store and transport. In the farm belt in the US, there are huge, huge storage facilities, big tanks. They look like water tanks from the outside that are filled with anhydrous ammonia that’s cryogenic. So, we know how to do this. Having said all of that, anhydrous ammonia is toxic. So, each has its pros and its cons. And depending on the application, the use case, we might see one or the other win. There are also emerging technologies. So, there are these things called liquid organic hydrogen carriers, which are molecules that can be hydrogenated and dehydrogenated with relatively low energy input or relatively little energy loss in the process. So, think of these as recoverable fuels. It’s a liquid that just changes state and either absorbs or releases hydrogen. That’s a very, very promising approach that I’m ultimately quite optimistic about.
AZEEM AZHAR: There are some solid state approaches as well that are emerging. There’s a British company, H2GO Power, for example, playing around with solid state approaches as well with similar process, right?
RAFFI GARABEDIAN: That’s exactly right. And again, I think there’s going to be a robust competition between technologies, which will ultimately result in low cost approaches for storage and transport of hydrogen. It turns out long distance, high volume transport of hydrogen is extremely cheap. There are numerous existing hydrogen pipelines today, which typically connect an industrial facility like a gray hydrogen production plant, it’s called a steam methane reformer, to an ammonia plant, a Haber-Bosch plant, or a petrochemical refinery. And there are many places in the world where these facilities kind of coexist and are connected by hundreds of miles of hydrogen pipeline. That pipeline, for all intents and purposes, looks and functions just like a natural gas pipeline and has a similar cost structure. So, very, very inexpensive to move gas that way.
AZEEM AZHAR: Once it’s built of course. And all of the underlying property owners have signed off on their land, transit through their land and-
RAFFI GARABEDIAN: Interesting point, Azeem. It turns out building pipelines is less problematic, even from a NIMBY perspective and an environmental perspective than building electric transmission cables. So I’m a recovering electrical engineer. It was very hard for me to actually admit this to myself. But after we did the research, I was quite convinced that pipelines win in the transport of bulk energy over long distances. And they win by a long shot.
AZEEM AZHAR: So, let’s talk about your approach as well, which has to be driven by costs. So I think a number that’s often thrown around for hydrogen to become cost competitive with sort of other alternatives is $1 to $2 per kilogram of hydrogen. Is that roughly where we ought to be aiming for?
RAFFI GARABEDIAN: When I started in solar in 2008, there was a pipe dream to get to $1 a watt constructed plant cost. Now in good resource locations were probably down to 60 cents a watt and the energy that results from those facilities costs under $20 a megawatt, under 2 cents a kilowatt in the US. So amazing transformation that all results from industrial scale learning. Now let’s talk about what we’re comparing hydrogen costs to. If we believe that there is a problem to solve vis a vis anthropogenic climate change, that’s driven by CO2 emissions from combusting fossil fuels, then we probably believe in the momentum we’re seeing politically around decarbonization. Which implies either a price on carbon emissions or mandates for the capture and sequestration of carbon.
RAFFI GARABEDIAN: If we overlay that on top of the price of natural gas, the equivalent cost that hydrogen has to achieve to be thermally equivalent in cost to natural gas, depending on where you on are in the world, it falls somewhere in the range you quoted. $1 a kilo to $2 a kilo. So if we get down to that $1 to $2 a kilo, we anticipate on the techno-economics that there will be a massive inflection point in the adoption of renewable hydrogen as an alternative to the fossil resource.
AZEEM AZHAR: And of course, the next question is, where are we today? And where are you from that number?
RAFFI GARABEDIAN:
It depends on the price of electricity, but electrolyzers today, that’s the gear that makes the conversion, electrolyzers today are extremely expensive. I’ll quote a number just to put a number out there. They cost on the order of a $1000 a kilowatt to construct. So, that’s all the hardware and the labor and installation and commissioning of a plant to perform the conversion. Now the largest plants in the world are on the order of 10 to 20 megawatts in scale. And a typical electrolyzer is on the order of one megawatt in scale or less, hundreds of kilowatts even.
RAFFI GARABEDIAN: So, this takes me back to the early days of wind and solar. Wind turbines were extremely small. They weren’t very efficient, same with solar panels. Fast forward to where we are today. Wind turbines are multi megawatt in scale. Solar panels are extremely efficient and very low cost and quite large, physically. That’s the transition we’re anticipating in electrolysis as well. And at Electric Hydrogen, we believe deeply in the notion that cost drives adoption in infrastructure and energy. So, if that’s your mentality, you think about driving costs because growth is actually the necessary element to decarbonization. We have to grow to significant scale.
AZEEM AZHAR: Growth is also the driver of declining costs. Because what growth allows you to do is to generate learning effect. I use the example of lockdown bread baking. When we went into lockdown, people got into bread baking. The first loaf of sourdough we made took ages, tasted terrible, and there was mess all over the kitchen. By the time we got to the fourth or the eighth loaf, we were really dab hands and super, super efficient. And when we look at a bunch of technologies that have gone from expensive and rare to cheap and ubiquitous photovoltaic cells, semiconductors, silicon chips, they have had tremendous learning effects. Now I’m kind of curious about what the learning effects look like in Electric Hydrogen.
RAFFI GARABEDIAN: Azeem, let’s use your baking metaphor. I like it a lot. I’m also a COVID baker. If you compare two bakers, two home bakers, the one who bothers to read a lot on the internet, maybe buys a book or two and watches a bunch of YouTube videos and then gets started baking. Let’s compare that baker to another one who just starts trying it. Are they going to have the same learning rate? Probably not. Probably the baker who takes their time to think it through and starts with a more robust baking technology is going to do a lot better. Now, from the standpoint of an industrial R&D operation, we don’t think about learning rates at all. We think about discrete projects that have techno-economic benefit. And so what are we doing? We are reimagining reconstructing electrolysis with an eye towards driving two parameters. One is scale. We believe that electrolysis has to occur at a much larger scale of throughput than it is currently being done at. And two, cost. Now cost implies two things. It implies utilizing effectively that very, very low cost renewable resource, which is inherently intermittent and low capacity factor. So, it’s only present a little of the time during the day, and it has a tendency to come and go rather quickly, either because of clouds or because of wind. And the second element of cost, of course, is the capital cost of the equipment, which has to do with its scale and its throughput. So, those are the factors we’re focused on.
AZEEM AZHAR: You talked about needing to drive scale as what you mean, throughput, and to drive costs down, and I’m curious about what you mean by scale. So, I sort of imagine, and I perhaps I’ve got this wrong, there are vats of water and there is some kind of membrane that gets current passed through it – and that’s where the electrolysis happens. And you’ve got a little tube that gets to height the gas off, and then you separate it by sort of density at the end. So, when you say scale, do you mean bigger and bigger sheets of where this electrolysis happens? So, bigger and bigger tanks? What is it when you say scale?
RAFFI GARABEDIAN: So, if you think about a panel electrolyzer, the big ones are about the size of a small refrigerator. That’s the electrochemical unit itself. It’s a bunch of membranes stacked up on top of each other. A lot of expensive materials go into this. Now you can take the approach of just trying to make that bigger physically. The cost goes up with the amount of materials and manufacturing inputs that are required, and that’s how you achieve higher throughput. So, that’s not necessarily a great cost reduction approach. You can try to make the materials themselves cheaper, but at some point you get down to kind of commodity material costs, which are very hard to drive. And in fact, in my estimation, we’re looking at a period coming up here of decades of increasing commodity costs, not declining commodity costs. If you take that same physical unit, but you put more power into it and produce more hydrogen out of it as a result, that is a much lower, effective cost thing. Even if the thing itself has the same price. You’re getting a lot more productivity out of it. That what I mean by throughput. So that’s the best way in our view to drive reduction in cost, but it also drives increase in scale. Which means that same refrigerator size unit could produce, let’s just throw out a number, it could produce 5 or 10 times more hydrogen than the equivalent today.
AZEEM AZHAR: Right.
RAFFI GARABEDIAN: Why is that important?
AZEEM AZHAR: Yes. Why is that important? The thing that strikes me today about the sort of hydrogen market is that it’s so small. It feels to me like things would be very bespoke, whereas most things that get to scale – there’s some modularization, there’s some standardization. I mean, can the hydrogen industry get to sort of a product mentality in terms of the production of the gas?
RAFFI GARABEDIAN: Well, first of all, you’re absolutely right. The industry has been a small niche industry with a great vision. Now, all of a sudden, because of the political will to address climate change and the need for an energy transition, the opportunity has exploded orders of magnitude in scale. And so the technology and the companies that produce it have to adapt if they want to be relevant in that new set of applications.
AZEEM AZHAR: The hydrogen market today is not really huge market. It’s less than $150 billion a year, depending on who you believe. It’s going to have to grow ten times, thirty times over the next twenty or thirty years, and I’m curious about how you enter that market. What policy makers often talk about, they just think that we’ve got to drive down the cost. If we drive down the cost, then magically build it and they will come. And I wonder, is it sufficient to just get the price down practically? You are having to build this. You have to build a company or do you need to also stimulate demand? Are there risks in having a market that is just supply driven if you are making a bet that demand will just sort of show up on Thursday morning to take all this gas off your hands?
RAFFI GARABEDIAN: A Cardinal rule in manufacturing businesses is to not build it and hope that they will come. That’s a path to disaster. It’s absolutely critical to stimulate demand. Now cost has a really important role to play in stimulating demand. But what we’re looking for and hoping for is a leveling of the playing field. Energy writ large, and particularly fossil energy, it’s an industry that’s driven largely by national and international policy and politics, and through very, very complex circuitous web of flows of capital and also legislation. The fossil industry benefits greatly in terms of its deployability and its cost structure. We need to level that playing field first and foremost. And we need to internalize the cost of carbon emissions from fossil fuels. That in and of itself will stimulate tremendous demand.
AZEEM AZHAR: I also wonder about many engineering innovations that emerge. They often have a path into a market that can be at the high end. So, the very, very demanding user. Clayton Christensen who wrote the Innovator’s Dilemma, one of his examples of course, is in electric art furnaces for making steel, which could not compete with the high end of steel, the most profitable steel, which was surgical steel. But as the technology got better and cheaper, ultimately this started from a bridgehead of a rather undesirable market and just became a huge market. Is there some dynamic within the renewable hydrogen market that could look like that? That you can find a bridgehead market where you can actually compete on whatever basis is not fully functioning, like the first mini mills, but you know that as the technology improves, matures, costs come down, scale goes up, you’ll be able to take more of these use cases. Or does that kind of disruption model not work here?
RAFFI GARABEDIAN: I mean, it’s a generalized model that’s worked in a lot of places and probably works here. But the devil’s in the details. So, there’s a famous US company, Plug Power, that is powering Ford trucks with hydrogen. Interesting business. It might be that market that helps the industry go from zero to one. It might also be a dead end. It might also be a distraction. When I say the devils in the details, what I mean is whether or not the product that’s being developed, there has a roadmap to then scale into the markets that we’ve been talking about, the use cases that are much, much larger. But it’s a very difficult pathway because the product requirements, the product market fit is fundamentally very, very different. So we’re attacking the problem head on. And rather than looking for a bridgehead market, we are looking for customers who have an internal and an intrinsic motivation to decarbonize very difficult use cases.
AZEEM AZHAR: Would it seem to me like the natural places to start would be those people who actually consume hydrogen in large quantities from dirty sources? So in fertilizers and chemicals.
RAFFI GARABEDIAN: It’s such an interesting topic. And it’s so obvious to go there immediately. You mentioned the hydrogen market. It’s not actually a market. There’s actually no commodity desk for hydrogen. It’s not a freely traded commodity. It’s typically a bilateral or unilateral purchase arrangement. Breaking into that industry has certain structural challenges, both legal and business challenges that might make it… it seems like an obvious place to start. It might actually be a very hard place to start. We’re exploring those opportunities, but I would say the answer right now, isn’t obvious. It’s also important to note that the pressures to decarbonize those industries, either the intrinsic or extrinsic pressures are not as severe as they are in other use cases and applications.
AZEEM AZHAR: I’m curious about what you think the contribution over the next decades of hydrogen could be to the decarbonization journey. Is it that we are at the stage where we just don’t know what works so we need a portfolio of tools and we might be able to get there without hydrogen? Or is it that it’s going to actually be absolutely necessary and part of the mix? And if it’s the latter, how much part of the mix?
RAFFI GARABEDIAN: We’ve been using a lot of energy for the last few hundred years as a species on the planet. We have not, in those hundreds of years, found a way to consolidate and harmonize our energy input to a single source. We have many, many different sources of energy and sources of chemical precursors that we use in different places and applications because they work better. So, to think that just because we want to say “electrify everything” it should happen, I think is a little bit naive. There are things that can be electrified effectively with renewable energy. There are things that can’t be. And the things that can’t be are a huge, in my estimation, 50% or more of the energy system as a whole. That’s where hydrogen I think can play and probably should play. So, to put a scale on that opportunity globally, we are talking about tens of terrawatts of equivalent generating capacity or the conversion to chemical form, whether it’s hydrogen or some of the downstream downhill forms of renewable fuels that might be more transportable and storable.
AZEEM AZHAR: And I think we should just scope what, what tens of terrawatts means. What does that mean relative to US energy electricity use?
RAFFI GARABEDIAN: So, if we think about solar as an industry, the global production capacity of solar modules, which is the critical piece of the solar value chain, without which you can’t build a solar plant, is just over 200 gigawatts a year. The ability globally to make wind turbines is something south of that. Renewable energy writ large can be deployed globally, something south of 400 gigawatts a year.
RAFFI GARABEDIAN: Now a large portion of that deployment will go directly to the electric grid, direct electrification. So, only a small fraction of it can ultimately be bypassed or utilized in electrolysis for the production of hydrogen. So, to think about the scale of the problem appropriately, we have to also talk about the scale of the energy resource going into it. And we have to talk about expanding the scale of that energy resource. When I think about solar, the constraint to adoption is the infrastructure necessary to integrate that solar onto the grid and to move it to where it’s needed when it’s needed. Batteries are super expensive. They’re going to remain super expensive from a grid perspective for the foreseeable future. And wires are really hard to build and expensive to build. So, in fact, this is why my partners and I got into the hydrogen business in the first place. We came at it from the perspective of how do we lift the constraints on deploying more solar and more wind so that we can move through the decarbonization journey faster than we are today. And actually hydrogen provides potentially that pathway by lifting the constraint of grid integration from the renewable industry.
AZEEM AZHAR: When we think about our listeners, they’re probably listening to this thinking, will they ever touch hydrogen? Will we ever need to know, care, understand about hydrogen, or will all of this good work really happen just behind the scenes, almost a transparent and seamless way for us?
RAFFI GARABEDIAN: One of the challenges in building a business like ours at Electric Hydrogen is that capturing the imagination of lay people, people who aren’t in the renewable industry in the energy business is extremely hard because we don’t touch these things. Most people don’t know where their electricity comes from, and don’t really care to know. Similarly, most people don’t know or care to know where the nitrogen is fixed to produce the food that we eat. These kinds of projects are deep within the industrial basement of society. It’s our job to try to elevate these discussions and make them more accessible and make them more interesting if we can, to people.
AZEEM AZHAR: I think it’s really important. A lot has been taken for granted, not just in industrial systems and energy systems, but in many, many other ways, over the last forty, fifty, sixty, seventy years. The arrival of mass manufacturing and consumerism meant that we didn’t have to understand how our meats got on the table and how the light bulb turns on and what are the decisions that are taken. And in fact, I think curiously, it’s quite disenfranchising for people, if that is the case. And I would hope this podcast will take the time to understand what actually goes into making that sandwich. So, Raffi Garabedian, thank you so much for giving me your time today.
RAFFI GARABEDIAN: Azeem, thank you for the opportunity and for the really thoughtful questions. This was super fun.
AZEEM AZHAR: I hope you enjoyed that conversation. Check out our podcast feeds for other discussions with people like Troels Schonfeldt. Founder of a nuclear fission company, Seaborg and Nick Hawker, the founder of First Light Fusion, a fusion company. Today’s episode was produced by Fred Casella and Marija Gavrilov and researched by Chantel Smith. Our sound editor is Bojan Sabioncello. Exponential View is a production E to the Pi i Plus One, Limited.
