Blain’s Morning Porridge – Sept 29 2020: A Blue path to Green?

“I could be a lawyer with strategems and ruses, I could be a doctor with poultices and bruises”

Global Coronavirus deaths top 1 million. That’s a tragic number. So is the World Bank reporting that 38 million Asians in poorer countries are likely to be slung into poverty as a result of the pandemic crisis economic shutdown. The data here in the West shows how fearful populations have become – we aren’t driving as much, we don’t go out, and the economy shows few signs a resurgence is on the way – unless you believe recovering stock prices and a slew of opportunistic US M&A deals are a better judge of the real economy?

I read stories about young people giving up on job hunts – reckoning the virus and the economy are against them. Maybe it’s time to stop scaring us and talk about positive stuff. Life is dangerous. Go live it. Perhaps an interesting statistic is the prediction Covid deaths are heading towards 2.3 million per annum – not quite double the number of the 1.4 million people killed in road accidents globally. Many, if not most, Covid victims have lived good and full lives. Most road victims missed that chance – dying young.

One thing we can say here in the UK is rising infection rates don’t seem to be matched by rising deaths.  The authorities aren’t talking much about mortality rates – assuming they will rise in line with infection rates (which will rise because more people are being tested!). Perhaps the reason deaths are down is because the first wave already removed many of the most vulnerable, and as we come to understand the virus better we are able to treat it better. For instance, when did you last hear anyone mention the need for ventilators on the news?

One of the big issues has been Long-Covid – why do some otherwise fit and healthy people get it so bad?  Two of my chums are triathletes and both have spent months recovering. There seem to be lots of promising leads. For instance, I hear there is much discussion about “Mast-Cell Activation Syndrome” explaining why certain individuals are hit much harder than others.  In some people Covid triggers an over-active immune response causing a histamine and clytokine storm that wrecks healthy bodies and hits those subject to MCAS particularly hard. Apparently about 19% of the population have the syndrome – and it can be treated with a simple hay-fever tablet.

Let’s talk about something more positive this morning:

The Hydrogen Economy

Very interesting headline on Bloomberg that might tell us lots about the future: Saudi Sends Blue Ammonia to Japan in World-First Shipment. Blue Ammonia is safe way to transport Hydrogen – without any of the unfortunate Hindenburg exploding balls of flame side-issues. It will be burnt in Japanese power stations producing energy with zero carbon emissions. Blue ammonia is made with Blue Hydrogen – that’s hydrogen made from fossil fuels. The residual CO2 from the manufacture process is captured and stored in mangroves.

Green Hydrogen is even more interesting – it’s made with zero carbon inputs using clean renewable energy sources. I’ve been writing occasionally about the possibilities of Hydrogen in the Morning Porridge for a number of years – but over the past 12 months that I’ve noticed interest and debate on the topic escalate massively.

In 2019 trade body The Hydrogen Council predicted the international hydrogen market could be $2.5 trillion by 2050. Last week Bank of America came up with a market value 4 times higher at $11 trillion within the 30-year timeframe. BoA said: “Hydrogen could supply our energy needs, fuel our cars, heat our homes, and help to fight climate change,”adding; “We believe we are reaching the point of harnessing the element that comprises 90% of the universe, effectively and economically.”

There are problems with Hydrogen – it’s difficult to store, and it’s explosive. Storing and transporting it as Ammonia raises issues as well – which can be overcome. However, the emergence of a new Hydrogen Economy into mainstream energy discussions could underly a massive technological revolution and decisive shift from carbon fuels. It’s a slightly less powerful fuel than oil, and more difficult to store in pure form, but its clean. In a fuel cell format is could solve many grid capacitance issues.

Hydrogen has suddenly become “interesting” because renewable power is “maturing”. In the early days of wind farms and solar power, the talk was all about how “Green, Shiny and Save the Planet” these energy sources were. When technology is new – proponents naturally focus on the upside. The renewable power prophets tended to ignore the big problem with renewable power sources: wind and solar are “unreliable”! The sun don’t shine and the wind don’t necessarily blow when you want peak power, and when they are producing power might not coincide with peak demand. The issue was how to store renewable energy that isn’t being used – the capacitance problem.

10-years ago – when I first looked at financing a project to build an electric power feed from Iceland to Scotland – I remarked that Iceland was the world’s most efficient battery. The Island currently exports its abundant electrical wealth in the form of aluminium ingots. The losses on power cables are still too high for the project to work, but back then I said: “whoever solves the global capacitance problem will become a trillionaire.”

Green Hydrogen is one practical solution to the capacitance problem – and neatly solves Carbon emissions as well. The only waste product from fuel-cell is water.. which is great news as a power system across water-poor emerging economies.

The hydrogen revolution is already happening faster than we think. Last week I wrote about Airbus’ plans for hydrogen fuelled airliners. I didn’t know as I wrote the piece, but the day before a UK based company successfully flew the first Hydrogen powered aircraft, powered with fuel-cell technology. Over the winter I am looking at replacing the battery system on my yacht with hydrogen fuel cells – and have been told an ultra-reliable electric engine/generator package is coming in the next few years.

The shift from our coal & oil-based economy towards something greener and more “sustainable” has happened in the best traditions of our capitalist society – unplanned, chaotic, inventive, opportunisitic and littered with risks. There has been little synchronicity around it – which is perhaps why some react as Luddites to a perceived threat. It may explain why a large number of Americans still think climate change is a hoax and a green economy is a Communist plot to neuter America’s oil wealth.

They’d do better to see it in terms of massive opportunity for America’s inventiveness. Its evolutionary and will create a whole new economy around it. We’re likely to discover many of the “green” technologies being introduced today may be surpassed and replaced by new ones yet to emerge as the shift-to-hydrogen occurs.

We may also see a further stimulus for renewable power – which will be needed to produce Green Hydrogen. My thesis on green power is that we only get a true shift to carbon neutrality when intermittent wind and solar power is balanced with ultra-reliable tidal energy. At present Tide costs about 5x as much as Wind, because of maintenance and construction issues, but these costs will fall making Tidal-power mega-efficient to produce green-hydrogen.

And, I can’t resist a sly dig, but green hydrogen power via fuel cells and new battery tech could well make Tesla’s current lithium ion battery tech look like a steam train/dinosaur. (That’s essentially what happened in the 1900s when the new ICE (internal combustion engine) tech proved more efficient and better than early electically powered cars.)

The fact the green renewable power revolution is happening at all is entirely due to the success of capitalism and markets being able to overturn rigidities. The global economy works on “access to capital”, responding to demand and supply. As an economic need for something new  emerges, the market allocates capital to finance the economic shift that occurs. Green energy went from being a beardy-crank earth-hugger concern a few decades ago to becoming a core ESG investment requirement for many funds today.

I know, from recent experience, it is now much easier to finance risky new-tech floating ocean wind farms than it is to fund a simple coal deal with guaranteed income vs tried and tested mining expertise and technology. (Don’t forget – to build a wind farm you need steel, and to make steel, you need metallurgical coal.)

The shift towards a green economy and decarbonisation has left many gaps. If everyone started using electric cars, and charged them when they get home the lights will go out across the land as the venerable national grid gives up.  We need to rethink capacitance and delivery of electricity. What if everything you think about ecology, renewable power and the green economy is set for yet another Nudge moment, and that moment is called Hydrogen?

The Green Hydrogen Economy is definitely worth paying attention to.

Five Things too Read This Morning

BBerg – ‘The Apprentice” Earned Trump $427 Million and Path to White House, NYT Says

BBerg – Solving One Trump Tax Mystery Opens Another

FT – Wirecard: The scandal spreads to German politics

FT – Fears of disputed US election fuel market volatility bets

WSJ – “Fallen Angels” Fall Short of Expectations

Out of time, and back to the day-job.. (which this morning is some admin drudgery…)

Bill Blain

Shard Capital