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MACRO MACCHIATO: SKIP LNG, MOVE STRAIGHT TO HYDROGEN?


Renowned philanthropist and exterminator of typing pools Bill Gates has ordered a luxurious super-yacht, his first as it turns out. The 112 metre LOA gin palace, first aired at the Monaco Yacht Show last September, will cost USD 500 Mn and is expected to deliver in 2024. It will have 14 guest berths and 32 crew berths, an infinity pool, helipad, a spa and - oh yes - it is going to by powered by hydrogen fuel cells.

Liquefied hydrogen will be stored below decks in vacuum tanks at 20.25 Kelvin, which is -252.9 Celcius, rather colder than the balmy -160 Celcius at which methane liquefies. The hydrogen will power electric fuel cells via a chemical reaction with oxygen in the presence of a catalyst. The chemical reaction liberates electrons which are harvested as electricity, while the hydrogen is oxidised, becoming water which is the only by-product. The yacht designers say their boat can cover 3,750 nautical miles at 17 knots on a full fuel tank.

Hydrogen has several advantages over fossil fuels, being the most abundant and the lightest element in the universe. When used as a fuel it has no carbon emissions or pollutive by-products, creating only water vapour as its exhaust. But there are engineering challenges to making hydrogen fuel cells. It is expensive to isolate the hydrogen in the first place. It is expensive to store and to transport it and it faces the same boil-off problems that LNG has presented. The most common catalyst is platinum, which is expensive and rare, though there is plenty of research going on into alternatives including carbon-mineral clay compounds which shows promise.

Bill Gates’ yacht does not however represent a technological revolution, rather an adaptation of an existing technology for commercial ocean transport. This fuel cell technology is already being used in space vehicles to replace older technologies. It has been researched by the US military for several years. A Norwegian consortium plans to install a 3.2 megaWatt hydrogen fuel cell onto a large vessel currently being designed by Havyard Design for the shipowner Havila. This will be the largest fuel cell ever placed on an ocean-going ship. There is some urgency in Norway, where vessels powered by any form of hydrocarbon that produces CO2, exhaust and other emissions will be banned from sailing in Norwegian fjords by 2026, according to Recharge, a Norwegian industry publication. Industrial users world-wide already approximately 70 Mn T of liquid hydrogen consumed every day.

Thus the technology already exists to use hydrogen as a transport fuel. National schemes for increasing the use of hydrogen fuel for transport exist in Japan and Germany. Industry body the Hydrogen Council reported last month that production costs for hydrogen could fall by 50 per cent by 2030, making hydrogen competitive with other renewables and with fossil fuels. Their study includes the conclusion that for over 20 applications “such as long-distance and heavy-duty transportation, industrial heating, and heavy industry feedstock, which together comprise roughly 15% of global energy consumption, the hydrogen route appears the decarbonisation option of choice.” Bernd Heid of McKinsey, who carried out the study for the Hydrogen Council, says that hydrogen is already lower-cost than fossil fuels in heavy-duty transport and trains.

To scale the hydrogen infrastructure in key geographies, the study authors estimate that USD 70 Bn of investment will be required by 2030. That is not very much when one considers the USD 5 Bn one 3 Mn Tpa LNG train costs to build, and when one considers the environmental benefits of hydrogen over fossil fuels.

THE TAKE AWAY

Along with other factors like a lack of finance and chronic overcapacity, the changing environmental rules in shipping have impacted newbuilding contracting massively. A ship built today will still be trading when the IMO’s rules on CO2 emissions come into force, if the EU’s proposed rules don’t force the IMO’s hand earlier, like their single hull tanker ban did. Naturally ship owners don’t know what to build. Lots of newbuilding brokers have been lobbying for charterers to get behind LNG as a marine fuel. No doubt their environmentally altruistic motives are leavened with commercial ambitions to drive a wave of LNG powered fleet renewal. But, as we have reported before, there are naysayers who reckon that LNG is a greater CO2 emitter than fuel oil on a wellhead-to-wake basis. Even LNG’s proponents admit that it is a 'transition fuel' on the way to a decarbonised global fleet. But why bother with LNG when hydrogen is already technically feasible, if behind LNG in terms of scale? Why not leapfrog the last fossil fuel and go straight into clean hydrogen? If McKinsey is right and hydrogen is competitive with fossil fuels on price for deep ocean transport, then there are good commercial reasons, as well as sound environmental reasons, to investigate it further, without delay.

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