barron’s and hydrogen viability
“Ballard Stock is Surging Because Hydrogen-Fueled Vehicles are Picking Up Steam” appeared at Barron’s on Monday. On one hand it sounded exciting, but there would likely be a good dose of optimism.
Articles in financial press are known to have baked-in optimism. There are far more on the “buy” side than the “sell” side. That said, I wanted to explore whether this article was internally consistent. Could a reader make sense of this optimism solely based on the article’s contents? The short answer is no.
the long answer
“Hydrogen technology is coming of age, and the cost of gas is coming down to levels to make the technology viable” was the second sentence. What gas? Is it hydrogen gas or is it natural gas, which is reformed to produce “grey” hydrogen? Gas is an odd term for hydrogen. It is more likely to be associated with, or used for, natural gas. Either reading is plausible because “grey” hydrogen is produced from natural gas. Let’s assume the author meant to say “hydrogen” instead of “gas”.
The first cost of hydrogen we see is $16/kg in California. I am not sure what, if anything, is unique about California, other than it may be where the author checked the price. Later, we are told Nikola believes it can drive the price below $4/kg, or below the cost of diesel when it is between $2-3/gallon. OK, we are looking at a factor of four decrease in the cost of hydrogen.
Now it becomes confusing. The author cites Ann Duigan, a J.P. Morgan analyst. She apparently wrote in a research note that “grey” hydrogen from fossil fuels, think natural gas, costs between $1-2/kg. She then states that “green” hydrogen i.e. from water electrolysis is between $2-3/kg, “ … which is good enough.”. Are we already below Nikola’s $4/kg? The numbers would suggest we are.
A caveat about extra costs associated with distribution and storage is given, but no number, or cost, is provided. This is a well used tactic. A reader tends to remember the numbers they see and forget about those that are not quantified.
is cost approaching viable levels?
Even though we are not directly told as such, the premise of approaching cost viability seems to be based on J.P. Morgan’s numbers. Unfortunately, these and the discussion around them leaves questions. We are led to believe the cost of green hydrogen, at the time of production, is currently, roughly equal to fossil fuels. This is hard to believe.
Cleantech and climate change are important topics and deserve clear and concise discussions. Hydrogen will play a role in the solution somewhere along the way, whether in chemical reactions or as a fuel in specific transportation scenarios. However, it will be more complex and nuanced than many will lead you to believe.