Things I noticed and thought were interesting
Week ending August 29th 2021
1, Hydrogen made at wind turbines. A consortium of companies was awarded €100m by the German government to integrate hydrogen and renewables fuel production into the interior of offshore wind turbines. The aim is to avoid any need to carry electricity to shore. One of the first sites to use the new model of turbine will be RWE's 10 GW AquaVentus project in the German North Sea. I wrote a post that looked at the reasons behind the rapid growth in interest in merging turbines and hydrogen production. I speculated that a large fraction of all offshore turbines will eventually be built with onboard electrolysis, partly because it is far cheaper to transport hydrogen by pipeline than electricity by cable.
2, Dual fuel shipping. Maersk ships 17% of the world’s containers, emitting about 30 million tonnes of CO2 in the process, or about the same as the whole of its home country of Denmark. It has long promised a full decarbonisation strategy and made a bold move this week, announcing an order for 8 dual fuel large container ships to be delivered from 2024. The vessels will be able to run on either conventional heavy fuel oil or methanol. The cash commitment of about $1.5bn is impressive, particularly since the dual fuel capacity has added about $200m to the budget. Maersk commits to sourcing as much properly ‘green’ methanol as possible, made from either biological materials or from air-captured CO2 and hydrogen. The company acknowledged that the world’s supply of truly green methanol is wholly inadequate for the 360,000 tonnes of annual requirements. (It would use far more than Denmark’s total green electricity output to make this fuel). The company says that it is now up to the worldwide industry to build the plants to fulfil the demand and several contenders propose to enter the industry. Methanol is substantially more expensive than conventional fuels but Maersk says it has obtained commitments from many of its major customers, such as H&M and Amazon, to pay a higher price. My analysis of this gamble is here.
3, Climeworks and Swiss Re. The reinsurance giant Swiss Re committed $10m over 10 years to direct air capture (DAC) of CO2 from Climeworks, its Zurich neighbour. Details of how much carbon dioxide will be captured and stored weren’t made available. But Swiss Re did admit that the current cost is ‘several hundred dollars per tonne of CO2’. This is the biggest single order of DAC from Climeworks, much larger than recent purchases by Microsoft (1,400 tonnes) and payments company Stripe ($250k). The next few weeks are busy for the company with the opening of its pioneering Icelandic plant and a worldwide online public conference alongside its main competitors. By the way, I can vouch for the current expensiveness of DAC; Climeworks offered me a price of about $1m for a unit collecting just 35 tonnes a year for use encouraging plant growth in a greenhouse. That’s before the cost of powering the unit 24 hours a day.
4, Urban Outfitters resale marketplace. Last week I noted the entry of H&M into the peer-to-peer second hand clothing business. US-based Urban Outfitters made a similar announcement in the last few days. It had opened a clothing rental subsidiary last year. Now, amongst other activities it will use its new peer-to-peer platform to sell items that have come to the end of their life in the rental business. One leading fashion journal says that the US second hand clothing market will be worth $67bn in 2025, about 20% of total sales.
I expect this will be good for the climate. But data on whether second hand sales actually reduce the amount of new clothing bought is hard to find. Perhaps people will just buy as much, but then sell it on after a few wearings. Of course, this what the retailers may be hoping for. Both H&M and Urban Outfitters are offering extra discounts on new clothes paid for with the money the customer makes from selling their second hand items through the platforms.
5, Sunshine direct to hydrogen. Spain’s Repsol gets credit for being the oil company most committed to a full move away from fossil fuels. It has been working on ‘electrophotocatalysis’ for a decade, hoping to find ways of making hydrogen directly from sunlight, without using electricity. It said this week that after successful experiments it now expected to build a pilot plant at its refinery site in Puertollano by 2024 and hopes for commercial viability of the technology before 2030. This is potentially a highly disruptive innovation. Generation of hydrogen from the splitting of water by sunlight would bypass electricity generation, implying that many of the investments in electrolysis, such as those mentioned in note 6 below, could be made financially unattractive. So far, other experiments in electrophotocatalysis have failed to prove its commercial possibility but Repsol and its partner, the Spanish gas distributor Enagas, have the resources and the clear incentive to make solar hydrogen a reality.
6, Australian hydrogen. Andrew ‘Twiggy’ Forest, one of Australia’s richest businesspeople and the head of a huge iron ore company, is an ever louder voice for determined action on climate change. Among other projects, he talks of creating a new hydrogen steel industry in Western Australia. Last week he went further, promising that his industrial group will produce 15 million tonnes of green hydrogen a year by 2030 and ’50 million tonnes thereafter’. (Currently the world uses about 70 million tonnes of H2 annually). At $2/kilogramme, 15 million tonnes would mean revenue of around $30 billion, the size of a moderately large oil company. His target will require between 2 and 3 times as much electricity as Australia makes at the moment. In terms of scale, Andrew Forrest’s ambition matches anything in the world, and he has some of the financial resources to achieve his aims. In a parallel announcement, BP in Australia said that hydrogen was also the new focus for the company, although its targets are far more limited and tentative than Forrest’s.
7, Car companies and electricity markets. Several years ago, battery maker Sonnen (now owned by Shell) started offering cheap electricity rates to householders in countries such as Australia who allowed the company to control the domestic battery, importing when power was cheap and exporting it when expensive. This is now a logical market for the electric car companies. Tesla is already in partnership with retailer Octopus in the UK to offer a tariff that uses the storage capacity of the Powerwall batteries (not the cars, I think). It has now entered southern Germany, apparently under its own name, with a retail offer. Car batteries will become the single most important source of short term stabilisation of electricity grids, possibly using Tesla's Autobidder software which has been tested for several years at the Hornsdale grid scale battery in Australia as well as in retail markets. 20,000 modern EVs might offer 1 GWh of storage, far bigger than any of the world's batteries today. Following Nissan, many of the major auto manufacturers are now preparing to offer full 'vehicle to grid' capability for their EVs, allowing them to export power when financially beneficial. VW, for example, will start offering this capability next year. (Thanks to Thad Curtz).
8, Basalt weathering. Climeworks’ new plant in Iceland (note 3 above) stores the CO2 by adding it to water and then pumping it down into the basalt rock beneath the site. The basalt absorbs the carbon dioxide, permanently changing the rock into a carbonate. A recent paper in Nature Geoscience looks at another possible way of capturing atmospheric CO2. It suggests that grinding basalt into a fine dust and then spreading it on land not used for agriculture may be an effective and cheaper means of storing carbon. As with the Climeworks technology, the basalt absorbs CO2. The additional advantage of spreading it on soil is the potential (as yet largely unproven) improvement in soil fertility because basalt contains phosphorus, an important plant nutrient. One estimate in the paper is that for a cost of about $79 a tonne, cheaply available basalt could capture a total of 0.2 gigatonnes of carbon dioxide a year (about 0.5% of current world emissions). My guess is that it would make substantial sense for investors or philanthropists to carefully research this technology. One expert I spoke to said he thought the energy costs of grinding the basalt into dust would be too high. But at $10/MWh for solar electricity in some places, does this matter?
9, Cheap electric cars. Electric cars remain substantially more expensive than their petrol equivalents, although the difference is diminishing. Some manufacturers are seeking to address the price premium by offering smaller city cars. More accurately, I might have written 'by offering absolutely tiny city cars'. Opel will launch a 47 mile/70 km range vehicle with a 28 mph/45 kph top speed in the autumn. It is 2.4 metres long. One industry journal speculated that the price will be about £5,500/$7,500. As China is demonstrating, my suspicion is that there is a reasonably sized worldwide market for very cheap battery cars only usable for short journeys at low speed.
With many thanks to the subscribers who wrote last week after the resumption of this newsletter. I am very grateful indeed for your comments.