“Clean Fuels” – Watts Up With That?

From the MANHATTAN CONTRARIAN

Francis Menton

Come here for the latest news on how the so-called “energy transition” is grinding to a halt. No amount of government handouts can make this ridiculously uneconomic fantasy work. My last post on the subject, on July 20, reported on the collapse of a large “green hydrogen” project in Australia, with the stated loss of an investment of about $2 billion (Australian) (equivalent to about $1.3 billion U.S.).

It seems that that one was just the tip of the iceberg. Today’s [August 19th~editor] Wall Street Journal has a substantial roundup of the financial status of a half-dozen or so so-called “clean fuel” projects. The headlines from the print and online versions tell you what you need to know. In the print edition (page B3) it’s “Clean-Fuel Startups Begin to Fizzle Out.” Online, it’s “Clean Fuel Startups Were Supposed to Be the Next Big Thing. Now They Are Collapsing.” As the headlines indicate, pretty much all of these “clean fuels” ventures are failing. Who could have guessed?

The Journal’s label of “clean fuels” is used to cover two different categories, one being biofuels, and the other being so-called “green hydrogen” (the stuff produced by electrolysis of water using electricity produced by wind or sun). The biofuels category appears to include such genius ideas as making fuel for airplanes or ships out of used cooking grease. Whatever you might think of that idea, these are still carbon-based fuels, and it’s not clear to me at all why they are supposedly “cleaner” than other carbon-based fuels like petroleum or natural gas.

Hydrogen, on the other hand, offers the promise of providing energy for planes, trains, ships and automobiles free of the dreaded “carbon emissions.” Just hook up some solar panels or wind turbines to big electrolyzers and watch the stuff bubble out of the water virtually for free! The badly misnamed “Inflation Reduction Act” made billions upon billions of dollars of subsidies available for these kinds of projects. Surely the successes should be rolling forth one after the other by this time.

It turns out that no matter how many subsidies the government doles out, nobody can make this “green” hydrogen stuff as cheaply as natural gas can be produced by drilling into rock.

One of the big green hydrogen startups is called Plug Power. The Journal quotes its CEO, Andy Marsh:

“The excitement of the early days has not lived up to the hype,” said Andy Marsh, chief executive of Plug Power, a startup that recently opened one of the country’s first plants making green hydrogen, a potential replacement for fossil fuels in industries such as steel making and chemical production. Shares of Plug Power have tumbled more than 90% since the passage of the U.S. climate law two years ago.

Well, at least they’re not bankrupt — yet. You do have to wonder how Mr. Marsh could qualify to be a CEO of such a company and raise hundreds of millions of investor dollars without ever crunching the numbers to realize that green hydrogen could never be economical. Could it be that his business plan all along was to pay himself a big salary out of the investors’ funds and then walk away when the inevitable bankruptcy came?

Here are a couple of paragraphs from the Journal summarizing the overall state of the industry:

Many clean-fuel projects have become money pits, in part because of the great amounts of power they need. High interest rates, supply-chain disruptions and expensive power-grid upgrades have driven up electricity prices. . . . “The only way to fix it is by lowering the cost of green electricity,” said Andrew Forrest, one of the most vocal advocates of hydrogen.

Wait a minute. Andrew Forrest — where have we heard that name? Oh, he is the Australian tycoon who goes by the name “Twiggy.” He’s the head of the company Fortescue, and was the subject of my July 20 post as a result of the collapse of his big Australian green hydrogen project. The Journal goes on to some detail about “Twiggy’s” ongoing green hydrogen plans:

Forrest, the billionaire founder of Australian iron-ore giant Fortescue, said his company’s 2030 hydrogen production target now looks unrealistic. Fortescue is planning to produce its own clean power to make hydrogen in Australia and is considering doing the same in Arizona.

But somehow the Journal fails to mention the failure of Forrest’s big Australian project. Could it be that they interviewed him a month ago, before that happened?

So the odds are that nobody will ever be able to make these “clean fuels” economically. The consequence:

Without clean fuels, emissions at many companies are expected to keep climbing, threatening U.S. and global climate targets. Industries including aviation and shipping are counting on the new fuels because wind and solar power and batteries can’t meet their huge energy needs.

When are we allowed to declare that this whole charade is over?

UPDATE, August 20: Commenter Pablo Honey suggests that it might be interesting to look at the financials for one of these “clean fuels” companies. Here is the 2Q 24 earnings release for Plug Power, just out on August 8. Some key figures: revenue — $143.4 million; “earnings” — net loss of $262.3 million.

Margins: “The Georgia plant’s increased production capacity and strategic price increasesacross the hydrogen product portfolio have significantly improved hydrogen margins.” So they are increasing prices from levels that were already a multiple of the price of natural gas for equivalent energy content. Good for them if they can get someone to pay, but that inherently means that their market is limited to buyers who either need hydrogen for its non-energy properties (i.e., fertilizer) or ones who are willing to forego profit out of religious devotion to “decarbonization.”

Government handouts: “Plug Power became one of the first companies to leverage the PTC [Production Tax Credit] for its liquid hydrogen plant in Georgia, optimizing financial performance and enhancing shareholder value. . . . Plug Power is progressing with the DOE loan, which aims to support the expansion of its green hydrogen initiatives and infrastructure for up to six sites.”