Out-Of-The-Box Thinking Is Required To Get Us On An Accelerated Pathway To Decarbonisation And Cleaner Energy, Affirms Frank Wouters, VP, Reliance Industries

Q: Given the current sustainability market, green hydrogen seems to be at the top of the alternative renewable energy resources. Do you believe that in many ways, hydrogen does have the potential to surpass the other renewable energy alternatives? 

A: First, the overall energy picture is dominated by molecules. So, in terms of overall final energy demand on a global level, that is not any different here in the Middle East, 20% is electricity and 80% are molecules. Coal for power generation, steel makes the cut just as natural gas to make power, diesel, and gasoline, to run vehicles, etc. Due to economies of scale, and continuous improvements, the cheapest form of power on a unit basis is solar and wind, especially here in this region where we've seen record low prices for large-scale solar. We've squeezed that out to the maximum and that is now the default option. So, in terms of electricity, that race toward renewables is going forward. So, part of the energy transition is electrification. 

For example, electric vehicles are now growing very rapidly. There, we can replace diesel and petrol with electricity, but above a certain percentage, that becomes challenging. We don't have the grid infrastructure, which will be difficult. We cannot do everything with electricity. Then the question is, what do you do with the remaining 50% of molecules that we continue to need in the future, that’s where hydrogen comes in. Hydrogen can replace that remaining demand for molecules in the energy sector, whether it's, gas for power, or gas for high-temperature heat, all those things can be replaced with hydrogen. 

It's not a question of, either-or, but it's complimentary. We also must note that the bulk of the hydrogen in the future will be made with electricity. So, we will have to start with building more electricity generation capacity, which will be solar, or wind because that is the cheapest, but then you'll make hydrogen for applications where you still need molecules rather than electrons.

Q: Tell us a little about your article on hydrogen economy and why you chose to work on a Utopian model economic model? Does it now bear a strong semblance to what you're witnessing in the industry?

A: Basically, I tried to figure out and build an economic model to support the question of how speed impacts the cost and the emissions of the transition. So, there is consensus in the world that we need to decarbonize, most countries in the world have subscribed to the Paris Agreement, which dictates that we have to be carbon-free in the future. Let's assume that by 2050, we've achieved that goal, then does speed matter, or what is the impact of speed on that equation? I modelled three pathways. One is where you do it gradually. So, you gradually replace carbon-emitting, energy aspects of the economy with clean energy, mostly solar, wind and hydrogen.

Then there were two other pathways. One is an accelerated one where you do all the transition until 2035. Lastly, delayed, which is what many people still like to believe makes sense because transition costs money, and it's difficult to change, etc., where you backload, so you start most of the transition in 2035. And then you do everything towards the end of the period between 2035 and 2050. Now, the results were very, very clear. 

That model economy that I call Utopia looks a lot like Europe. So, I took the high-level numbers for something like Europe and the quicker you reduce the emissions over that period it was a lot cheaper by a huge margin. We're saving trillions of dollars in economies of that size, by front-loading the transition, and that was a very clear result of that modelling exercise. I further put it in a paper which has now been peer-reviewed. Several people have looked at it and I incorporated all the results. 

A point of consideration here is that I did factor in a price on carbon, which is necessary to make a change. It's the most cost-effective policy mechanism and I think everybody agrees with it. That is something that we have, for example, in Europe. I was very moderate in the assumptions. Currently, in most countries, there's no price for carbon. I also modelled a carbon pricing regime that would not be  as aggressive and as ambitious as in Europe. The results are still the same. It still makes sense to go fast. So, a fast transition is cheaper, and of course, a lot cleaner.

Q: In the concluding part of the article however you write, “we should also realize that such a tectonic shift in a compressed timeframe will certainly not only produce winners, and many assets will have to retire before the economic life would have ended. So many jobs will be lost, or new ones will be created, and it will not be easy to redirect all the workforce to the new fields.” Is this being prescient and telling grad schools that they should be redirecting the young before the standard clear disadvantage?

A: That's a very clear message. If you're looking at your career, and you're starting to think about what you should study, etc., and if you're an energy person, be in clean energy, because that is what we need to be doing in the future anyway. So, in terms of futureproofing yourself, as well as future-proofing your institution, I was trying to convey this message. 

Change hurts and it's not easy. I am from the south of the Netherlands and that used to be a coal area. We had coal mines in the region, and they were closed decades ago. But these former areas where they closed those mines, decades after that closure, still lag in certain economic indicators. And that is something that we should pay attention to. Whether it's coal miners in South Africa,  or 500,000 people in the coal industry in India, we cannot just say, let's stop all this and then build wind turbines and solar panels and let 500,000 people go without a job. A lot of them, unfortunately, are not very well educated. 

That's the reason perhaps they're working in certain sectors in certain jobs, and we have to make an effort not to let that transition make it very difficult for those communities.

Q: What are the significant geopolitical effects that you see in the foreseeable future if more countries switch to renewable energies as a part of the energy transition?

A: Obviously, the sun shines everywhere. Even on the North Pole, you have research stations with solar panels, small wind turbines, etc. Though it doesn't work as well as in the sunbelt of the planet, it does work. However, now with the stress associated with the Russian aggression in Ukraine, people are thinking about how to become less dependent on other countries and do everything within their borders. That is not going to happen. If you are looking at countries and regions like Europe, which are largely dependent on Russian gas and oil from the Middle East, theoretically, you could conceive a system whereby all the power and the energy that you need in the future is being generated in Europe, covering the entire continent with solar panels, wind turbines, etc. First of all, it won't happen because it's too densely populated, we don't have the space.  

Secondly, it will be expensive. You'll end up with energy that is way more expensive than if you would import and connect to regions where you have much better resources. So, you will have a changing landscape, you will probably in the future not buy natural gas from Russia, but you may perhaps buy hydrogen from North Africa, import ammonia, etc. Now, the difference is that we'll have more options because they're not as geographically confined as they are right now. And there will be a sensible mix of pipelines and electricity cables that not only connect these regions of supply and demand but also liquids. That provides for a robust energy system that can work even in countries that are net importers and will remain so in the future. We know that India is an energy importer right now, but probably will also keep importing. We know Japan and Korea will never be energy self-sufficient, and Europe also won’t be. So, all of those countries and regions who are net importers will have a lot more options to choose from in the future.

Q: The hydrogen car market, which is expected to reach somewhere around $43.3 billion, and that is by the end of 2031, is not very far away. There is the danger of having to tie yourself back to fossil energy. There is also the concern about having to scrap all petrol-run automotives. Is this a realistic goal?  

A: There are very strong opinions on all ends of the spectrum. I think it's fair to say that we will see the end of the internal combustion engine with hydrocarbons as the main fuel. And then the question is, will we see battery-electric vehicles, or is it going to be hybrid, is it going to be hydrogen fuel cells or an internal combustion engine, etc.? At this point, it’s very clear that electric vehicles are not going to go away as they have clear advantages. You can charge them at home using solar panels on your roof in developed economies, where there is also supportive legislation for it, but whether hydrogen passenger vehicles will see an equally strong growth is something that still needs to be seen. 

Europe has a very well-defined gas grid, 200,000 kilometers of high-pressure gas pipelines, and a multitude of that in the distribution system. People are currently working on switching that system, from natural gas to hydrogen. There are several projects where the backbone is going to be converted and supported by the European Commission, and many countries are working on it. So, once you have large amounts of hydrogen in a gas system, then the threshold to also use that in refuelling stations for mobility might not be as big as it is right now. Right now, you have this chicken and egg situation where nobody buys a fuel cell car because there's no filling station, nobody builds a filling station, because nobody has a fuel cell car. You got to start somewhere. 

Now, I do think that it will be different once you have a whole bunch of hydrogen available, which is the declared goal of the European Commission, the latest target is 20 million tonnes of clean hydrogen by 2030. So that is going to be there, and then people will also use it as hydrogen for mobility. At the moment, we also have many different types of vehicles, we have electric vehicles, we have diesel vehicles, we have gasoline vehicles, compressed natural gas vehicles, and LPG vehicles, all of these are available right now for various reasons. Why can't we have electric and hydrogen-powered vehicles in the future? 

Q: As institutions like IRENA, are important in identifying and laying the foundational frameworks for the renewable energy sector, what do you believe are the key challenges in the public-private sector dynamic that remains unsolved?

A: Overall from a macro perspective, fast change is cheap, but it's also difficult. You will have to tap into cost-saving methods and most importantly the emission reduction footprint. Fast change is better, but it also means people will have to change their jobs so there may be early retirement of assets, etc. And that is typically where a good interaction between the public and the private sector is important. The current stress with empty gas storage in Europe was a clear failure of market mechanisms. There was just no market mechanism in Europe that made people fill the gas storage system in Europe. And right now, we're in crisis. And, that is typically the situation where governments should come in. If they would have seen the stress coming, they would have done something about it. 

So, in terms of accelerated change, which is necessary, maybe we do need to decarbonise our economies much more quickly than we have been doing. The private sector and market forces won't do it quickly enough. Governments don't have the money. They can steer and provide a conducive environment, legal frameworks, etc., for the market forces to work in. So, this is a moment where the public and private sector needs to come together hand-in-hand, to find common ways to find equitable solutions that are good for citizens and the planet together and find ways that capitalism works best, without hurting individuals. 

One of those elements could, for example, be the European Commission, which said in March, that we need to quadruple the amount of green hydrogen, by 2030, which is only eight or seven years away from now. That will not happen overnight unless something serious is being done. And one of the elements that you could think of would be building a strategic reserve, let's say, of that 20 million tonnes, 5 million tonnes could be held in a strategic reserve, which provides also an easy offtake mechanism for private actors that are now building hydrogen production facilities to sell into. 

The money would not be wasted, it would just be held in that reserve and that reserve can then also feed markets, etc. But it would also provide that initial kick-start for the hydrogen economy, which is currently still on paper. So out-of-the-box thinking is required to get us on this accelerated pathway toward decarbonisation and much cleaner and cheaper energy in the future.

Q: What led you to something like renewable energy when I'm sure 30 years ago, no one was looking at it as the most fascinating option available there? 

A: After I graduated from university, I was sent to the University of Zambia. In Lusaka, I was working at the Technology Development and Advisory unit, which was a business unit connected to the School of Engineering and we were trying to help society, specifically the agricultural sector with what we call ‘appropriate technology’ that people can understand and repair and make. My first project was a windmill design. It was a very simple windmill that would pump water in places where there wasn't water. In my first project we had dug a well and then the wind pump would provide water for high-value crops, for cattle, etc. That gave me first-hand insights into what renewables can do to change people's lives and livelihoods. When I came back to Europe, I found a job in a consultancy company that then grew into a large renewable energy conglomerate, and I've never looked back ever since. 

In 30 years, things have grown. I've grown old, but the sector has grown up and it has been a fascinating journey. In the beginning, solar was horrendously expensive, and then, like everybody else, I had not predicted it to go this far and this quick, but the fact is that now we don't debate solar anymore. Solar PV is the default option because it's cheap and it's quick and it's very uncomplicated. 

It's been a fascinating ride and I'm looking forward to the next years when we can grow this into something meaningful, the bedrock of our future economies. In the end, it's about technologies that can be made everywhere and it's much more equitable. We can provide solutions for everybody on this planet without destroying our lives and livelihoods and the natural environment. And I think that's fascinating.

Q: Which is your favorite quote, or your favorite book?

A: I always like Nike’s, ‘Just Do It. There are so many things that you can think about and ponder on, whether it's in your private life or whether it's at work. You can always find excuses and reasons not to do stuff. Or do it, make a mistake, get over it and do something else. That's one of the most brilliant marketing slogans.