Every day, headlines hint at energy’s next big thing: the shift from Liquid Natural Gas to hydrogen.
LNG long-term contracts are overpriced. The LNG market is oversupplied. LNG buyers are revolting. Spot prices are falling. Billions of dollars of excess LNG capacity faces premature writedown.
Hydrogen, meanwhile, keeps plugging along. Hydrogen fuel cell cars and stationary batteries continue to proliferate.
Hydrogen is the signal. LNG is the noise. Smart minds will follow the signal.
New ways to create hydrogen keep getting discovered: coal to hydrogen, sewage-to-hydrogen, solar-to-hydrogen. With each new innovation, the long-term economics tilt toward H, or hydrogen.
Perhaps most significant, hydrogen-powered electricity is now competitive with nuclear, LNG and coal in carbon and risk-adjusted terms (ie against nuclear).
These shifting price dynamics still have a long way to go. They’ll change everything. The leading edge of this revolution is in Japan.
Start with Tokyo’s 2020 ‘Hydrogen Olympics.’ During the games, Japan plans to power as much of the games as possible– from transport to accommodation — using hydrogen.
Tokyo also has one of the world’s best designed and functioning carbon markets. While it still covers only municipal emissions, prices are now up above $30 per tonne — among the world’s highest.
The market has enabled Tokyo to reduce its carbon emissions by a quarter in the six years since it was created in 2010..
The biggest development, however, is Japan’s plans to begin small scale-imports to Japan by tanker of Australian carbon capture and storage produced hydrogen.
This is a potential major game changer for the global energy industry. If successful, it will rank right up there with Japan’s pioneering of the global LNG age during the 1970s oil crises.
By the mid 2020s, for example, Kawasaki Heavy Industries plans to begin importing brown coal fired, carbon-capture-and-storage produced hydrogen from Australia’s state of Victoria to the southern Japanese port city of Kobe.
Kobe, which already produces hydrogen from sewage, aims to power ever more of the city with hydrogen, with domestic wind-produced hydrogen eventually supplanting hydrogen imports.
Over time, natural gas pipelines will be repurposed to carrying both natural gas and hydrogen, eventually shifting exclusively to hydrogen by mid-century, or earlier.
Japan will lead the way.