A few years ago, industry and political leaders embraced hydrogen as a solution to a laundry list of hard-to-abate decarbonization challenges — steel production, ammonia production, and more. But hydrogen failed to come down in costs and policymakers pulled back support. Ultimately, the bubble burst.
So what does it take to drive down the costs of low-carbon hydrogen and rebuild momentum?
In this episode, Shayle talks to Raffi Garabedian, co-founder and CEO of Electric Hydrogen. (Shayle is on the board of Electric Hydrogen and Energy Impact Partners, where Shayle is a partner, invests in the company). Shayle and Raffi cover topics like:
- Why the hype bubble burst: political pullback, high renewables costs driven by AI demand, and high CapEx
- The real cost problem: Why engineering, procurement, and construction (EPC) costs have remained persistently high
- Competing approaches: Why Electric Hydrogen chose supersized electrolyzers over modular units
- The China question: Why hydrogen’s EPC costs will limit the impact of cheap Chinese electrolyzers
- Real numbers: Realistic cost targets for fossil parity and Electric Hydrogen’s current pricing
- Where hydrogen wins: Markets where Raffi says green hydrogen can achieve fossil parity by the early 2030s, including Brazilian fertilizer
Resources
- Latitude Media: is 45v guidance killing green hydrogen production?
- The Green Blueprint: Electric Hydrogen’s bet on supersized electrolyzers
- Latitude Media: Electric Hydrogen is building through the market downturn
- Latitude Media: Hydrogen’s narrow pathway to positive climate impacts
- Latitude Media: Why the Electric Hydrogen-Ambient merger is a sign of things to come
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Credits: Hosted by Shayle Kann. Produced and edited by Daniel Woldorff. Original music and engineering by Sean Marquand. Stephen Lacey is our executive editor.
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Catalyst is brought to you by Bloom Energy. AI data centers can’t wait years for grid power—and with Bloom Energy’s fuel cells, they don’t have to. Bloom Energy delivers affordable, always-on, ultra-reliable onsite power, built for chipmakers, hyperscalers, and data center leaders looking to power their operations at AI speed. Learn more by visiting BloomEnergy.com.
Catalyst is supported by Third Way. Third Way’s new PACE study surveyed over 200 clean energy professionals to pinpoint the non-cost barriers delaying clean energy deployment today and offers practical solutions to help get projects over the finish line. Read Third Way’s full report, and learn more about their PACE initiative, at www.thirdway.org/pace.
Transcript
Stephen Lacey: A very brief word before we start the show: We’ve got a survey for listeners of Catalyst and Open Circuit, and we would be so grateful if you could take a few moments to fill it out. As our audience continues to expand, it’s an opportunity to understand how and why you listen to our shows, and it helps us continue bringing relevant content on the tech and markets you care about in clean energy. If you fill it out, you’ll get a chance to win a $100 gift card from Amazon, and you can find it at latitudemedia.com/survey. Or just click the survey link in the show notes. Thank you so much.
Tag: Latitude Media: covering the new frontiers of the energy transition.
Shayle Kann: I’m Shayle Kann and this is Catalyst.
Raffi Garabedian: We do recognize, at least at Electric Hydrogen, that we’ve got to collapse costs towards what we call fossil parity for the molecules that we produce.
Shayle Kann: Coming up: how to make green hydrogen great again — or great.
Shayle Kann: I’m Shayle Kann. I lead the early-stage venture strategy at Energy Impact Partners. Welcome. So if you were to read the headlines over the past year or maybe 18 months, your impression of the state of the green hydrogen market might be kind of dim after a classic hype cycle played out at hyper speed, basically from around 2021 to, I would say, 2024 reality very much set in for that nascent market. I think that reality check basically came in three forms first, and in my mind by far the most importantly, the actual delivered cost of green hydrogen from the first wave of projects that were being developed was far too high. Second, some of the markets that had been targeted, say light duty transportation or building heat, just didn’t make much sense in the first place. And third, as this happened in a number of other sectors over the same period, the durability, scalability, and magnitude of the so-called green premium turned out to be less than advertised.
So the result has been a clear removal of hype in that market, but just as a reminder, the market for hydrogen and the emissions associated with the production of that hydrogen is not going away anytime soon. We already have a $70 billion annual market using hydrogen in industry, predominantly in petrochemicals and in ammonia production and don’t look now, but there is a new wave of technologies entering the market that has the promise to actually deliver on the cost reduction that the market was seeking. All along Raffi Garabedian, who’s my guest today, is the CEO of Electric Hydrogen. One of those companies he’s been on the show before years ago, but he’s back now for an update and a fresh and sober look at where this market heads after its journey up and back down the hype cycle. As a reminder for disclosure, we at EIP are investors in Electric Hydrogen and I’m on the board of the company. Here’s
Raffi, welcome
Raffi Garabedian: Back. Thank you. Shayle, great to be here with you.
Shayle Kann: Let’s talk green hydrogen. I want to start by having you give me your version of the history of the green hydrogen market such as it is over, I dunno, let’s say the last five years or so. You picked your time period where
Raffi Garabedian: I was going to say, should I go back to Jimmy Carter or,
Shayle Kann: Yeah, no, we don’t need to talk about electrolysis in the seventies, but I think I can start with, I mean maybe around when you were starting to think about it, which is what, five-ish years ago, and then tell me what’s happened in the market since then.
Raffi Garabedian: Yeah, great. I think as you know, Shayle, I was in the solar industry up until the end of 2020, but it started to think about what can be done with renewable power beyond direct electrification, getting more renewables onto the grid, and that interest immediately leads to green hydrogen as the thing as the precursor, the foundation of most power to X kind of ideas. So in late 2020, early 2021, I and my partners here at Electric Hydrogen started to think about how to make green hydrogen cheap, really kind of approaching the problem from the context of renewable power where cost reduction, rapid scaling and reduction in cost helped to create a robust market for commodity in that case electricity. And we thought the same thing should be true in green hydrogen and derivative molecules. So that was a point in time early 2021 when there was the inklings of hype around green hydrogen, but hype hadn’t really hit us square in the face yet. I think it was more really in 2022, late 21, early 22 when things got really, really active. And in those days, green hydrogen was the solution to every problem everywhere in the world it was going to change everything. I mean, even at cocktail parties, people who know nothing about energy would say, oh, you’re in green hydrogen, that’s great, which is a sure sign that it’s overhyped.
Shayle Kann: Yeah. The second anybody asks me about something I do at a cocktail party, I know something’s gone horribly wrong generally, which maybe implies something about AI today. But anyway, go on.
Raffi Garabedian: Yeah, let’s not go there. But yeah, since then, so green hydrogen went through this just incredible ballooning of the bubble, and I would say since then the bubble has burst, and I can’t say whether right now we’re at the nadir of green hydrogen hype or whether we’re starting to come out of it, it feels like we are starting to come out of it now gradually, but those of the Gartner Hype Cycle know that the climb out of the trough of disillusionment is slow and gradual and long and arduous. I think that’s where we are in this market today.
Shayle Kann: And to what would you ascribe the bubble bursting fundamentally, why did it, I mean all bubbles burst if there are bubbles definitionally, but what made this bubble burst?
Raffi Garabedian: Yeah, so great question. So why would the bubble burst? Well, what’s green hydrogen all about? It’s all avoiding emissions in very hard to decarbonize sectors of the economy. Green hydrogen unfortunately has been and continues to be an expensive solution to those problems. Now there’s no cheap solution to those problems. It’s worth pointing out, right? All solutions to those problems are expensive, but at the peak of the hype, there was a naive hope that society was willing to pay the difference for deep decarbonization because it had turned into decarbonization had turned into a global priority. We had kind of Europe, the US, Asia, everybody, every country had a hydrogen strategy. The world’s changed dramatically since then, and I think that political climate is resulting in a retraction from commitment to retooling critical industries at some expense for the purpose of decarbonization green hydrogen. It is also true is expensive and it’s been too expensive over the last few years and it’s been too expensive for a couple of reasons.
If you look at the cost of making a kilogram of green hydrogen today, let’s say in Southern Europe, it might be unsubsidized, it might be maybe $6 US a kilo. I think rough numbers that might be about right, that can be broken down roughly 50 50 into CapEx and OpEx. Opex being the cost of the power going into the process to make the hydrogen and CapEx being the cost of carrying the capital, the cost of building the plant right now, remember the power that goes into making green hydrogen is carried out chemically as hydrogen. So it’s not lost power, it’s power that’s being transformed with some inefficiency. It’s about 70 to 75% efficient process. So really it’s a combination of those two things. And if we look at again, what’s happened in the last few years on both of those fronts, we’ve had bad news.
So green power, renewable power prices have gone up in many places in the world driven by an imbalance in the supply and demand, right? So green power is much more expensive. And let’s now switch to the US and I can give you real numbers. If you look in West Texas and you were to sign a solar and wind kind of a firm green power purchase agreement in Texas, in ERCOT territory three years ago, you might have paid $35 a megawatt hour for that product. Today you’re paying 65, maybe more dollars a megawatt hour. And that’s driven by, broadly speaking, increase in electric demand driven, most notably by AI data center demand coming online or planned to be coming online. And we don’t just see this in the US, we see this many, many places in the world where there is cheap power. Power prices have gone up dramatically. Green power prices have gone up dramatically because of new demand from data centers. So that’s certainly a headwind for green hydrogen. But then on top of that you have the CapEx component of the levelized cost of hydrogen, and that’s the other half of its cost, which has been extremely high and actually been going up rather than going down.
Right. So you’d like to think that as an industry gets its feet under it and starts to scale, starts to get past demo projects and building real scaled projects, costs come down. But actually people were maybe unrealistic about the costs that could be achieved, the capital costs that could be achieved particularly by large Western suppliers of technology like Siemens and Thyssenkrupp. I’ll just mention those two big names. I won’t mention all the rest, but when built by an EPC into a fully constructed project. So we’ve seen those capital costs go from, you know, an early promise of something like $1,500 a kilowatt, buck-fifty a watt, to now even over $3 a watt of capital cost. So that’s also had an escalating effect on the cost of green hydrogen. So bottom line, green hydrogen’s gotten more expensive today than it was supposed to be two years ago.
Shayle Kann: Okay. So I think people understand, although maybe generally don’t appreciate the degree to which this electricity supply demand imbalance has led to higher wholesale power prices in general and prices for renewables. We’ve talked about that though before on the show, and I think generally people understand it. I think the other piece is actually more interesting to me. So you said that part of the cost increase has actually been in the CapEx, which is like weird for this market, right? Normally what you expect is that as markets start to develop, get going, okay, maybe OpEx goes against you, but the prices of the things, like the electrolyzer prices go down. But you’re saying the opposite happened. Why?
Raffi Garabedian: It’s a couple of things. So first off, there’s been, I would argue, frankly inaccurate marketing about what those costs were going to be. I don’t know that they were false statements. I think the companies that were making those aggressive price forecasts probably really believed it, but I do think those were very, very optimistic cost targets that they’re finding to be very difficult to achieve. And secondly, I think there’s just been rip-roaring inflation in commodities, steel, you know, titanium, nickel, you know, the things that you’d build these plants out of that are electrochemical processes have increased in cost. And so I think those two things combined have left the industry sort of flat-footed at the moment and, and kind of stuck at very high capital costs.
Shayle Kann: How do you think about the, the primary driver of this bubble bursting between the, which I think you said is like half OpEx, half CapEx, the bubble bursting because of OpEx because power is expensive, versus the bubble bursting because of CapEx, because electrolyzers are way more expensive than they should be?
Raffi Garabedian: I think they’re equally responsible for it, right. They’ve both escalated. I think what I would say is that going forward, I think the power price escalation, that’s, that’s sort of a, maybe it sounds strange to say, but it’s a good problem to have. It’s, it’s connected with the build out of data centers and what that means for the electrification of the economy. You know, the build out of green generation in parallel, it will stimulate this massive build out of green generation, in turn building that larger market, creating a much more liquid market for renewable power and renewable molecules over the long run.
So I think power getting more expensive actually is not such a terrible thing. I think it’s inevitable, right? We’re seeing a huge transformation in our economy to run on electrons, the problem around CapEx though, that’s fundamentally something that this industry can and should work on. And if that CapEx continues to be as high as it’s been, then we’re not going to get out of the trough of disillusionment. And that’s, I think, the core problem facing the industry. And that’s the problem that we’ve actually set out to solve as a company.
Shayle Kann: And you certainly have solved part of it. I mean, it’s, it’s no secret that you guys are, are highly competitive on the CapEx side of, of the electrolyzer cost question. But I want to ask, because I hear this every so often, and I don’t know how true it is, maybe, maybe you can tell me. If, if you’re right that it’s sort of equally the OpEx and the CapEx side, but the CapEx can be dealt with, I’ve heard people say that there’s something like you can, you can always do dispatchable electrolysis, right? Like, you don’t have to pay the highest price for power if you can, if you have a very low CapEx electrolyzer and you can just buy power when it’s extremely cheap. I’ve heard people say you can basically set your power price and, and you can ride out part of, of that OpEx problem. Can you explain why that is or is not true?
Raffi Garabedian: No, it’s totally right. It is absolutely 100% right. And just to kind of reframe the question or the thesis you just laid out, the question is, or the, the key to doing this is to have the CapEx of your, of your factory low enough that you can throttle production up and down in response to power pricing and still be cost competitive in your levelized cost of hydrogen at the end of the day. Right?
And so just to set some, some parameters for that, if you have a, a plant that has a CapEx of call it $3 a watt, which is roughly what the competition, the large incumbent Western players offer, and you’re going to drive that plant at a 33% capacity factor buying power when it’s cheap. You can’t afford to pay really anything for power because the CapEx becomes so expensive because of the low capacity factor that you can’t, you can’t buy really any power at any meaningful price. Whereas if you can cut that CapEx in half or more and get down to a buck 50 or a buck 25 a watt, then you can actually very affordably buy power when it’s cheap, meaning buy it at, you know, those, those momentary prices below $15 a megawatt hour and have a very cost effective green hydrogen product. And that’s a dispatchable electrolyzer, and you’re absolutely right. If you have cheap enough electrolyzer CapEx, you can, you can ride out that, that, that higher power, that higher power prices.
Shayle Kann: That actually makes me, I mean, it’s, it’s helpful to understand the degree of latitude you have based on your CapEx. It, it also makes me slightly more bearish on the hydrogen market, at least in, in the near term. Because the implication of what you’re saying is with dispatchable, so if you’re gonna just buy power when it’s very cheap, which is kind of what you have to do when you have OpEx going up. And again, I’m assuming it stays there, right? Like right now power prices are really high, but at some point that will level off. At some point that will probably go the other way. But if you assume for the time being, that power prices have gotten much more expensive, a dispatchable electrolyzer kind of is the answer, but you’re gonna need a very, very low CapEx one, which I think means you need a technological step change, which your company has and others are working on.
But if, but there’s a second implication of dispatchable electrolysis, which is your capacity factor is, is, you’re by definition going to be very low capacity factor. So to produce hydrogen at any sort of volume, you need like a lot of these things, right? Like you need a just, and again, you can solve that through technological step change. You need really, really, really cheap CapEx to actually be able to make a lot of hydrogen at low capacity factors. How do you think about that trade off between CapEx, power prices, capacity factor, volume?
Raffi Garabedian: Yeah. So just to, to put some absolute numbers on this, so you asked me to characterize what I think the, the, the dynamics of the industry have been. And I can also tell you that over the, the time period we’ve been working on this at Electric Hydrogen, say 2020 to today, our technology roadmap, which is what we show to the market, and we’re not selling, kind of selling widgets, we’re, we’re selling plants, but our technology roadmap has moved down from, you know, in the $1200 per kilowatt range to now where we offer under $900 per kilowatt for our, for our major assemblies, which is basically everything but hydrogen storage and some very basic equipment.
So, you know, we’ve had about a 30% decline in our costs over the last three and a half years or so. And you know that that’s happening in that period where the, the commodity costs have been climbing. So we’ve been fighting against commodity cost headwinds. We’re still bringing, bringing our costs down. And where we’re headed towards over the, over the coming years is towards a $600 per kilowatt cost for, for those major assemblies. So, you know, call that another, you know, 30, 35% decline in our cost basis. That will put us, you know, well below half the cost of, of what the incumbents are offering today. And that level of cost, you can run, you know, 40, 45% capacity factor. You can pay up to $35 a megawatt hour for power and still make hydrogen for under $3 a kilogram. That is way cheaper than any of the competition can offer. That is way cheaper than gray hydrogen is today.
Shayle Kann: Got it. Okay. So you’re, you’re saying that you don’t need like truly rock bottom power prices if you can get CapEx low enough that you can take slightly higher priced power at higher capacity factor and, and still get a levelized cost of hydrogen that’s low. And, and where do you need to be on levelized cost of hydrogen in order to compete with gray hydrogen, which I don’t think most people know how much gray hydrogen costs.
Raffi Garabedian: Yeah. So if you, if you just look right now, unsubsidized gray hydrogen costs are probably between $1.50 and $2.00 a kilogram, depending on where you are in the world and what, you know, commodity price of natural gas you’re looking at. And then where are those costs going? Well, it’s, it’s floating with, with gas and gas of course has been extremely volatile. Arguably going forward, we don’t know what’s going to happen with gas prices, but, but gas supply is plentiful. So you might argue that gas prices will stay low for the foreseeable future. And so gray hydrogen might continue to be in that, that dollar 50 to $2 range. But keep in mind that that doesn’t account for carbon, right? It doesn’t account for the emissions associated with that gray hydrogen. And there are in fact, uh, carbon prices in much of the world. And the carbon price varies dramatically, but it’s over $100 a ton in, in Europe and around $80 a ton in California, which are two notable markets. And when you, when you, when you, you apply that that tax to natural gas, you’re looking at a cost of somewhere between $3.50 and $4.00 for that hydrogen. So that’s what we, what we would call fossil parity accounting for carbon.
Shayle Kann: So, so basically like in different markets, there’s gonna be different answers to that question. It seems like in some geographies you need to get below $2 a kilo, in some geographies you need to get below $4 a kilo, right? Like there, there’s, there’s a range of what is fossil parity depending on where you are in the world.
Raffi Garabedian: Right. And actually we’ll just, we’ll continue down that line of thought. And I’ll say, if you look at, sorry, if you look at the US and you apply a $75 or $85 a ton uh 45V or 45Q tax credits to green or blue hydrogen respectively, then you’ve effectively priced in carbon and we’re there. We, we do recognize, at least at Electric Hydrogen, that we’ve got to collapse costs towards what we call fossil parity for the molecules that we produce, whether it’s hydrogen or derivative molecules like ammonia. We’ve got to get close to fossil parity.
Shayle Kann: Can we talk about ammonia for a second? Because I think a lot of folks listening may not be following. They’re like, wait, I thought we were talking about green hydrogen. Why are we talking about ammonia? So tell me, how do you think about where is the market for hydrogen, where is the market for hydrogen derived molecules, like ammonia? Which should we care more about?
Raffi Garabedian: Yeah. So it, it really, the answer is gonna be both and I’ll, I’ll explain why. So let’s start with, with markets that exist today that are pretty massive. So the biggest market for hydrogen today is in the production of ammonia. That, that’s 180 or so million tons of, of, of ammonia produced annually, which is the equivalent of about 30 million tons of hydrogen. Most of that hydrogen is gray, meaning it’s produced from natural gas. And ammonia is the foundation for all artificial nitrogen fertilizer in the world. It’s a huge market. And you know, depending on, on how you look at it, you know, roughly half of humanity depends on nitrogen fertilizer for food production. Like this is a, this is a, a really critical, critical commodity, and it is and will continue to be a huge consumer of hydrogen.
Now there are other large markets for hydrogen. The other big one is, is refining, the production of refined product from crude oil. And that, that’s probably also on the order of maybe 30 million tons of hydrogen per year. So you have two massive markets that already exist in the scale of tens of millions of tons. And if you think about it in terms of energy, you know, it’s, you’re talking about 10% or more of global energy production, total primary energy production going into these two processes. So those, those are massive markets. Now when we talk about derivative molecules, I think ammonia is the prime example right now, but you can also think about sustainable aviation fuel, you can think about methanol. Those are other molecules that require hydrogen as a component and that, you know, in aggregate provide very large market opportunity.
Shayle Kann: And I presume you’re going after markets that use hydrogen or a derivative molecule today, as opposed to new markets like, I don’t know, long haul trucking or backup generation or something like that, right?
Raffi Garabedian: Yeah, that’s, that’s largely right. I think there will be new markets that emerge. I don’t know yet whether I’m right about this, but I would make a bet that shipping is one of those markets. And we haven’t talked about steel yet, but I think the conversion to hydrogen-based, direct reduced iron for, for steel production is another really, really major market that’s emerging. But but you’re, you’re right, the, the low-hanging fruit are the markets that currently exist and consume, you know, several percentage points of global energy already.
Shayle Kann: So that’s, I think, helpful to, to understand better where the market is. And then the question is, okay, we’ve, we’ve talked about why it’s hard. Why did the bubble burst? We’ve talked about what, what it takes to get the cost down, which is primarily bringing CapEx down. And you’ve, you’ve gone through like a description of, of the pathway. Once you have that, do you actually believe that there are markets, especially in the near term over the next call it five years that are actually willing to pay for green hydrogen or green ammonia, irrespective of the cost? Like is there a green premium?
Raffi Garabedian: Yeah. So I think the green premium in the US is there today, but it’s a result of policy and it’s, it’s, it’s manifested in tax credits that subsidize green hydrogen and, and blue hydrogen actually, and it’s, and it’s real. It’s, it’s, it’s being deployed, projects are being deployed around it. And that green premium exists I think in the EU as well. There’s a host of green funding mechanisms to support the build out of the industry and also regulatory requirements to consume a certain percentage of green molecules.
I think those two markets are, are very active right now and, and we’re, we’re targeting those markets. As for the next five years, as for kind of the durability of that green premium, I think it’s very difficult to say, especially given the current, you know, situation in the US, I’ll say with respect to energy policy and climate policy, these are changing. And I think what we are seeing in green hydrogen is very similar to what we saw in solar as it was scaling back when I was in the solar industry. The, the green premium is very sensitive. And if the premium is cut even a little bit, it can have a very large influence on, on the market. And so I don’t think I would bet heavily on green premiums remaining high or remaining stable. What I would bet on is that we can get to cost parity with fossil equivalents, and that’s the real opportunity here.
Shayle Kann: Can, can you explain to me, because I think this is, this is an important, it’s actually applicable in not just green hydrogen, but I think solar to some degree. Can you explain to me, like not, not green, but, but just renewables broadly, like the, the difference between what the market seems to have valued as a green premium and what you can actually build a business on top of if you were to do contracts that are not, you know, subsidized by a tax credit or a requirement. Like can you describe like what is the delta in the green premium that you would need the market to give you versus what you actually think you can get?
Raffi Garabedian: Yeah. So, you know, it’s really interesting because if you look at renewables, you can get to the same place with renewables. There are values to renewable power that are independent of the carbon footprint of renewable power, right? You buy a green PPA, that’s a fixed price for 10 or 20 years, whereas if you buy fossil power, your price for that power kind of floats with the fuel price. So there’s various values that can be derived from conversion to renewables that are independent of the carbon footprint of the renewables, and we’re starting to see the same kind of more sophisticated point of view on the market emerging in molecules. I’ll talk for a little bit about a market that I’m really interested in, and it’s not a market we’re incredibly active in.
We’ve just dipped a toe in the water over there, but the market is Brazil and give you, let’s like a few facts about Brazil. So Brazil is a huge agriculture exporter. I think agricultural exports are about 20% of Brazil’s GDP, represent about 50% of Brazil’s exports with most of the rest being minerals. I believe. For this industry to exist in Brazil requires a great deal of artificial nitrogen fertilizer. So as you guys know, all agricultural products require nitrogen fertilizer. There’s not enough natural nitrogen to go around. And so we make nitrogen fertilizer primarily from, well, almost exclusively from ammonia, which either is used as ammonia or is converted to nitrates or urea or other molecules that are easier to distribute. Brazil, it turns out imports over 90% of its nitrogen. Its biggest import partner for fertilizer is actually Russia. So alarm bells can start to go off in your mind about the geopolitics of all this, the risks that Brazil’s economy faces as a result of importing critical feedstock for its primary industry to the country.
But also think about it in terms of the money that Brazil is spending effectively abroad to support its agriculture industry. If you put all that together, you have an interesting proposition for conversion of the Brazilian economy to local production of nitrogen fertilizer. But there’s more because Brazil imports all of its nitrogen. And the reason for that is simple. Brazil doesn’t have natural gas, so they can’t produce fertilizer the old fashioned way by cracking natural gas and running it through the Haber-Bosch process because Brazil imports all of its fertilizer. The price of that fertilizer is relatively high due to the logistics costs of moving ammonia. Now today, fertilizer coming into Brazil might be 450 or $475 a ton, but if you look back 10 years, the 10 year average is around $600 a ton and that you can go 20 years back. It’s about the same number, right?
It’s a very volatile commodity. It’s not typically bought on long-term contracts. It’s traded in the market and it goes up and down and up and down. So if we use that $600 a ton benchmark as the bogey for what I’ll call fossil parity ammonia in Brazil, the billion dollar question is can we achieve that using Electric Hydrogen’s kit, green hydrogen production to produce e-ammonia? And the answer turns out to be, yeah, we think we can. So we’ve done a lot of analysis on this particular market case. There’s another really kind of positive fact pattern about Brazil. It has a great deal of hydropower and is increasingly installing more and more solar and wind. The result of this is Brazil’s grid is around 90% green already, and power prices at least away from the coastal economic centers are quite low, 30 to $35 a megawatt hour.
That in and of itself allows us to make on the order of seven to $750 a ton ammonia today with our equipment, which is not quite fossil parity, but not a huge stretch from it. And with the other benefits to Brazil’s economy and resiliency from onshoring the production of fertilizer, we think there’s a strong business case for Brazil as a country to start to build out local ammonia production. Now, if you take our technology roadmap a little further out and you think about scale and also improvements we have coming in our technology along with what we expect to see in terms of continued cost reduction in wind and solar, we think we can get to actually cheaper than fossil hydrogen around the beginning of next decade, the next decade. So in the early 2030s, that’s a pretty compelling case. That’s a market where we think we can be cheaper than the fossil alternative for a critical piece of Brazil’s economy. That’s the kind of market I get really excited about because now we’re not talking about a solution that’s better because it’s green. We’re talking about a solution where green is the icing on the cake, not the whole cake. I think you said that Shayle. I’m,
Shayle Kann: I think, yeah, it’s a short description of where I think the world is at, not the world, but at least the US is at the moment, which is if you’re going to be green, it’s often insufficient to be green. You want green to be the icing, not the cake itself, and you got to have some other benefits. It’s not universally true, but it’s more true today than it was two years ago.
Raffi Garabedian: I think it’s pretty close to universally true today with the possible exception being China.
Shayle Kann: Yeah, I mean, various things don’t hold in China that hold other places. That one probably among them. I guess I want to wrap up then with, so that’s I think a compelling promise land of let’s remind ourselves that the goal of getting this market, the green hydrogen market off the ground, is replicate a version of what we’ve already seen in solar, which is get it to scale, get it down the cost curve, get it so that it is cost competitive, and so you’re painting the picture of where it actually can be cost competitive straight up without a premium and carry all these side benefits. What does it look like to get from here to there? This is my final question for you. So we started with the picture of the last five years. What does the next five or 10 years have to look like?
Raffi Garabedian: So I think the next five years looks like very, very tactical kind of one-off projects that are policy driven in places like Europe that have the policy frameworks in place or emerging to motivate consumption of these molecules. And we’re seeing that and we’re very engaged in that market. That process will get us to scale where we can start to deploy in markets like I described around Brazil, but there are other similar markets. India is a great example of another very similar market with similar fact patterns where we think we can actually solve not just an economic problem, but a host of other problems that are geopolitical in nature.
Shayle Kann: Why do you retain optimism about this market? Bring me into your head and explain to me why you’re excited about the future in this market despite that.
Raffi Garabedian: Yeah, I mean two things, both of them long term, actually, I think the short term is a slog, but really two things. So thing one, I see a clear path to parity with fossil equivalent molecules in a number of industries and a number of places in the world that has me really excited. So really it’s all about getting to subsidy free economics, and when you get to that, the market is insatiable for a product like ours. So that gets me very excited. And the other thing that gets me excited is my kids, honestly. Again, I have kids in their twenties and I know how they think about the problem of climate and energy, and they give me optimism that the situation we’re in right now, it’s a cycle. But if I look out five years out and think on a 10 year horizon, we are as a society, going to implement innovations to fix the problem.
Shayle Kann: Alright, Raffi, as always, appreciate the conversation and the candor and the optimism and we’ll check back in once we’ve got a bunch of these multi hundred megawatt actually cheap green hydrogen plants up and running and see where we are on the cost curve.
Raffi Garabedian: Well Shayle, we’re building our first one in west Texas today, and it’s going extremely well. So I’m looking forward to showing that off to you when it’s up and running.
Shayle Kann: Raffi Garabedian is the co-founder and CEO of Electric Hydrogen. This show is a production of Latitude Media. You can head over to latitude media.com for links to today’s topics. Latitude is supported by Prelude Ventures. This episode was produced by Daniel Woldorff. Mixing and theme song by Sean Marquand. Stephen Lacey is our executive editor. I’m Shayle Kann, and this is Catalyst.
