Be first mover or ‘a very good No 2’? Keppel Infrastructure MD on why hydrogen projects face impasse

ENERGY players today face an impasse in deploying low-carbon solutions, despite the immense interest around them to fix global warming. And the barriers go beyond the billions required, Chua Yong Hwee, managing director of new energy at Keppel Infrastructure, said.

Take utility-scale green hydrogen projects. Although ammonia is demonstrated to be an effective hydrogen carrier, there still isn’t a global price marker for it. Without a clear marker, it is hard to figure out how bankable a project is. 

To fix this, the world needs first movers – but who will stand out? Chua presented this chain of thought at the DNV Singapore Energy Transition Conference on Monday (Sep 4), when asked at a panel discussion on why investments in low-carbon energy solutions are still not happening. 

DNV is a Norwegian energy expertise and assurance provider that opened its Asia-Pacific headquarters in Singapore in 2014.

Stressing that taking action is “not so straightforward”, Chua said such projects are not similar to the Lao PDR-Thailand-Malaysia-Singapore Power Integration Project (PIP), which brought to fruition Singapore’s very first renewable energy imports. 

The PIP, which imports up to 100 MW of renewable hydropower from Lao PDR to Singapore via Thailand and Malaysia using existing interconnections, requires “very little capital upfront”, as it relies on existing grids, he noted. 

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Moreover, renewable projects sell to the local market through a feed-in tariff or a contracts-for-differences mechanism, and are bankable as long as production costs are lower, he said.

In the case of a 2 GW green hydrogen project, which would likely cost S$5 billion or more, a board would need a lot more convincing, Chua added.

Not only that, “the moment I put ammonia into a boat, I am no longer fighting in the local market. I am fighting in the global market. How can I be sure that this ammonia coming from Australia, India, or the Middle East is globally competitive?” he said.

“Today, nobody can give a very straight answer, because there is no global price for low-carbon ammonia. There is no clear marker yet.”

Chua said it was thus difficult to approach his board with certainty regarding issues such as the price of ammonia, the bankability of such a project, and how to ensure that the resultant assets would not end up becoming stranded.

He also pointed to two possible business strategies around hydrogen: Keppel Infrastructure can either choose to be the first mover, or “a very strong No 2”.

Noting that electrolyser technology is rapidly improving, he said it might not make sense to invest in first-generation electrolysers. “Why not wait for the second generation, when I know that (it) can be very competitive?”

Concluding that there is no easy answer, Chua said: “The industry needs to somehow find a way to break this impasse. If we can’t break this impasse, we cannot move, and we cannot start doing.”

Fellow panellist Jane Liao, the vice-president of CPC Taiwan, a state-owned petroleum, natural gas, and petrol company, responded to Chua’s remarks with candour: “Well, I don’t think we can become the so-called first mover.”

Agreeing with Chua’s points, she said: “There is no international trading for ammonia or even hydrogen. We are still waiting for some others – let’s say, Japanese players – for their liquid hydrogen vessel. That (puzzle piece) is very important for energy importing countries.”

Sellers also need off-takers, she added. “Even though you’re brave enough to become the first mover, where are your downstream customers? The whole value chain is not yet there.”

Adding to this point, Australian energy player Woodside Energy’s executive vice-president for new energy Shaun Gregory noted that the barrier his company worries most about is the “end-to-end simultaneous readiness of the supply chain”.

Pointing out that there are probably solutions to each singular part of the supply chain, but a lack of coordination to enable them, he said: “Are they all going to (commence with a) final investment decision (FID) with their respective boards at the same time, so that we all are ready to start out on Jan 1, 2030?

“That, to me, is the biggest barrier. The more people are just stepping back and waiting, the less (likely) we’re going to get that supply chain… That integrated supply chain needs to be ready at the same time.”

Chua later chimed in, and said that the government – as the only entity that is sovereign and has deep enough pockets to seed an industry of this scale – has a big role to play in breaking the impasse the industry is facing.

Several countries are already seeding demand, he noted. India’s Ministry of New and Renewable Energy is mulling a green hydrogen mandate in certain industries, while Australia has announced the establishment of a A$2 billion (S$1.76 billion) initiative to underwrite the biggest green hydrogen projects to be built in the country, he said.