The energy landscape is undergoing a profound transformation, as companies frantically seek solutions that will promote a more sustainable economy; one in which decarbonisation and technology investments will be the key to achieving short and long-term emission reduction goals. One of the most promising areas is green hydrogen, which has the potential to be one of the main pillars of a new energy system based on renewables. Hydrogen could replace natural gas over time, which means it could also help remove coal and oil from energy use.
Hydrogen is the most abundant element in the universe, but it did not emerge as a 100% sustainable alternative until relatively recently. The problem was in production. Burning hydrogen produces only water vapour, rather than the greenhouse gases that come from burning fossil fuels, but electricity created sustainably is needed for the truly carbon-free production of green hydrogen, which occurs when hydrogen molecules are separated from oxygen molecules via electrolysis, using wind, solar, wave-generated, or other renewable electrical power.
Hydrogen is attractive because it has plenty of possible uses, but governments and companies are increasingly turning their attention to how to produce it in a climate-friendly manner. For hydrogen to become a sustainably viable fuel option, the process needs to be clean, and cheap or cheaper. Green hydrogen is the goal, but it remains very costly:
“Currently, producing 1 kg of green hydrogen by electrolysis costs 5 Euro per kilogram. Drivers will consume roughly 1kg to cover 100 kilometres. If production and delivery costs can be reduced to something like 3 to 3.5 Euro per kilogram, then significant benefits over fossil energy sources will be there.” Senior Executive, Global Materials Company, Asia
Governments are racing to incentivise projects for domestic and export green hydrogen markets, working hard to attract the billions of dollars expected to be invested over the coming years. The United States has a hydrogen road map. Germany plans to invest nine billion euros ($10.6 billion), while for France and Portugal the figure is seven billion euros each. The UK plans to spend £12 billion ($16.6 billion), Japan $3 billion, and China $16 billion to ‘green’ their industries using Hydrogen.
However, in order to transform the energy sector and realise the potential offered by hydrogen power, and especially green hydrogen, Pedersen & Partners believes that four pillars must be put in place to support future development:
1. Sufficient capital availability
2. The right technologies
3. Appropriate policies & regulation
4. The right leadership and people.
Although there appears to be widespread discussion of the first three of these pillars, the fourth seems to have been neglected, despite it being an essential if not the essential building block and final determinant for eventual success. The big question is, do the companies involved have the leaders and talent needed for the future?
Leadership & Talent Challenges?
While many of the technological principles and challenges across the green hydrogen value chain (i.e. sourcing renewables, electrolysis, storage, transportation etc.) are relatively well-known, delivering these solutions at the right cost and with the right timing can and will be tricky. Having the right technical people for research and development in your organisation will be a critical factor for success.
- The hydrogen environment currently offers many investment opportunities, but realising their full potential will require excellent strategic competencies in key functions, as well as outstanding skills in government and external relations, and interacting with other market participants and stakeholders.
Moreover, companies that innovate will need to protect their intellectual assets. This can be especially important with geographical expansion into challenging markets and/or when operating in alliances and partnerships.
- These demands can only be addressed by executives who have corporate experience and are accustomed to working in dynamic and unstructured environments. They will also need experience in budget management, planning, and reporting based on indicators and scorecards. Furthermore, they must have a wealth of energy sector knowledge, especially in hydrogen.
- The executives that will spearhead the adoption of green hydrogen will also have to possess a strategic vision and entrepreneurial profile. These dynamic and experienced leaders will need knowledge of the market and new energy trends, with the ability to design and implement a strategy appropriate to the evolution of the sector and consumer needs. A background in innovation development projects will also be a must, with the ability to understand technology and manage both capex and opex. It will be highly valuable to have had previous experience in technological development and innovation projects or have worked in a centre for operational excellence.
- Leading the switch to hydrogen power will also require judicious and courageous decisions, with a high capacity to identify and promote the changes necessary to anticipate and adapt to unexpected situations. These abilities must be bolstered by strong communication skills to explain ideas and results clearly at all organisational levels.
- Naturally, these leaders will also require the ability to manage multi-disciplinary teams and employ a collaborative style and inclusive leadership that enhances the capacities of people. A focus on results aligned with business goals will also be necessary, as will a knowledge of the relevant stakeholders at national and international levels.
Although hydrogen development is not an entirely new topic, the scale and nature of its potential future will undoubtedly place significant stress on the relevant talent 'pools'. Of course, many national oil companies (NOCs), energy utilities, renewables players and other similar organisations already have many of the competencies needed. However, it is certainly possible that people will have difficulty retooling for a hydrogen future, and that there will simply not be enough talent and competencies out there to supply the people needed to deal with the pace, content, and scale of a Hydrogen-driven 'net zero' future.