“Green bread, no ham”, by IRINA SLAV
“Europe needs to move faster in putting low carbon bread on the table, if it wants to meet its emission targets, according to one of the world’s largest crop nutrient producers?”
Green bread, no ham
SEP 9
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PAID
The phrase “green bread” hardly conjures up an appealing image, at least for the more literally minded. But green bread is now apparently a thing in a non-literal sense, at least for fertiliser major Yara, whose CEO has called for more subsidies from the EU for the production of green ammonia. Because of course wheat production is also a source of emissions and this needs to change. Just when you thought you’ve heard it all.
“Europe needs to move faster in putting low carbon bread on the table, if it wants to meet its emission targets, according to one of the world’s largest crop nutrient producers,” the Financial Times informed us grimly earlier today, citing Yara’s Svein Tore Holsether.
According to Holsether, green hydrogen holds a lot of promise but it can’t take off without generous government support because — you’d never guess — it is currently too expensive to make commercial sense. This doesn’t look like it’s about to change, so the only way to make that promise happen is through heavy subsidising — a stunning revelation, no doubt.
Emissions from the use of hydrocarbon made fertilisers account for about half of all emissions related to the production of a loaf of bread and I’m sure we are all grateful for that piece of priceless information but not half as grateful as we should be upon learning that this could be fixed “easily”, per Holsether. Governments just need to “take this seriously”, meaning pour a few billions into it. Which the EU is already doing, by the way. Shockingly, it’s not enough.
Two months ago, one of the biggest fans of green hydrogen, Andrew Forrest, pulled the plug on one of the most ambitious green hydrogen plans in the world. Details about the reasons for the decision were not disclosed but, according to reports, the most likely ones were high cost and slow demand.
These same two reasons have also caused other green hydrogen projects to be delayed or shelved in recent months, even as others have moved ahead. It’s a bit confusing, really.
French Engie, for instance, recently delayed by five years a plan for the development of 4 GW in green hydrogen production capacity by 2030. The company cited slower than expected industry progress, per Hydrogen Insight. It seems demand for hydrogen is slower to materialise than expected — and that amid all the hype.
Norway’s Statkraft also recently pushed a green hydrogen target forward by five years and revised it downwards. Originally, it planned to have green hydrogen capacity of 2 GW by 2030. Now, this has been revised to between 1 and 2 GW, to be built by 2035 — if demand deigns to make an appearance.
Interestingly, at the same time some companies are making final investment decisions on green hydrogen projects. The companies in question? BP, Shell and TotalEnergies. It’s as if the only ones with the money to spend on such high-risk projects are the dirty old Big Oil majors. Everyone else needs subsidies. They might soon need government mandates, too, to help with the demand creation.
Bloomberg reported in August that there are plenty of green hydrogen projects in the planning stage but few of these would see the light of day because “The vast majority of those projects don’t have a single customer stepping up to buy the fuel.” Not only this but “Among the handful with some kind of fuel purchase agreement, most have vague, nonbinding arrangements that can be quietly discarded if the potential buyers back out.”
Now why might that be, inquiring minds would want to know. The reason is as simple as it is uncomfortable for the hydrogen hypesters. Per Bloomberg again, “Most of the businesses that could run on hydrogen would need expensive new equipment to use it, a leap they’re reluctant to make. Hydrogen produced using clean energy costs four times as much as hydrogen made from natural gas, according to BNEF. And it’s hard to build the infrastructure to supply hydrogen—not just plants to make it but pipelines to move it—when the demand may not materialize for years.”
Now it’s easy to see why Yara’s CEO is calling for subsidies, more subsidies. If green hydrogen still costs four times as much as gas-derived hydrogen, and if there are hefty additional costs for supply and distribution infrastructure, no company in its right mind would risk shouldering this cost load alone — especially with demand uncertain. But governments? They’re totally the ones to take on the costs, it’s their job, after all.
Governments don’t have shareholders that would be unhappy if green hydrogen never becomes a thing. Yara does. If green bread never happens, Yara would shrug and say “Well, we tried” and move on — but only if it’s not spending its own money on said green bread. And that is why it is demanding “financial help in a nascent area where profitability was hard to come by,” per the FT.
This is not to say that Yara is putting no money at all into green hydrogen. It is. The company opened a green hydrogen plant in Norway earlier this year and it’s got a deal with PepsiCo to supply green fertiliser to farmers. There’s just no word about the price of that green fertiliser and whether Yara would be selling it at a loss, like carmakers and their EVs — waiting for demand to grow.
“Producing clean hydrogen using renewable energy is more expensive, and many projects, which set out with ambitious targets, have failed to find customers willing to pay for higher priced green fertilisers. Where government subsidies are available, the cash has often been slow to come through,” the FT wrote in that same report that quoted Yara’s CEO, likely making many green hearts bleed with the injustice of governments.
Those with functioning brains in addition to hearts, however, might be inclined to dwell on the unavoidable parallel between the EV market and the green hydrogen market. In both, we have a product that is more expensive than the dominant one. In both, we have a push to turn the tables and make the green product dominant by any means necessary.
In EVs, the means have already included sales mandates. In green hydrogen, we could reasonably expect some form of mandates for the same reason they were implemented for EVs: if demand is not forthcoming naturally, it must be created artificially. And forcibly, I might add.
In an earlier report this year, the FT called green hydrogen’s conundrum a chicken and egg problem — one identical to the EV industry’s car/charger problem.
“There is a “cycle of people not building hydrogen production capability because they are not sure who is going to be using it . . . and [of] people not building capabilities that need hydrogen [because of the lack of supply]”,” the chief executive of one green hydrogen company by the name of GeoPura described it.
The parallels between green hydrogen and EVs are disturbing, or at least they would be if anyone was paying attention to them. They are, in fact, quite disturbing because EVs are not four times as expensive as regular cars and people still don’t want them.
EV sales growth has been entirely dependent on government subsidies, and when these dried up, sales plummeted immediately. There’s an obvious lesson in this that people like Yara’s CEO would do well to learn but, alas, the chances of that happening appear slim — instead, these people are calling for more subsidies because subsidies worked so well for carmakers they are now wondering what to do with their loss-making EVs and closing factories.
By the way, carmakers now face another problem: internal markets commissioner Thierry Breton is about to give them a piece of his mind regarding the slow sales growth. I mean, how dare they not push EVs on people. Perhaps carmakers should consider giving them away for free. So what if those losses skyrocket?
It is often disheartening to see the determination with which executives like Holsether refuse to acknowledge facts — just like car executives refused to see the truth about EV demand for years. Subsidies have proven they cannot magically create, expand, and sustain whole new industries. They could certainly create those industries and they totally help expand them through favourable regulations and appropriate mandates.
Where subsidies fail is at the sustainability stage — that’s up to the market. And the market has time and again showed to all willing to see that cheaper is always better, with all the expensive stuff always and forever remaining a niche within that market, from EVs to bio chia or whatever it is that vegans like to splurge on.
When it comes to bread, however, a basic foodstuff in Europe, the wise thing to do is keep it cheap rather than green. Bread is not and cannot be a luxury niche market. Once upon a time experienced politicians knew it: mess with bread prices, lose the next elections.
Now, we have corporate executives trying to do the politicians’ job. They don’t risk losing elections, after all. It’s up to the politicians to decide whether it’s worth messing with farmers yet again — and everyone down the supply chain all the way to the end consumer, who often also happens to be a voter.
Working on a depopulation programme, using a fictitious economy, which has no ceiling, you can pay as much as you want, to get the results you want, although they are relying heavily on China, who can pull the plug at anytime?