Hydrogen, Dependent on a New Economy

More Government Central Planning and Handouts

Francis Menton has a great deal of admiration for Elon Musk, Tesla’s CEO. “He is a bona fide creative genius,” applauds Mr. Menton.

The Gaming of Government Subsidies

That said, aka The Manhattan Contrarian also advises readers not to lose track of this: Elon Musk’s main pre-Twitter businesses –electric vehicles, batteries, solar panels and space launches – are almost entirely, if not entirely, dependent for their revenue on the gaming of government subsidy and handout programs.

The electric vehicle business, in particular, that underlies the lion’s share of Musk’s net worth, has a valuation that can only be justified by a faith that essentially all vehicles will soon be electrified.

So far, the market share of EVs has been almost entirely dependent on a combination of government subsidies and compulsion (e.g., “fuel economy” standards that exempt EVs). If EVs don’t take over the auto market, then Musk may be no wealthier than you or I come 2030. I suggest keeping that in mind when considering the Tesla “Sustainable Energy” Report.

There is a huge amount of detail in the report, and Mr. Menton narrows it to looking at how the Tesla Report proposes to deal with the energy storage for the U.S.

Recall that Ken Gregory calculated that if the U.S. fully converted to wind and solar generation, it would need to store approximately 250,000 GWh (which would be 250 TWh) to make it through a full annual storage and discharge cycle, given the seasonal pattern of wind and solar generation. Try to provide the 250 TWh of storage with lithium ion batteries at $200/KWh, and that will run you about $50 trillion. That would be slightly unaffordable, given current U.S. annual GDP of under $25 trillion.

At the Manhattan Contrarian, Menton presents a chart on how Tesla plans to deal with the issue of storage for the U.S.

Tesla’s answer is hydrogen.

The total storage proposed, at 120 TWh, is less than half of what Gregory calculated as needed, but not wildly out of range.

In Tesla’s favor, the idea of using hydrogen for the storage is substantially less insane than relying mostly on batteries. But, as discussed in my energy storage Report, hydrogen produced by electrolysis from water using electricity only from renewables is far from cheap. For my Report, I found a figure of $4-6/kg for producing this “green” hydrogen, which translates to a price of $32 – 48/MMBTUs (the units in which natural gas prices are typically quoted).

By contrast, natural gas prices fluctuate, but over the last ten years they have always been under $10/MMBTU, and mostly around $3-5/MMBTU. The current price is more like $2/MMBTU. The Tesla Report cites a price of about $3/kg ($24/MMBTU) just to store the hydrogen on an annual basis.

Hydrogen, explains the Manhattan Contrarian, is more challenging to deal with than natural gas in every respect.

It is less energy dense (meaning, more pipeline capacity needed to transport the same amount of energy), it embrittles steel pipes, it is more explosive and dangerous, it is more prone to leaks, and so forth.

To move to hydrogen as the vehicle of energy storage would mean creating an entire national infrastructure of new facilities. Next to none of that currently exists, nor is it under construction or even in the planning stage. I can’t find any effort in the Tesla Report to estimate a cost for any of this.

Will private investment not build it? Probably not. It’s too expensive. Natural gas is cheaper and better in every respect.

Nobody is going to buy green hydrogen at $40/MMBTU when natural gas can be had for $5, and nobody is going to build the infrastructure to transport and store hydrogen until it is price competitive to do so.

Despite Tesla boasting that their zero-carbon energy system “requires less investment and less material extraction,” the fact is the market is saying otherwise.

The whole “hydrogen economy” thing is completely dependent on a new economy of government central planning and handouts and is sitting around waiting for the next round of hundreds of billions of dollars of government subsidies to get it going.

Energizing the Bureaucrats

Why would Tesla put out such a report? Easy to understand.

Getting the bureaucrats excited about their utopia coming to pass is the route to the mandates and subsidies for EVs and batteries for decades to come, all of which will maintain Musk as the world’s richest man. And if it all doesn’t work in the end? Somebody else’s problem.

… if all this can be done for “less investment” than our current system, there should be real money to be made by building the demonstration project to show us all how it works.

How about taking one of the smaller Hawaiian Islands (Maui?), and installing the wind turbines, solar panels, hydrogen electrolyzers, and storage facilities to go 100% carbon free? The Hawaiians will all save money, and you’ll make additional billions.

Menton Admonishes Musk

Put up, or shut up!