Hydrogen’s time is now in post-pandemic world

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The new Febus hydrogen bus during its presentation in Pau, France. EU nations are using the pandemic to push forward with “green” hydrogen energy plans. (AFP)
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EU heads are beginning to pay closer attention to cleaner energy sources, like hydrogen, which advocates say is “ready” for the big time. (Reuters)
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Updated 09 May 2020

Hydrogen’s time is now in post-pandemic world

  • Alternative fuel hailed as the “holy grail” in bid to move away from oil and gas

Hydrogen has long been touted as a clean alternative to fossil fuels. Now, as major economies prepare green investments to kickstart growth, advocates spy a golden chance to drag the niche energy into the mainstream of a post-pandemic world.

Green hydrogen was pushed to the fore last week when Fatih Birol, head of the International Energy Agency, said the technology was “ready for the big time” and urged governments to channel investments into the fuel.

Some countries, including the Netherlands, Australia and Portugal, have already begun investing in the technology. Now investors, politicians and businesses are pushing the EU and others to use its post-crisis recovery plan to support hydrogen in areas like trucking and heavy industry.

The promise of hydrogen as a fuel to help power vehicles and energy plants has been a talking point since the 1970s, but it is currently too expensive for widespread use. Proponents say infrastructure investment and more demand from transport, gas grids and industry will bring the cost down.

Most hydrogen used today is extracted from natural gas in a process that produces carbon emissions, which defeats the object for many policymakers. But there is potential to extract “green” hydrogen from water with electrolysis, an energy-intensive but carbon-free process if powered by renewable electricity.

EU officials, one of whom described green hydrogen as the “holy grail,” said it could replace fossil fuels in sectors that lack alternatives to align operations with the EU’s Green Deal plan to reduce net emissions to zero by 2050.

“Hydrogen could solve a lot of problems. We need everything else as well but the political interest is because to achieve deep energy efficiency and decarbonization, hydrogen seems relatively easy,” said Jesse Scott, senior advisor at think-tank Agora Energiewende.

“It is less alarming (for policymakers) than some other elements for meeting net zero,” she added, such as carbon removal technology for example.

Momentum appears to be building; EU industry chief Thierry Breton met hydrogen companies online this week to discuss the bloc’s recovery from the pandemic.

“We could use these circumstances, where loads of public money are going to be needed into the energy system, to jump forward towards a hydrogen economy,” said Diederik Samsom, who heads the European Commission’s climate cabinet.

This could result in hydrogen use scaling up faster than was expected before the pandemic, he added.

The European Commission has earmarked clean hydrogen — a loose term which can include gas-based hydrogen, if fitted with technology to capture the resulting emissions — as a “priority area” for industry in its Green Deal.

Over the past year, several governments, including Germany, the UK, Australia and Japan, have announced they were working on hydrogen strategies, and the pace has picked up over the past month during the coronavirus pandemic.

This week, Australia set aside A$300 million ($191 million) to jumpstart hydrogen projects. Portugal plans to build a new solar-powered hydrogen plant which will produce hydrogen by electrolysis by 2023.

The Netherlands unveiled a hydrogen strategy in late March, outlining plans for 500 megawatts (MW) of green electrolyser capacity by 2025. A German hydrogen strategy is expected later this month.

The Dutch government is pushing for the EU to follow suit and present an “action plan” for clean hydrogen, a spokesperson told Reuters.

When it comes to transport, hydrogen fuel cells trail electric batteries in the push for greener cars, given their higher price and the lack of refuelling stations. But proponents see potential for heavier vehicles.

Daimler and Volvo Trucks unveiled plans last month to bring hydrogen fuelled heavy-duty vehicles to market within the decade.

Hydrogen gas is already used in industry to produce ammonia, which goes into fertilisers, and methanol, used to make plastic.

A major drawback of the green hydrogen that governments are most interested in is that it requires a large amount of renewable electricity to produce. The good news is renewables prices have fallen sharply in recent years.

According to Bernstein analysts, hydrogen made from fossil fuels currently costs between $1-$1.8 per kilogram (kg). Green hydrogen can cost around $6 per kg today, making it significantly more expensive than the fossil fuel alternatives.

However, increased demand could reduce the cost of electrolysis. Coupled with falling renewable energy costs, green hydrogen could fall to $1.7 per kg by 2050 and possibly sub-$1 per kg, making it competitive with natural gas. Higher carbon prices would also encourage the shift.

“Clean hydrogen produced from electricity is around three times more expensive than that from natural gas, but solar and wind costs have decreased in recent years and if they continue to fall, clean hydrogen produced with lower electricity costs would become more affordable,” said Philippe Vie, global energy and utilities lead at consultancy Capgemini.

“On hydrogen we are right now where we were with renewables in 2000-2005. Ten to 15 years is probably a good time lapse to become competitive,” he added.

Any serious attempt at large-scale use — either in industry or transportation — would require major infrastructure investments. For example, power from an offshore wind farm would need to be connected to an electrolyser that produces the green hydrogen, which would then need to be transported to end users.

Europe has around 135 MW of electrolyser capacity, but planned green hydrogen projects could bring that to 5.2 gigawatts, according to consultancy Wood Mackenzie. But many projects hinge on further investment partners or subsidies, which advocates fear will be scarcer in the coronavirus-induced economic slump.

“Investments that would have been foreseen to be done now are not made because production is delayed,” Jorgo Chatzimarkakis, secretary general of lobby group Hydrogen Europe, told Reuters.

To help lower costs, several projects are being worked on across the gas infrastructure, industry, mining and energy sectors.

Royal Dutch Shell and Dutch gas firm Gasunie unveiled plans in February to build a mammoth wind-powered hydrogen plant in the northern Netherlands, capable of producing 800,000 tonnes of hydrogen by 2040.

In Germany, oil refinery Raffinerie Heide is embarking on a project using excess wind energy and abundant water supply in the region to produce hydrogen to make kerosene.

"The price of hydrogen we pay for now is four times natural gas from an external source fed through the pipeline and produced 30 km away," said CEO Juergen Wollschlaeger.

A big fear for companies in the hydrogen industry is that they will be unable to take advantage of the unique opportunity presented by vast economic stimulus packages, and that governments will favour supporting traditional high-carbon fuel sectors that have been hit hard by a collapse in energy demand.

"For us, that will be the question to be answered in the next weeks. Will the carbon fuel industry succeed in convincing the officials to support them?" Bernd Hübner, chief financial officer at German green hydrogen start-up Hy2gen said. 


INTERVIEW: All eyes on Starzplay as lockdown reaps rewards

Updated 59 min 3 sec ago

INTERVIEW: All eyes on Starzplay as lockdown reaps rewards

  • CEO Mazen Sheikh sees business soar as Saudi viewers turn to streaming services

Mazen Sheikh has had a good lockdown.

The founder and CEO of Starzplay, the Middle East’s leading entertainment streaming channel, saw his business soar as curfews, social distancing and travel restrictions left people with little to do apart from slump in front of a TV and binge watch for hours on end.

“I think when the whole situation was unfolding, we were trying to think which way is up and which was down, both on a personal level and also as a company — what it means for our subscribers. It was nerve-wracking in the beginning,” Mazen Sheikh told Arab News.

In the region, it was Starzplay subscribers chose to watch, rather than Netflix or other streaming services, in English and in Arabic.

“What we benefited from, of course, was all the people staying home, but one of the things that worked in our favor was that we are an organization based and headquartered here, and we were able to adapt and localize our services much faster than anyone else,” he said.

“In Saudi Arabia, you can sign up for Starzplay via STC, Mobily or any of the other services. You can sign up with your mobile phone number. Netflix came to this region with a very US-centric mindset, thinking that everyone had a credit card and that having a credit card is a norm in the world. In fact, the reality is different, especially in Saudi. Not everyone has a credit card,” he added.

“So, through one bill where you pay your landline and your broadband, you can also have access to Starzplay on the same bill. You can just download onto your smart TV,” he added.

Starzplay has been in business for five years, and while it is probably not as well known as Netflix, it has been making big inroads into the region, especially Saudi Arabia.

The Kingdom accounts for 40 percent of total revenue, while almost half of all consumption in the Middle East and North Africa region comes from Saudi viewers.

And what have they been watching during the long weeks of lockdown? 

Lots of “Vikings,” “The Office” and Turkish-made romantic soap “Jusoor Wal Jamila.” 

Saudis on average watched more than 18 hours of Starzplay in May, compared with less than 12 a year before.


BIO

BORN: Islamabad 1970.

EDUCATION

  • Schooling in Dubai, UAE.
  • Oklahoma State University, US.
  • University of Kansas, MBA.

CAREER

  • Various executive roles in media and communications, US.
  • Chief sales and operations officer, OSN, Dubai.
  • CEO and founder, Starzplay.

“The beauty is that everyone has a mobile phone. We were there in the market with the right product, the right content, but also the right distribution so the masses can actually sign up for our service. It really benefited us.

“It was not just that we were a streaming service. The whole category benefited from the lockdown, but we were the only one in the market that had this kind of distribution and payment arrangements. We were the only one available to the masses,” Sheikh said.

It is not just the distribution platform that is different from Netflix. Starzplay takes a distinct stance on content, too, as Sheikh explained.

“Our industry is evolving in a simple and predictable way. What is happening is that the more Netflix has gone into its own originals, the more studios see them as a competitor. So studios have been pulling their content away from Netflix.

“Until now, with what comes out of Hollywood and the UK, 95 percent of English-language content was produced by seven or eight studios. In the UK it’s the likes of the BBC and ITV, while in the US it’s Warner, Disney, Sony, Showtime, CBS, all the major studios,” he said.

“So, the way the industry is evolving is that if you want Netflix originals, you go to Netflix, if you want anything else you go to Starzplay,” he said.

Sheikh reeled off an impressive list of top shows on his platform. “Big Bang Theory,” “Billions,” “Grey’s Anatomy” and “Britannia” are among them, while younger viewers soak up “The Flash,” “Supergirl” and other DC titles made by Warner Studios.

Starzplay has also made its first foray into original content, tailored for a Middle East audience, with the series “Baghdad Central.”

“Data is the new oil, they say, and ‘Baghdad Central’ was the result of our experience over five years of consumption history, with billions and billions of minutes consumed. So based on what people were consuming in our key markets and with those insights, we produced our first original,” Sheikh said.

“Baghdad Central” was launched in March with a big name Hollywood actor — Corey Stoll from the award-winning series “House of Cards” — as well as top British and Arab actors.

“We wanted to bring a show to the region that combined the best of the three. It was shot in Morocco in partnership with UK and US producers,” he explained.

That kind of content has pulled in the viewers during lockdown. The figures show Starzplay hit a peak of 6.5 million daily minutes of consumption in Saudi Arabia in the middle of April, compared with about 2 million before the pandemic lockdowns.

Existing viewers are also watching more. The average Saudi spent 28 minutes daily in front of a Starzplay show before the lockdown. That more than doubled to one hour as movement outside the home was restricted.

“To put that into perspective, it took us five years to go from zero to 2 million minutes a day, and it took us six weeks to go from 2 million to 6.5 million. We did more consumption growth in six weeks than we did in the first five years,” Sheikh said.

He is reluctant to forecast how many of these consumers will stay with Starzplay as the lockdowns are eased around the world and the region. 

“I’m expecting some churn, so it’s tough to predict what the base will look like later in the year. We saw tremendous growth, but as the lockdown eases I think we’ll see some churn on those subscribers,” he said.

But even as the lockdown are eased significantly in the region, consumers are not going back to pre-pandemic levels. There is likely to be a permanent shift in demand for Starzplay in the “new normal” environment.

“Unlike Netflix, one of the challenges we had in the region is that the brand awareness and content awareness of our service was comparatively low. One of the things that has happened is that because of increasing demand and awareness, people got to find out about Starzplay. People experienced that and connected the content to our brand.

“That is going to be an enduring and lasting benefit for our company. You cannot unlearn it. I’m expecting some churn in high sign-ups and reduced consumption volumes, but the lasting benefit we’re hoping for is the brand awareness and content awareness that was created,” he said.

That kind of growth is likely to accelerate Starzplay’s evolution from a privately funded startup to a listed public company. It has raised $125 million over its five years, from some pretty impressive investors, including US media giant Lionsgate, the big financial firm State Street Global Advisers, and Nordic investment firm SEQ, which backed Starzplay from the beginning.

With profitability just around the corner, Sheikh does not see the need for further funding, especially as investment sources have dried up during the uncertainty of the pandemic period.

“During COVID times, when consumption and new subscribers were going through the roof, the flip side was that we realized that capital markets were going to be out for 2020. Lucky for us, we are well capitalized, and we are not in a situation where we need to use funds. This is not a good time to be out there raising money,” he said.

“The goal is to serve our customers and also create shareholder value. There are multiple ways of doing that. One is that you generate cash and shareholders benefit from cash dividends. That’s the traditional model. The more high-growth model that is more applicable to companies like us is shareholders push for more growth and expansion to increase the enterprise value of the company,” he said.

Sheikh has set his medium-term sights on a public listing. “In the long run the goal is to continue to grow the business, and in the next three to five years to get into a position where we can list the company on the London Stock Exchange.

“We haven’t absolutely decided that, as it’s so far out. I’d say what we’re looking to do is list ourselves, and if not in London, then other markets, local or London. That’s the ambition, to look to IPO on London or other markets. We’re not there yet. We’re still two to three years away from a decision, but that’s our ambition,” he said.