I know I am going to get trolled remorselessly for the following post – but it’s important to say it: What the world needs now to decarbonise is efficient capacitance – storing and distributing energy. Whatever a bumptious South African thinks, Lithium batteries are not a good solution. They are inefficient, dirty, and riddled with ESG sinkholes.  We need something better.

One of the expert sources I most respect in the Decarbonisation/Renewable energy world is the remarkably named Thunder Said Energy. Their energy consultancy commentary is excellent – and will surprise you. (If you decide to meet them, or sign them up, please mention Shard and how you read about them here!) Recently they produced a report showing how Battery Electric Vehicles (BEVs) will actually increase demand for Fossil Fuels for at least the next 17 years. Thereafter we will remain heavily dependent on Gas to produce the electric juice for BEVs for decades to come.

TSE have run the numbers in great detail, and it won’t be till 2037 that BEV’s actually start to lower the amount of fossil fuel energy required each year. That’s because it takes 3.7 times more energy to produce each BEV than the net road fuel it displaces each year. This is bad news from EV proponents who have been telling us how they can decarbonise the planet, but great news for the Gas industry which will be needed to make the electricity to power BEVs for many years into the future.

The research shows it takes about 9 tonnes of Co2 to make an EV battery – without even considering the other ESG implications of how Lithium is obtained. It takes about 50,000 miles before the battery breaks even with a conventional combustion engine car.  If you assume an EV will have a practical life of 300,000 miles then it will create just 40% less CO2 than a conventional car. BEVs have a significant carbon cost.

Meanwhile, some of the top performing stocks of 2020 include a number of US and UK hydrogen-linked fuel cell makers. Hydrogen and oxygen react in simple fuel cells to create power, and a very simple and useful end pollutant – water. Nothing else. Fuel cells are a brilliant, simple and clean tech – but at the moment come out massively more expensive than lithium batteries. Like all new tech, the cost of producing hydrogen will fall, especially if renewable power sources can be directed to making hydrogen. Effectively, hydrogen could become a much cleaner and more efficient capacitor for EVs than a lithium batteries. Plus, hydrogen is the most abundant element – while child miners in Africa are digging less and less dirty lithium out the ground.

The Chinese are into building out a whole Hydrogen Economy. The obvious stuff is building fuel-cell buses. But they intend to use hydrogenise their whole economy to power transport, industry, chemicals, power, residential and commercial property and whatever else takes their fancy. They are solving the logistical problems around hydrogen in terms of transmission, distribution and storage. They are getting over the grid capacitance problems of renewable power by using intermittent solar and wind to manufacture green hydrogen – which at the moment remains more expensive than creating H from coal!

They have realised hydrogen offers a complete and cleaner route to decarbonisation, replacing fossil fuels earlier if it can be manufactured in quantity, and cost-efficiently. That will require renewable power costs to fall even more – which is what has historically happened. There are couple of exciting technologies coming on stream to produce hydrogen from methane (natural gas) and through direct solar energy generated power. (If you want to learn more, I’ll be happy to forward you some recent notes from banks and research companies.)

The bottom line is the current crop of EVs are probably an evolutionary step on the way to clean power and transport:

· Hybrids are analogous to the first lung-fish that crawled out the sea some 15 years ago.

· The current crop of BeVs – including Tesla – are like the reptiles that followed them; better, and able to cope well, but still limited by issues like range, battery tech and the sheer weight of carrying the batteries.

· The next evolutionary stage is likely to be fuel-celled hydrogen powered HEVs, a leap forward with simple efficient tech, range, weight etc.

· You were probably waiting for me to write “Dinosaur”, and so Hydrogen may prove when the “mammal” finally emerges – a safe fusion reactor the size of a golfball powering everything…

A thousand years from now people will be looking at fossilised Tesla and wondering exactly what it was…

Bill Blain is a well-known City of London commentator, and has 35 years’ market experience as an investment banker. He currently is Strategist at Shard Capital, a London-based boutique.

Republished from the Morning Porridge by permission.

Picture by Xi Yin – Own work, CC BY-SA 4.0, Link.