Two competing narratives about hydrogen played out the last two years in the press. One was that hydrogen is being pitched by the fossil fuel community as a way for natural gas to retain longer-term relevance. The other is that hydrogen will be an important part of the energy transition. The latter narrative appears to have won.

The cost of electricity is the single largest operating cost for producing green hydrogen. With electricity prices rising, the economics have taken a step backwards. New tax credits in the Inflation Reduction Act of up to $3 a kilogram for producing clean hydrogen will help. Other important issues remain such as how to move hydrogen and where to get scarce water. Nevertheless, a number of start-up hydrogen companies are getting into the sector. Projects are starting to advance.

A panel talked about the challenges and opportunities in the hydrogen sector at our 31st energy finance conference in South Carolina in June. The following is an edited transcript.

The panelists are Rob Morgan, CEO of H Cycle, Dr. Naomi Boness, managing director of the Hydrogen Initiative at Stanford University, Himanshu Saxena, CEO of Starwood Energy, Ivana Jemelkova, a senior managing director with FTI Consulting, and Rachel Crouch, senior counsel with AES Clean Energy. The moderator is Jim Berger with Norton Rose Fulbright in Los Angeles.

Color Competition

MR. BERGER: Most hydrogen is made currently from natural gas using a process called steam methane reforming. Around 80 million tons of hydrogen are produced annually. It leads to about 830 million tons of carbon dioxide.

Most hydrogen is used to refine petroleum and treat metals.

I have two questions. Is there a way to replace most of the current hydrogen with green hydrogen, and what new markets are developing for hydrogen?

MR. MORGAN: We are going after that existing demand with the refinery market and talking about how we reduce the carbon intensity. The refining market is huge. Refineries have to decarbonize, in multiple markets, all around the world. There are low carbon fuel standards. Those are expanding, not decreasing.

We are using a waste feedstock, so we are helping to reduce carbon emissions as well by avoiding sending waste to landfills where it decomposes over time into methane.

The waste feedstock lets us put our plants closer to hydrogen users. It is easier to move waste than hydrogen.

After refineries, we want to expand into other markets, such as steel, glass and the transportation sector with its heavy-duty trucks.

MR. SAXENA: Renewable energy generators have been decarbonizing electricity for more than 20 years. Decarbonizing heat is harder. Manufacturing and cement production are heavy carbon-intensive industries.

We are starting to see an explosion in hydrogen demand across the board.

People have been making hydrogen for a long time. The question is how to supply the new demand in a carbon-neutral and cost-effective way. I don't think we are going to replace the existing hydrogen production any time soon. We are not looking for grey hydrogen versus blue hydrogen versus green hydrogen. I think it will be all of the above for a long time. All types of hydrogen will have a role to play because the demand that we see is enormous.

All of the industrial gas companies are playing in the space. Others are entering the market as well. BP just announced a $30 billion investment in Australia in hydrogen. Ammonia and methanol, which are hydrogen products, are going to become the next LNG businesses of the world. That's our belief. We expect exponential growth.

DR. BONESS: I agree. It is really important to move away from the colors and think about carbon intensity. Every region will be putting together its own suite of solutions based on local priorities and the local resources available.

In markets that are using SMR hydrogen from natural gas, probably the most cost effective way in the near term to decarbonize is to add carbon capture and underground storage. It would add something like 20¢ per kilogram of hydrogen to shift away from putting CO2 into the atmosphere. Let's keep our eyes on the end goal of reducing emissions.

MR. MORGAN: Amen to Naomi. Colors tend to blur and obscure the conversation.

MS. JEMELKOVA: A good rule of thumb when looking for potential customers for hydrogen is to think about what is heavy, what is long distance or long duration and what is high heat.

I encourage everyone to look at Michael Liebreich's hydrogen ladder. It is an interesting intellectual exercise in where hydrogen provides the highest added value versus where other technologies might be a better solution. We may have different views on some of his suggestions, but it is a great way to wrap one's head around the role that hydrogen can play in the energy system. The same kind of ladder could be made for other technologies, too.

Hydrogen truly shines when it is allowed to play the role of an integrator, where it brings decarbonized, low- or zero-carbon primary energy into the system to do things that electrons and direct electrification simply cannot do.

MS. CROUCH: Our company is probably agnostic as to where the hydrogen ultimately ends up, although there are a lot of interesting discussions to be had on that subject. These are complicated projects that are going to take a long time to build. Developers need to have visibility into the offtake from an early stage. That is really our focus at this point.

Best Uses

MR. BERGER: Ivana Jemelkova, you mentioned high heat as a potential use for hydrogen. That makes me think of things for which we use natural gas currently, such as heating and cooking. Can you talk more about the types of applications where you think hydrogen is best suited?

MS. JEMELKOVA: We already touched on some of them, but if the goal is decarbonization, the focus should be on potential uses of hydrogen in all areas where other solutions will not do. I would start with the pie chart of global emissions and look at hard-to-abate sectors that contribute the most. That would be the most effective way to reduce industrial carbon intensity.

DR. BONESS: The biggest benefits I see from hydrogen are in applications like steel refining where we do not have any other alternatives.

The hydrogen markets today, particularly in the US, are being dominated by transportation applications. The US catalyst is the low carbon fuel standard credits in California. Hydrogen is being used, for example for heavy-duty trucking. That has the early attention from developers. The next logical step is aviation fuels where there is no other solution.

MR. MORGAN: Hydrogen is an energy molecule. It is also a chemical. The feedstock value of hydrogen is extremely high, and there are many potential applications.

I have been in the power sector for 30 years. Solar and wind have won that race on the marginal cost of electricity, and batteries are helping, so we should electrify everything that we can.

Hydrogen as an electricity source is a low-value use right now. Hydrogen might be a great storage medium as we figure out how to do that, but it is use as a feedstock where hydrogen provides the most value today and where most of the market penetration will be over the next five to 10 years.

MR. SAXENA: We are starting to see a lot of demand from Japan for hydrogen, and a lot of that demand is to displace coal with ammonia to fuel power plants.

Japan Inc. will be looking to procure as much as 90 million tons of ammonia over the next 30 years. The ammonia plant that we are building is only 1.3 million tons, so we are going to need hundreds of these plants just to supply the demands of Japan. We are seeing similar interest from Europe. German utilities are now starting to look to procure ammonia. Ammonia is a way to transport hydrogen overseas.

The Russian invasion of Ukraine may end up pushing the US into the role of the last provider of energy to the world. The Russians are out, and they are going to be out for a long time.

We can take natural gas, convert it into LNG and ship it overseas, which is something that we are already doing, but that is very high in terms of carbon footprint.

Alternatively, we can take natural gas, convert it into blue ammonia, put it on ships and take it to Japan, Germany and other places. A lot of demand is coming from overseas, and that has made the competition for hydrogen and ammonia in this country pretty robust. When we started building our ammonia plant three years ago, the price of ammonia was about $400 a ton. The price of ammonia in the spot market today is about $1,800 a ton, reflecting how global the commodity has become. We are starting to see that hydrogen is a global commodity, very much like natural gas.

MS. JEMELKOVA: We touched on the economics, the carbon impact and the geopolitical implications. Another really critical perspective is consumer perception of hydrogen and consumer readiness for some of these applications. A utility ran an extensive customer survey on what consumers are ready to install in their homes, and whether they want to have gas, molecule-based or electron-based heating, cooling and appliances.

The main conclusion is customers are very reluctant to change. Many of those using gas today are keen to keep it, perhaps with a transition to decarbonized molecules. More broadly, both electricity and hydrogen are facing different consumer acceptance challenges. Electric vehicles are popular but not yet so widespread. Hydrogen is not something that people can commonly touch and feel in their day-to-day lives. We all know electricity plugs. We charge our phones, we charge our laptops, we operate with that type of energy in our daily lives.

DR. BONESS: We used to use hydrogen in the UK. My parents tell stories about how people converted their stoves to burn gas when the North Sea fields were developed. The same thing happened in the eastern US. These are not insurmountable challenges.

MR. MORGAN: Himanshu makes a great point about the spot price of ammonia. One of the consequences of Russia's war on Ukraine is that one of the major ammonia pipelines that exits at the Black Sea and accounts for 15% of the world's ammonia supply has been shut down by the war. Prices went crazy in March. The hydrogen and ammonia markets are global at this point.

MR. BERGER: Do you have a sense for whether consumers would prefer to switch a gas stove to a hydrogen or electric stove?

MR. MORGAN: Are you asking for personal preferences?

MS. JEMELKOVA: We can point you to research. I am happy to share a link to a survey that was conducted on exactly this in the northeastern United States. There are some really interesting insights. It is really a question of where does the market align and where do the consumers align.

MR. SAXENA: The retail application for hydrogen still seems far off. The industrial applications are where I think we will be focusing for the next 10 to 20 years. There is no network of pipelines in this country to transport hydrogen to homes. There is not even a network to transport it to most industrial facilities.

You can't use the existing gas pipeline system to transport hydrogen. There is lots of research underway across the country where people are injecting a small amount of hydrogen molecules into gas pipelines to see what it does. It is on the order of 5% because hydrogen is the smallest molecule. It will escape. You cannot put hydrogen in any meaningful amounts into the pipeline system as it sits today. Refurbishing the pipeline system so that hydrogen can be contained is a very expensive venture.

The point is it is not just a production issue. As Rob said, it is also a transportation issue. Right now we are focused on producing next to the load centers like Texas City in Texas and other places where a hydrogen pipeline system exists already. More widespread applications will require large investments in new pipelines.

MS. CROUCH: I agree. In the medium term, we are going to see hydrogen used in industrial applications where it is difficult, if not impossible, to electrify. It is difficult to electrify all residential applications, but hydrogen is too inefficient to put in our houses.

Producing Hydrogen

MR. BERGER: Let's move to the production of hydrogen. There is electrolysis, and there is gasification. How will most green hydrogen be produced?

MR. MORGAN: We are a producer that is focused on decarbonizing. There are two ways to make renewable hydrogen in my view. You can start with water, use renewable energy and do electrolysis, or you can start with a hydrocarbon feedstock, organic waste, and release the hydrogen and carbon from that.

We plan to use organic waste because we have two tailwinds. First, we have the steam methane reformation issue you talked about earlier, which is all the CO2 emissions coming from extractive natural gas going to hydrogen. Second, there is a move by US states, and now countries around the world, to stop putting organic waste into landfills in order to reduce methane emissions. That is actually the law in places like California, Oregon and Washington.

Those two tailwinds give us a great benefit. We give municipalities and cities a way to comply with their diversion targets, and we give the low carbon fuel sector a way to get a lower-carbon feedstock into its compliance. We are catering to two compliance markets. We are not even touching tax credits yet. Tax credits would make things even better.

As for technology, I would like to quote one of my old AES friends, Chris Shelton. "We are technology agnostic, but highly opinionated." We are a gasification company today, but we are really a renewable hydrogen company, and we will move with the market.

MS. JEMELKOVA: Hydrogen is an energy carrier. It carries energy from any primary source that you want to use. The way you make hydrogen turns on where you feel your primary energy should come from.

The key issue when it comes to production is the lack of standardization. We have those colors that are probably well-intentioned, but at best quite unhelpful in the conversation. What should be the carbon standard for clean or low-carbon hydrogen? We cannot agree internationally, and we cannot agree domestically either.

The US Department of Energy is working with two different standards depending on the intended use of the definition. Clearer guidance and certainty are in the interest of all stakeholders, as they would help address some of the myths and unhelpful emotional conversations that are happening.

Four Keys

MR. SAXENA: There are four things we look at when we think about what technology is best suited for a certain need. They are scale, cost, location and carbon intensity.

Hydrogen has been in production through steam methane reformation for 50, 60, 100 years. The technology is well proven. You can put carbon capture systems on SMR, remove as much of 95% of the CO2, and produce a blue hydrogen.

Those are very large systems. We are talking about $1 billion plus projects each, especially if you add a carbon capture system.

Scale is next. Electrolyzers tend to be much smaller. There are 20, 40 and 50-megawatt applications. If you are next to a customer, you can build smaller systems so that you do not have to worry about transportation.

Carbon intensity is another point. If you need green hydrogen, you are not going to produce it through steam methane or autothermal reformation; you are going to use electrolysis and do it where the price of renewable power is cheap.

There is no winner or loser in this debate right now. The method for producing hydrogen is case-specific and varies by opportunity.

As investors, we don't bet on technologies. We are not betting on a better electrolyzer 10 years from now. We are investing in what is available today. There are at least three different electrolyzer technologies. Producing hydrogen is not difficult. Producing it cost-effectively is the challenge that we face as an industry.

DR. BONESS: The other thing is that there is no silver bullet in terms of which technology is going to be sustainable. All of these technologies have warts on them. We are dealing with equipment that uses fancy metals that should only be found in a jewelry box. We are dealing with processes that require large quantities of water. CO2 is still part of the equation. We are trying to optimize around lots of different parameters.

The one technology that has not been mentioned and about which I am super excited about is pyrolysis. It is essentially gasification without the oxygen. Instead of CO2, you get solid carbon. At Stanford, we are working on things like making hydrogen with super high value carbon nanotubes as the byproduct that you could imagine being used in construction materials.

MS. JEMELKOVA: Another technology or feedstock primary energy that has not been mentioned is nuclear. There is quite a bit of excitement around nuclear and hydrogen and how these two technologies could work together.

There is no such thing as a perfect solution with energy. The versatility of hydrogen is hydrogen's biggest blessing and also hydrogen's biggest curse. What use cases are economic? What use cases really matter?

MS. CROUCH: To round out the discussion about how we are producing it, my company's sweet spot is building renewable power projects, so we are focused on the electrolysis application, but even within that, there are questions of additionality, what our customers are looking at as alternatives for whatever issues they face, and whether they want the electricity to be delivered behind the meter. There are a lot of permutations for how green you get and what it means to be green, especially in the absence of stringent federal or national standards.

Location

MR. BERGER: An overriding theme is the old real estate adage, location, location, location.

MS. CROUCH: In the context of green hydrogen from electrolysis, location may not be the biggest thing since a lot goes into putting these projects together, but it is a major consideration for all the reasons that you want to find a good location for your renewable power project.

For a behind-the-meter project, not only are you looking for really good insolation or a really good wind resource, but you are also looking for both of them in roughly the same place, and you are looking for them not to be very highly correlated in order to maximize the amount of time that you are running your electrolyzers.

Water was mentioned. Water, in addition to electricity, is the critical feedstock. You need a large amount of it.

We also focus on transportation. You must either put your project near the customer or have a viable plan to move the molecules to the customer. Transportation by truck is very expensive.

Another issue is where do policy incentives line up? Many people are eyeing federal money for hydrogen hubs. The California LCFS credits are a game changer for anyone trying to sell into California. There are also ordinary course policy incentives that you might have for developing a project in a particular jurisdiction.

Economics

MR. SAXENA: The single largest operating cost for an electrolyzer plant is the cost of power. There is a direct correlation between the price of power and the price of green hydrogen. If you buy electricity for $30 megawatt hour, then you can sell your green hydrogen for about $4.50 a kilogram. If it's $40 power, you need at least $5.50 a kilogram for the hydrogen. It is almost linear.

The price of renewable electricity has skyrocketed in the last nine months. Projects that were willing to sell renewable power for $20 a megawatt hour now want $40 to $45 a megawatt hour. We see an effect on the entire green hydrogen food chain because the price of hydrogen is not changing in tandem with the price of electricity, and we think that is a serious challenge.

We are starting to see a blowback effect on everything from cryptocurrencies and data centers to hydrogen suppliers. Green hydrogen is not economic to produce today. People are not going to pay us $5 to $6 a kilogram of hydrogen that we need to make those projects viable. Tax credits for hydrogen are important to close the gap. A $3 tax credit is going to be the difference between green hydrogen taking off and green hydrogen not taking off.

DR. BONESS: Hydrogen is not a fuel that can be sourced directly, except for one well that I know of. It is made from some other energy source, and so it is always tied to the price of whatever material is used to make it.

That is also true for blue hydrogen. It is tied almost linearly to the price of natural gas. I just published a report that discusses the economics of blue hydrogen in California. Now I have to redo all of the figures, especially the comparisons to green hydrogen, which is looking a lot less attractive.

MR. MORGAN: Jim, you raised an interesting point. I think transportation is going to be the linchpin for hydrogen because that is a really important step.

Going back to some of the energy input issues, our business model does not need a hydrogen tax credit because we are using the energy that is already in the hydrocarbon to release it. For example, electrolysis uses 50 or 55 kilowatt hours of electricity to produce effectively 30 kilowatt hours of energy value in the hydrogen. We need only nine kilowatt hours to make 30 kilowatt hours of energy value. The energy equation is critical.

Transportation is going to be the thing that we all have to solve. How do you get it to the customers that need to use it?

MS. JEMELKOVA: There is a lot of excitement about taking hydrogen production to places like Chile, Morocco, Australia and the Middle East, where you could get the cost below $1 a kilogram because the renewable electricity feedstock is so cheap.

Then the question is how to get that hydrogen to Europe where it may be needed. The US has the potential to produce all of its hydrogen supply domestically. Europe will most likely need to import large quantities. Right now when we look at European targets, they are 10 million tons produced domestically and 10 million tons imported, but no one is able to say yet exactly how that will happen. The European Union is placing various political and financing bets.

MR. SAXENA: People are trying to solve that problem by converting hydrogen into something else, and that something else is ammonia or methanol.

Air Products has a $10 billion project in the Middle East where it would use renewable energy in the Middle East to make green ammonia and then ship it globally. I see a lot of parallels with the LNG trade, where you convert gas into something that can be put on ships. Ammonia is the next LNG in my opinion.

MS. JEMELKOVA: It is not about the cost of the production, but really the cost of the shipping? The shipping costs are a significant component of the final price.

MR. SAXENA: Shipping costs for ammonia are about 20% of the production cost, so it is meaningful, but they are not the core driver from what we have seen so far.

DR. BONESS: I think a big component of the cost is associated with the reconversion of the ammonia to hydrogen. Reconversion is inefficient and absolutely kills the economics, so I really like some of the solutions that people are working on to use ammonia directly. I think you mentioned in coal power plants. There are some turbines that do that. There are obviously some NOx and SOx issues associated with using ammonia directly, but I think it could really improve the economics.

Hydrogen Hubs

MR. BERGER: The government has authorized $8 billion to authorize construction of four or five hydrogen hubs around the country. How important is this? Where do you expect the hubs to be built?

MR. MORGAN: Joe Manchin is going to get one.

MR. SAXENA: That is the price of build back a little bit better. We are seeing companies and states band together. West Virginia is one. Texas and Louisiana are talking about separate bids.

There is either going to be a blue hydrogen hub or a green hydrogen hub in each location chosen. The blue hydrogen hubs are going to be focused in markets where there is already a lot of geology to sequester CO2 underground, so that will be in the Midwest, in the Marcellus formation in Pennsylvania and New York, and in formations in Texas and Louisiana.

There is a lot of carbon capture and underground storage already. There are CO2 pipelines. It makes sense to put blue hydrogen hubs in the same locations. Maybe two of the four hubs will be blue or maybe three of the four will be two blue and one green. This is a really good start for the hydrogen economy.

MS. CROUCH: The Department of Energy put out a notice in the last two weeks. Six to ten hubs are under consideration. The number before was four or five. We were encouraged to see that slightly smaller projects or hubs appear to have opportunities.

MS. JEMELKOVA: This is a real step change. DOE used to finance mainly research and development and some demonstration projects with funding of a few million dollars at a time, perhaps up a few tens of millions in exceptional cases. Now we have a pot of money that is $8 billion.

It is a huge amount and a whole new challenge for DOE to figure out how to invest it in a smart way that really catalyzes movement in this space. The guiding principle is how to unleash the potential of the sector at large.

We had a look at some of the early candidates and what are likely to be the key success factors in that competition. I am using the words very carefully because I think that it is not about competing against each other but coming together as an industry and placing bets where they make the most sense.

There are about 20 different hubs in various stages of development so far.

There is a lot of quantitative data available about the type of investment, the carbon impact, the sort of jobs and growth impact on certain regions. There is not as much qualitative data on issues such as environmental justice and community engagement, and we all know how challenging those issues can be when it comes to permitting and getting the local communities on board and how important those are to the DOE.

At least 15 governors have come out to support different hydrogen hubs, and the split is pretty much even. There are seven Democrats and eight Republicans. We can expect the political considerations to play an important role as well.

MR. SAXENA: The topic of bringing Democrats and Republicans together is important because it is a refreshing change in the political discourse in this country. We have spent the last 10 to 15 years demonizing fossil fuels. Russia and Ukraine have reminded us that putting all of our eggs in one basket is not the best approach. The lights will go out if we take the demonization too far.

Hydrogen allows natural gas to play a role as a transition fuel by combining natural gas with carbon capture systems in the right markets by producing essentially carbon-free hydrogen. This will enable gas and renewables to coexist for a long time. That coexistence is what is bringing the Republicans and Democrats together. Joe Manchin doesn't really care so much about wind and solar. What he cares about is the natural gas in his state. It is a refreshing change to see people trying to find common ground instead of retreating to rigid positions.

MR. MORGAN: It is a great point because the hubs are going to draw bipartisan support. You are going to see a coal hub: Manchin. You are going to see a gas hub: probably Texas. You are going to see a nuclear hub: probably the Midwest or PJM. Then there will be a California one that is some mix of electrolyzers and other technologies. Those things are all the first level. Six to 10 hubs is the ultimate goal.

You are going to see carbon sequestration in North Dakota and along the Gulf Coast. I don't want to leave the topic without giving a shout out to Jigar Shah and the DOE loan guarantee office because it is doing great work as well.

Audience Questions

MR. BERGER: We are about out of time. Let's see if we can fit a couple audience questions.

MR. SLOAN: Mike Sloan, CEO of Synergetic, a green hydrogen developer. How do you connect more users of hydrogen with the best production areas, which are probably going to be in the middle of the country or the desert Southwest? Can you speak to the anticipated timing of when you think we might get a pipeline system going for hydrogen?

MR. SAXENA: I am not seeing people talking about building long-haul hydrogen pipelines yet. You either have to move electrons or move molecules.

It is far easier to move electrons because there is already a transmission grid. Aren't you better off building transmission lines to bring renewable electricity closer to places where there is a demand for hydrogen instead of producing molecules in West Texas and trying to transfer those molecules to Houston? AES has been thinking about this a lot, right?

MS. CROUCH: We have. Pipelines are challenging to build. We have been focusing on moving the electricity to where there is demand for hydrogen and on 24/7 type products. Another issue is how to define green. Does the load need be tied to the generation or can the power supply be virtual. That would be another way to free it from being next to the electrolyzer.

MS. JEMELKOVA: Two utilities that are trying to wrap their heads around this are National Grid in the Northeast and Southern California Gas in California. They operate in two completely different markets with different sets of issues, challenges, regulatory environments and so on. One of them plans to try blending, at least in the initial phase. The other is planning to try pure hydrogen and is focused on how quickly it can get to that stage.

Both have published their strategies publicly. There is data behind them. They will provide anyone interested in this topic insights into two different perspectives.

DR. BONESS: I grew up in oil and gas where trying to get permits for any pipelines, regardless of what you are putting in the pipelines, is almost a non-starter.

We are almost starting from ground zero with the hydrogen hubs. They offer the prospect of getting critical mass, especially around ports. From that start, there will be connections that make sense, particularly along the transportation corridors. At that point, pipelines will probably have a higher chance of being permitted.

MR. BERGER: Last question.

MR. SKELLY: Michael Skelly, CEO of Grid United. The panelists are very nice to one another, but I am wondering if –

MR. SAXENA: We're just good people! [Laughter]

MR. SKELLY: I want to test that. A lot of people who say that if you look at the full lifecycle of natural gas production, the industry has done a horrible job of managing emissions. Blue hydrogen is not nearly as low carbon as many people make it out to be. I am wondering what your response is to that critique. One of you characterized it as an emotional argument. People do get excited about it because, as you all pointed out, it is all about carbon.

DR. BONESS: I also run a program called the Natural Gas Initiative at Stanford. We have a big methane emissions detection and quantification program. We just published a paper saying that the emissions in the Permian Basin are double what was previously thought, so I agree that it is a problem.

However, there are a lot of detection technologies. We have been working with companies on them. The upstream end of the supply chain is now getting a handle on this. With the evolution of satellite detection, there will not be any place for upstream to hide, so I think that we are going to get this under control and that it is less of a concern for the long run for blue hydrogen.

MR. SKELLY: You are more optimistic than I am about the Texas Railroad Commission.

DR. BONESS: I am a rock nerd so I am an optimist at heart.

MR. SAXENA: Michael develops transmission lines, so there is no greater optimist than that, my friend.

MR. MORGAN: I am thinking Michael Skelly has been trying to do this with transmission lines for 10 years, so I am not betting on pipelines.

MR. SAXENA: Look Michael, my view is perfection is the enemy of the good. You are not going to get it perfect for a long time. The energy transition is not happening overnight. The idea that a 50% reduction is not good enough is not the right way to look at it.

Folks think the transition can occur in the next 10 years. It is probably going to take the next 40 years. China is building new coal plants again. Australia is talking about restarting its coal plants. Germany is no longer shutting down its coal plants and is keeping them in reserve. You are starting to see globally that the push for decarbonization is taking a backseat to energy security and reliability.

We do renewable energy. We do conventional energy. We have to be practical, which means that blue hydrogen is a step toward a more glorious future. Let's not lose the intermediate step because, without it, you will never get to the end.

MR. MORGAN: So since Michael invited us, I am taking the gloves off. Carbon capture and storage is the incumbent answer to keep burning fossil fuels. We should change the source of our hydrogen and other feedstocks to renewable resources.

MS. JEMELKOVA: This brings us all back to the start of the conversation. There could not be a better case against hydrogen colors because all blue hydrogen, for example, is not the same. It depends on how good your carbon capture and storage are, how well you manage your fugitive emissions and so on. We need a clear carbon standard that removes the uncertainty and creates an incentive to produce truly clean hydrogen.

MR. SAXENA: But we have to do this in a cost-effective way. I spoke at a Reuters conference last week after the energy minister of Nigeria spoke. He used a term that I had not heard before. It was "energy poverty," and when he talked about energy poverty, it struck a chord.

In the United States, our lights never go out, but in places like Nigeria and India, you have power outages that last 10 to 15 hours. When we talk about global warming, we have to be practical. There is no such thing as an overnight transition. Even in the United States, when energy bills are rising, at some point people say, "I don't care what the carbon footprint looks like. I need cheap electricity, I need it now and I need it to be 100% reliable."

We have to move to clean energy in a methodical way. Abrupt changes are politically fraught and will set us back rather than move us forward.