Achieving Cost Parity with Green Hydrogen – Chris Cannata

Peter Perri 0:00

All right and we are live on Energy Superheroes today. We are excited to have Chris Cannata. He is the director of hydrogen at EDF Renewables and he provides overall direction leadership for the North American green hydrogen business over at EDF. Chris is calling in today from Wichita, Kansas. We’re excited to have you on the podcast. Chris, welcome.

Chris Cannata 0:23

Thank you for having me.

Peter Perri 0:25

So Chris, tell me about what you do day to day over there at EDF and what your role look like?

Chris Cannata 0:34

So day to day activities range wildly from you know, creating the high level strategy and vision and direction for this new business line EDF Renewables North America all the way through, you know, doing budgeting, managing people to dig into the details on particular projects, doing development work or the toy work, you name it. So it’s one of the things that attracted me, both to the role and then to EDF Renewables, as well as the ability to do a wide variety of things, sometimes, often parallel at the same time. So giving us all areas of the brain that will not just kind of limited to one activity per day.

Peter Perri 1:17

Now, absolutely, that sounds great. So how long have you been over there?

Chris Cannata 1:22

Been over here for about a year? So EDF Renewables North America has been in the renewable energy game in North America for about the last 35 years. And then the EDF group, globally has been around since I think the 50s or 60s, one of the world’s largest low carbon utilities in the world and, you know, operating grids, I think, in the UK and France. So in like 2018, or 19 is when EDF group started seriously looking at Green hydrogen, and they started a business called dynamics that’s focused on hydrogen development in continental Europe. And then EDF has spread hydrogen to UK, Asia. And then now of course, the last year or so it’s kind of gotten focused into the Middle East, North America and South America.

Peter Perri 2:12

That’s awesome. So how has your life changed in business since you went to EDF and started focusing on hydrogen?

Chris Cannata 2:21

Yeah, so my background is with a company called Koch Industries, which is a global conglomerate based in Wichita, Kansas, that seemingly has its hands and everything. So I spent the last 13 years there. And lately, let the energy industrial gas group want this stuff, which is a nylon producer. So how it’s changed dramatically is you’ve kind of gone from a strictly petrochemical focus to something that is a pure renewable product. So we were doing with kind of molecules and electrons on both sides. But the biggest change here, I would say, is kind of being the molecule expert, if you will, in a traditional electron company, as opposed to an electron expert, and a traditional molecule company will at Coconut VISTA. So it’s been nice, being able to kind of pull upon that expertise, but at the same time, you’ll kind of be focused on you know, that was comes next, which we believe is green, hydrogen, you know, offshore wind, then even so, he’ll custom builder, Virgin transmission lines, North America.

Peter Perri 3:34

Gotcha. So do you feel the green hydrogen markets really picked up lately in the last year and last even more last six months?

Chris Cannata 3:43

It has, you know, the green hydrogen space in North America. It’s kind of the bright new shiny object. And for good reason. I do think that it’s early stages of development. In terms of, you know, economic cost parity with gray hydrogen, it’s not quite there yet. I will say that announcements and early adoption has picked up and certainly interest is picked up as well. And then by the middle of this decade, and certainly towards the end of this decade, we’re gonna see a lot of steel on the ground and start to see some of these early costs drop down as well.

Peter Perri 4:18

Gotcha. Is the is it the electrolyzer cost is the biggest thing or is it the overall project cost? Or what do you see as the biggest barrier to getting it down to that more parity level with gray hydrogen?

Chris Cannata 4:29

I think all the above. So electrical acquisition costs, you know, there’s several roadmaps out there and several technologies, they’re going to be driving that down. Obviously, manufacturing, utilities, economies of scale, excuse me, will assist as well. But yeah, overall plant costs, you know, they’re high right now, as with any kind of new technology, I use air quotes, because the hydrogen has been around for about 100 years or so. And then, you know, certainly electricity costs, you know, green hydrogen makes up A lot of sense, you know, when, for example, you can store excess renewable energy, for example, in the form of hydrogen, obviously, the round trip efficiencies aren’t great. But if you’re dumping into the grid at negative power prices, or you’re curtailing it, then that’s less of an issue. So the electricity prices declining, along with everything else is really good and help drive adoption. Plus, you know, any taxes or incentives that come down the pike will only help. And then certainly, and something that I’m pretty passionate about as the end user, you know, that’s going to be requiring products made with green raw materials and factories powered by renewable energy. That’s going to naturally kind of elevate the bar, if you will.

Peter Perri 5:46

Yeah, for sure. So let’s, let’s talk to the end user a little bit. Where do you see the demand coming from? If it isn’t there today? Where do you think it’ll come from in the future, we’d love to know more of your insights on end users for green hydrogen.

Chris Cannata 6:01

So in North America, the early adopters is clearly on the west coast, the low carbon fuel standard mobility market, so light duty vehicles, you know, forklifts you know. So early adoptions are we going to be kind of that mobility sector. And then I do see kind of longer term as your power grids, you know, seek to be 100% decarbonized, there is a home there for green hydrogen that take the place of natural gas, and to kind of act as that longer term storage method versus say, for our batteries. So that’s going to be kind of locational driven in the early days, but then again, as infrastructure is built out over the course of the next 10 or 15 years, kind of more options will be available for the power generation space. And then based on my personal background in the refinery, pet cam space. I like green hydrogen as raw material. Because if you have industries that must decarbonize, or would like to decarbonize, there are many options available to have industry Aside from using low carbon, hydrogen. So that’s anything like ammonia, methanol, plastics, refining, steel, that sort of deals. And then longer term, many people are bullish on kind of green hydrogen for export, green hydrogen for, you know, marine applications, specifically, like ammonia and methanol.

Peter Perri 7:32

Gotcha. Well, let’s, you know, dig into refineries a little bit more, because we I don’t think we’ve had anyone on the podcast that has that refinery background would love to hear your thoughts on that. And how, what’s the timeline, and maybe you could talk a little technically, because I don’t think a lot of people know how hydrogen is used in a refining operation, I would love to get your thoughts on that.

Chris Cannata 7:55

Yeah, to clarify, My expertise is on the particular vehicle, but currently kind of speak to refinery is as well as probably some others that you have, or will host, however, kind of in that space, in general, you know, it will really be dependent in the short term on kind of end use customer, you know, if you have an oil refinery is producing gasoline, you know, the owner would need to make sure that that is an asset, that’s going to be around for, you know, 2030 2060 timeframe. If not, there may not be a need to decarbonize by adding the expensive of green hydrogen. However, on the plastic side, and on the petrochemical side, you know, I do see, you know, plastics with us, you know, indefinitely they have, you know, setting aside the recycling date, which, you know, many smart people were working on, and, you know, not dumping it into the Pacific Ocean and creating a, you know, a plastic patch. But setting aside those difficulties, you know, the plastics industry does have something to offer, you know, lightweight applications. You know, it’s, it’s tremendous relative to its alternatives. And so we as green hydrogen need industry need to make sure that they can do that in a sustainable, environmentally friendly way as possible. So adoption is really going to be dependent upon those end users that will need to that need that green attribute of the raw material more than the kind of absolute lowest cost. And then as we start getting as the industry, excuse me, starts getting closer to that gray hydrogen parody, you’re gonna see more adoption on an economic basis. You know, that could be good. A lot is dependent upon your end user policies, incentives, but that could be towards in this decade or the early 2030s. But this is really picking up in that space.

Peter Perri 9:47

Yeah, for sure. I mean, if you saw something like a carbon tax or something, then people are going to adapt rapidly. So to Petrochem How is hydrogen used in that operation? Just walk me through that, because that’s something I don’t know, or is it? Or are you seeing it replacing, say natural gas and some sort of process within the plant? How does? How does it actually work technically within a petrochemical facility.

Chris Cannata 10:16

So it could be both in certain applications. And what I know best, again, as I mentioned earlier, is nylon, it is a major raw material to create the plastic itself. In other applications, you know, I could see that it could displace natural gas, you know, for green and plant steam, and that’s what we deal with boilers. However, I believe that unless there is some sort of penalty or incentive, both in the light gas where the hydrogen side, I don’t know if I would adopt it just to create steam personally.

Peter Perri 10:47

Gotcha. All right. Well, I think I think that’s, that gives us a good a good description, in terms of the development side, as far as building out green hydrogen facilities, what size? Are you guys looking at? What’s the right size plant? How do you know? Because you’re not sure about the demand side? So how do you size your plant that that it makes sense economically?

Chris Cannata 11:11

That’s an excellent question. In the early days, again, it’s going to be driven by whatever the off taker needs, because again, it’s going to be an early adopter, that that’s driving the plant sizes early on. However, EDF is targeting kind of, you know, great scale level projects, because that is our area of expertise. We do gigawatts of renewables, seemingly each year. And that’s just kind of our bread and butter. So we’re targeting projects anywhere from 25 to 50 to 100 plus megawatts. And we’ve seen kind of a tipping point, you know, recognizing where the industry is in North America. And now we’ve seen kind of a tipping point of kind of that 25 megawatt range, which is something that starts to really interest us and starts to kind of drive down cost.

Peter Perri 12:06

All right, so if you do have let’s, for around math, say a 50 megawatt project, how much hydrogen does that Project Produce in a ballpark? And if it’s a hard calculation, tell me but for me, it’s always tough to convert from megawatts into kilograms, you know, and I’m sorry to give you a math problem, but it’s, it’s one of those things like I have a power Gen background, and it’s easy for me to understand, okay, megawatt is a megawatt but now we’re going to a fuel and kilograms, you know, doing that conversion is tough. Sometimes,

Chris Cannata 12:39

it’s just doing a get some rough math, you do a 50 megawatt project operating 95% of the year. So that would imply, you know, kind of behind the behind the meter, excuse me renewable energy backstopped by, say, renewable energy from another, EDF asset or from the grid, depending on what the customer and the rules allow, you know, that can produce anywhere between seven to seven and a half million kgs per year.

Peter Perri 13:07

Okay, that’s, that’s good. A good number. And then, you know, I’ve seen a lot of people talk about tons per year. Right? So if you do seven half million kgs, you what divided by is a 2000. To get to tons kg should be divided by 1000. By 1000, excuse me, showing my lack of math skills.

Chris Cannata 13:35

That’s all right. That’s cool. About 70-70,500 tons per year.

Peter Perri 13:42

So gotcha, and so then you could be with that you could be displacing gray hydrogen, or you could be displacing diesel. And depending on what other fuel you’re displacing, you’ll be able to come up with some amount of co2 that you’re reducing, by putting that fuel out there, because the hydrogen, of course, has zero emissions. So if you can produce it with no emissions, you’ve got you’ve got something that’s really green, is that sort of the calculation that the people look at?

Chris Cannata 14:14

Correct? Yeah. Especially in the markets as they exist today. Many people including ourselves, you know, we’re targeting that California Green 3.0 model to kind of some of the early standards in terms of carbon intensity of the hydrogen. I think that’s fair based on where we are right now in terms of scope one emissions, but yeah, your longer term good. It’s a lot dependent upon you know, policy of rules and the end user, but I could very well see you know, EDF building a large scale production facility, then you have different tiers of loci available. So, the obviously the highest cost here will be the hydrogen graded, you know, purely with behind the meter. Global Energy. So what does that say wind or solar or company by battery, what have you. Then, given our footprint, which is the largest in North America, we could bring it energy power from other assets. And that could be kind of a next year in terms of both a little bit higher CI and a little bit lower price. And then, again, to drive that electrolyzer utilization rate up as high as possible can be backstopped with electricity from the grid in some instances. And then, you know, to be made grain, good person retire renewable energy credits, for example. You know, that’s kind of a sticking point and where we are in the North American green hydrogen industry, because there’s not a unified set of rules. And so, you know, some customers are saying, No, it needs to be just behind the meter. kind of forget, Bryce and others are like, wait, you know, we’re still price sensitive, but we still need that secret. low carbon intensity. So it’s kind

Peter Perri 15:58

of the gotcha what’s the Delta, you know, ballpark between, say, a gray hydrogen dollars per kilogram and a green hydrogen dollars per kilogram? You know, let’s say you’re using all behind the meter and just producing it with the most high efficiency electrolyzer, you can get, you know, let’s say, good conditions, you’re running 95% of the Year, how big is that delta based on the today’s electrolyzer efficiencies?

Chris Cannata 16:23

Yeah, so I’ll go to what I know best. And let’s, let’s look at the US Gulf Coast, a lot of hydrogen demand is down there, for sure. So on $1 per kg basis, and it’s highly dependent upon natural gas price, highly dependent upon a number of things, you know, great hydrogen can be anywhere between say 50 cents per kg all the way up to about two to 50 per kg. Right now, setting aside kind of, you know, long haul logistics and storage implications, kind of pure green projects in the Gulf Coast, or, you know, in the three to $4 per kg range. So, if you tack on maybe another 50 cents to $2, depending on how to get it to market, you know that the gap is somewhat significant, which is why you need to find those customers that kind of, can absorb that premium now to help kind of drive this market forward. No different than where the solar market was in 2005, when people were signing, know, for sure. 110 $120 per megawatt hour PPAs. And, and now what solar is like, what 40 or 50? I don’t even know. So,

Peter Perri 17:30

oh, it’s lower than that. And so I, you know, when you tell me that that’s the Delta, I do think back to 2004, or five, because that’s actually when I started monitoring solar energy market, and back then they had concentrating solar power, and they really weren’t using PV. And it was a high tech product. And then some smart people said, You know what, this is a scale issue. Let’s just make PV as cheap as we can make it, and then the price plummeted. So I think it’s fair to assume that there will be a lot of coming down and the price for green hydrogen as electrolyzers become more efficient as you do it at larger scale. So it’s, it’s good to hear that there. The price is actually not that out of line today. It’s I think it’s a good starting point.

Chris Cannata 18:21

It is, yeah. And then the $3 per kg production tax credit, that was part of the build back better plan, you know, a standalone bill gets passed, that’s really going to drive adoption significantly, it’s going to pull it forward. And it’s going to bring that parity pretty close. If you look about excuse me, if you look at what’s going on, obviously, Europe, with the high energy prices, you know, caused by the war in Ukraine, among other factors, you know, there are areas where, you know, parody has been breached already. This, who is, you know, what can you do about it in 2022, nobody’s planning to take some time to build infrastructure to build that and get it over there. But, you know, we’re seeing it now. And it’s just a matter of, you know, what the long term prices are, you know, run your scenario analysis quarterly.

Peter Perri 19:10

Gotcha. Are you guys bullish on say, some sort of production tax credit getting passed as a standalone bill?

Chris Cannata 19:17

Yeah, so I am, I can’t speak to ETFs official position off the top of my head, but the reason why I am is because now setting aside the fact that 2020 twos in the election year, there is support for stand alone, you know, climate change, incentives on both sides of the aisle, although some of our friends may not be willing to admit that so, you know, Bill back better from a purely green hydrogen perspective had a lot of provisions in it that would definitely help the industry and then therefore the environment as well. However, you know, kind of coming on the back The bipartisan infrastructure bill just kind of sounded like was a hill, you know, too high to climb at the time. So if we can get a standalone, you know, called energy policy or climate change bill out there, I think it stands a pretty good chance of passing. But the giant caveat is it’s an election year?

Peter Perri 20:20

Yeah. Well, it would be amazing to have that that federal standard, you know, I compare it to the biogas market that’s got a lot of support with California LCFS, and then also the d3 RINs. So if we could get something like that for hydrogen, I think it would make a huge difference in bringing that forward, comparing it to a fuel like, say biogas where sometimes the biogas can have a negative CI score under the California greed model, because of the fact that you’re reducing some kind of methane and then converting it into a fuel. You want to I don’t think you can ever see green hydrogen, sort of with the negative CI score the lowest it’s going to get as probably a zero, but maybe I’m wrong. Is there some way under that, under that California greet model, you can get a negative CI score does it is zero kind of the limit?

Chris Cannata 21:09

I don’t think I could speak definitively excuse me to that at this time. However, I kind of largely agree with your statements. What I can say is that I believe given the size of the issue, the size of the market, and kind of the size of the opportunity, that, you know, all colors of hydrogen and all flavors of r&g are going to be needed and come into play. So to say it simplistically, you know, there’s not enough you know, off gas from you know, cattles in landfills and whatnot to kind of completely solve the carbon issue. Just like there’s not enough, you know, holes in the ground to, you know, store the carbon associated with blue hydrogen. So, it’s going to take kind of all colors, all flavors of what comes next to really kind of see this through. But I can’t I can answer you definitively this time.

Peter Perri 22:08

Yeah, I hear you on that. Now. It’s you think about 51 billion tons of carbon is a lot of stuff, period, right? It’s, it’s an enormous amount of stuff. So in order to reduce that amount of annual carbon emissions, you got to have everything. It’s going to take all hands on deck, so to speak.

Chris Cannata 22:26

And that’s my point of view, at least. Yeah,

Peter Perri 22:28

I agree. So Well, tell me what you do for fun out there in Wichita, Kansas. I mean, you know, I personally have never been out there, but I hear it’s beautiful.

Chris Cannata 22:37

Well, you’re not missing a whole lot if you like, what most people think of as Kansas. That’s it. So south central Kansas is pretty flat, pretty farmland. You know, for fun around here, you have this great hunting, fishing, you know, me myself, born and raised out here. It’s just kind of poem, right? So, you know, hanging out with the kids, you know, work around the house, just kind of your normal day to day stuff, I’d like to, I’d like to say that I’m probably one of the most boring people you’ll meet, and I’m perfectly happy.

Peter Perri 23:12

When you’ve got space around you is certainly a benefit during COVID. Yeah, what was your work experience like? Have? Have you enjoyed working remotely? Do you miss going to the office physically? What is what’s that been like for you.

Chris Cannata 23:28

So the remote situation is working out quite well, I am in the various offices and you’re visiting with customers on the road quite a bit. So it’s nice to be centrally located, kind of being able to reach anywhere in the country or North America pretty straightforwardly, that’s also quite frankly, nice to be responsible for all of North America yet sit in Central Time Zone. So it makes kind of calls quite nice. But in terms of being in the office, you know, I don’t feel that necessarily missing anything, because I am in the office and you know, quite a bit. And then, you know, certainly as we said, the beginning of this call, we don’t care you’re talking face to face, even if you’re just kind of, you know, on screen, but you know, I do think this remote situation will likely expand to industries that can obviously absorb it. And I think that it’s you know, it’s producing can’t obviously says to definitively, you know, happier workforce in the sense that you don’t focus on, like, not what to draw, you know, can avoid commutes unless there’s, you know, significant reasons for being the office state or team meetings and, you know, face to face customer visits, that sort of deal. So, you know, it’s a mixed bag, I’m sure. But I do see that more of these kind of, you know, to home during the office and whatever form that may takes will likely expand in the future.

Peter Perri 24:59

Yeah, agree. It’s, it’s been great, you need a lot more done for sure when you’re not having to spend all that time and you can have more meetings than you could have in the old days when you had to get in front of people every time.

Chris Cannata 25:09

No, you’re absolutely right, that does make the time in the offices more intentional. And there’s a story where we at after COVID, we were back in the office, in my previous role, you know, pretty quickly as he said, you know, space in which doesn’t pretty few and far between and in Kansas at large wasn’t hit nearly as hard as others country. So, you know, within reason, you know, for folks, workers be back in the office. But what we discovered is conference rooms were limited to, you know, one or two people, when traditionally, they held, I don’t know, eight to 16 was you would be on via zoom calls, team meetings, and you would basically be hearing the person in the office next to you. So it’s kind of like, that’s kind of the office just to do what you and I are doing now. So that’s gonna be, you know, dependent upon each company side, you know, their best path forward. But I would say largely, in my experience, we’ll have cbdfx This is an Oregon Mall.

Peter Perri 26:11

That’s great. Have you guys started going back to trade shows as a company?

Chris Cannata 26:16

We have. So I’ve attended a few. I believe that we had some representatives at AACT on beach last week. And I believe some folks are the ACP in San Antonio as we speak.

Peter Perri 26:29

Good stuff and what shows are your favorite? I don’t want to I don’t want to get you guys in trouble. But which one? Do you like the best? do you think’s the best well run show?

Chris Cannata 26:38

Oh, man, that’s a tough one. Yeah, better a better shy away from that. Just sort of the, you know, step on anything. And then I would have to probably give that more thought than then I would want you to have to sit here wait, and wait, no.

Peter Perri 26:56

Gotcha. I could say I love the power Gen show. I used to go to that a lot. Because I thought it was a good broad show. And then they combined distribute Tech with it. And it was a pretty good show to go to. But I know there’s a lot of great shows out there. Which is real cool. Are you involved at all in the finance side of the business? Or do you focus purely on operations?

Chris Cannata 27:19

A bit of both. I mean, there are, there are a lot of people inside of EDF that I can pull on to run the finance side that are much better equipped than me, I try to kind of stay in my lane when it comes to finance but no enough to be kind of somewhat dangerous.

Peter Perri 27:34

Yeah, for sure. I mean, I always look at things from a from the finance side. And that can always be a challenge with getting with getting projects built. But I think EDF has huge balance sheets. So you probably are able to finance a lot of stuff yourselves without outside capital.

Chris Cannata 27:51

Yeah, that is one of the strengths that I see of EDF, you know, as being a large company, a global company, that we you know, we’re not just a desk and a phone development shop, if you will, you know, we are have a long term ownership mentality. And we own or operate our assets, we’re willing to, as you said, you know, balance sheet finance things. And then even you we have done, especially for utility customers being worth more and willing to design, build and sell projects for him. So we bring a lot to the market as opposed to just being a hydrogen provider or a renewable energy provider. And I think that a lot of that is down to you know, their finances but the way we are able to operate given our size.

Peter Perri 28:36

Gotcha. On the on the utility side, you mentioned utilities, which I think is a great point. Which utilities do you see are really jumping in to the green hydrogen market and or sort of forward thinking in terms of their operations.

Chris Cannata 28:53

So in terms of green hydrogen, look at the areas that have you know, hundreds and decarbonization goals. The reason announcement with the city of LA through Los Angeles Department of Water and Power, they are converting a coal plant in Delta Utah to a 30 70% Hydrogen net gas blend with a goal towards making that facility out 2% hydrogen as things improve, so that’s kind of a covering the city of LA and then you Arizona has announced some decarbonization goals that could require green hydrogen to kind of fill in the gap between the two wind solar batteries, you name it. I would say that anywhere where it has the political will and the regulation similar to RPS standards back in the day is where you’re gonna see more adoption of green hydrogen, at least in the short term. You know, as we reach parity, and as kind of infrastructure gets built, you could see a lot more opportunistic plays on the utility side.

Peter Perri 29:58

Now, good stuff. We’re gonna wrap it up here pretty soon, Chris. But before I before I let you go, is there anything that I that I should have asked you that I didn’t ask you that you think the audience really needs to know about green hydrogen? That’s, that’s not so much out there?

Chris Cannata 30:16

Well, considering that there’s a lot out there. Yeah, nothing, nothing comes to mind, I would give the audience I would probably caution, you know, there are a lot of announcements. And there’s a lot of, you know, a, we’re gonna build multi gigawatts, this and that, and, and while I hope that happens, just say we’re kind of in that stage of the market where there’s more hype than reality. So just kind of tread cautiously, but optimistically, I would say.

Peter Perri 30:49

Yeah, I think that’s definitely good advice. We, of course, saw that same thing happened in the beginning of the renewables with wind and solar, where there was, I think there was 14,000, or something developers in the interconnection queue at one point, you know, back up. Wow. And so it went crazy in the beginning, but then, of course, a lot of good stuff did get built. And I think, you know, we’ll probably see a similar path here. But green hydrogen, certainly exciting market. Chris, I really appreciate you having on coming on today having you on. Though the audience is definitely excited about green hydrogen. We get a lot of notes around it, and appreciate you sharing your insights today.

Chris Cannata 31:31

Absolutely. It’s my pleasure. And yeah, if anybody wants to reach out, I’m here to talk.

Peter Perri 31:37

How can I get in touch with you, Chris?

Chris Cannata 31:39

So I can provide my email and phone number.

Peter Perri 31:43

All right, so reach out to us and we’ll get you in touch with Chris if you want to talk green hydrogen. This has been Peter Perry with Energy Superheroes we had on today. Chris Kannada. He’s the director of hydrogen at EDF Renewables, and he’s based out of Wichita, Kansas. Chris, thanks for being on today.