Plug Power Inc. (PLUG) Earnings Call Transcript & Summary

All right. And I believe that we are live. So hi, everyone, and welcome to today's webinar and first episode of our green hydrogen with Plug series, monthly webinar series where we bring in experts from across the hydrogen value chain to discuss industry topics. My name is Merrill, and I will be the host of today's webinar. And today, I am joined by Esben Sorensen, Plug's Senior Director of Global Market Development; and Bridget Van Doreston, Senior Research Analyst, Hydrogen and Emerging Technologies at Wood Mackenzie. Esben is responsible for Plug's development of the green chemicals market for Plug's electrolyzer product and prior to plug, he worked at Topsoe across various roles for 30 years. Bridget is a hydrogen-focused research analyst within Wood Mackenzie's energy transition practice with deep expertise in cost modeling and developing market forecasts for emerging hydrogen technologies. Before I hand the floor over to our speakers, I'd like to just quickly go over a few important features of the platform that we're using. So I will quickly run down. On the left side here, you should see your speakers in this top box, our videos. Underneath that is our Q&A. So we've reserved for all of your questions. So pleased throughout today's webinar we're going through slides and what not drop in your questions, and we will get to as many as we can at the end of the webinar. Of course, our slides are in the middle. You also see all of these boxes as big as you would like them using the icons down at the bottom. And then quickly running down the right side here, our speakers files are at the top. There is a post-event survey, which we would love to know how we did today, if there's topics in the future that you would like to hear, please do fill up that survey. And then last but not least is to share the webinar, if you liked it, and then also take action, we're having another webinar next month that we would love to see all of you there. So with that, I will hand the floor over to Bridget and Esben and we can dive in.

Thanks a lot. We have a lot of things to cover today. So we'll dive right into it. A quick look at the agenda. We will essentially be focusing on 2 areas: green hydrogen and e-fuels forecast and green e-fuels options, then we will have a quick summary and end with a Q&A session. So this slide shows some of the many applications of hydrogen headwind, you can see is really at the core of the green's transition and some of the -- all of these pictures represent different applications of the chemicals that you can produce from hydrogen. We will today be focusing on the slide. Diving a little bit further into it, highlighting the definition of what we call e-fuels whether we react hydrogen will biomass or with nitrogen and CO2 and/or CO2. So if we reacted with biomass, we generate what we call biofuel this is not the topic of today's talk. But if we react the hydrogen with green hydrogen with nitrogen and all CO2, then we get e-fuels. So the focus of this presentation is really on the part of the graph highlighted in blue here. So who should be sitting and listening to this presentation. This is the question we asked ourselves when we developed the slide. And we decided to focus on primarily people that are developing e-fuels projects or people who are working with people in that role. And particularly, what we are addressing here is some of the high-level considerations that you want to do early on when you're developing an e-fuels project. Some of these questions are, of course, how are the green markets going to develop? What do I want to react my hydrogen with CO2 or nitrogen or maybe both? How do the economics look for such a project and then also some sanity checks, thermodynamics project complexity, technology readiness level and that sort of thing. So with this, I'll turn over to Bridget.

Thank you, Esben. Good morning and good afternoon, everybody. My name is Bridget Van Doreston. I'm a senior research analyst with WoodMac, our hydrogen Research Group. And I've been with WoodMac for about 3 years, and I initially transitioned from our consulting group. And then prior to WoodMac, I was working in hydrogen refueling for road transport with both [indiscernible]. And I'll just provide a quick background on Wood Mackenzie for those of you who don't know who we are more repeatable. Research and consulting firm with just under 2,000 researchers and consultants. And we have deep roots in the oil and gas industry, and we're quite known for having some of the most granular and accurate data in industry but over the past 15 years, we've been building out the Power Renewables section of our research. And in the past 4 to 5 years as energy transition has become more of a hot topic, we've been building out that research as well. When we talk about decarbonization and how to move to net zero or in that direction, it's a large conversation. And it's a give and take between all sectors that Wood Mackenzie covers with multiple solutions for decarbonization. And this energy transition is all a part of a large conversation at WoodMac, where we're not restricted to the silos, but we can discuss what is realistic and what is needed for these different energy transition scenarios that we consider. And then through these conversations, we developed scenarios, which result in different global warming degree scenarios that will affect climate change. And so today, we'll be discussing how green hydrogen plays a role in e-fuels and how that helps with the energy transition. So here on the left, I'm demonstrating 2 different scenarios that Wood Mackenzie has that forecast the green hydrogen out to 2050. Our AET or advanced energy transition scenario of 1.5 degrees Celsius global warming degrees represents, obviously, a more aggressive scenario with 30 million tons of green hydrogen by 2030. And then we also have our base case scenario in light blue, which represents 11 million tons of green hydrogen by 2030. The base case that we have is derived by policy and country-level targets, strategies and goals, supporting hydrogen and in its role for decarbonization, base case also represents existing project announcements and project development status, a balance of supply and demand, which generally reflects where the market is heading, if we were to continue business as usual. And this base case more closely aligns with a 2.5 degrees Celsius warming scenario. Then we have our global net zero scenario in this AET 1.5 scenario, which demonstrates a world in which we're able to achieve this 1.5-degrees Celsius global warming degrades. And it's a case that we build out across WoodMac to understand the decarbonization potential of different technologies and the role it will play net zero world. And of course, this case is much higher because it is net zero after all. However, I think the base case makes more sense to talk about today as it is business as usual. So the current status of the hydrogen market today is that there are 70 million tons per annum of hydrogen project announcements for the production of low-carbon hydrogen. 55 million tons of that 70 million tons is for green hydrogen production. But relatively speaking, all of these projects are announced and very few of them are moving through the project development status as quickly as we need to see them. And there's a lot of policy that's driving production, the incentives and hydrogen production targets, for example, the production tax credit is probably the most attractive piece of policy that has been released. The U.S. released this through the inflation Reduction Act, then Canada just 2 weeks ago in a reaction to the production tax credit that was announced out of the U.S., released our investment tax credit, and we're also seeing different strategies in Europe with contracts for different [indiscernible] hydrogen pricing. But while policy is also driving this hydrogen supply, it's also stalling in some ways as there's an uncertainty with regulations surrounding the carbon intensity requirements for the hydrogen that gets produced for example, if you're going to tie your electrolyzer into the grid. What does that mean for the carbon intensity or hydrogen? And there's also a lack of policy in the U.S. forcing decarbonization. We see a carbon tax out of Europe, but we don't have that same kind of policy reflected in the U.S. And so that's kind of 2 different approaches to market carrot versus stick and policy is really behind low carbon hydrogen per view today and its role in decarbonization. And so we're going to move to a poll here because I've represented Wood Mac's view, but we also want to ask the audience how you feel flogs view on hydrogen production in the short term is going to be.

Yes. And maybe we could provide a little bit of guidance here. Being an electrolyzed provider, we, of course, want to make sure that we are able to cater for the market demands. And therefore, we have a keen interest in following these data. We could also say that Plug is actually a large consumer of hydrogen, and we want to have as much as possible of this hydrogen as green hydrogen and our target is actually by 2025 to produce 500 tons per day green hydrogen in the U.S. alone. So -- and consume all of that ourselves, by the way. That's a little bit of guidance.

I think that's been about a minute, you can probably go to the poll results. 12 million tons by 2030. Well, let's see. All right. Well, thanks for participating in the poll. As you can see, Plug is more closely aligned with that 25 million tons per annum, which is more closely aligned with Mackenzie's global net zero scenario. And with that being the case, I think that makes sense, but I was obviously very optimistic about green hydrogen as a decarbonization technology, but I also want to mention that a global net zero of scenario is possible. while it may be difficult as long as we have the right support in place, it is possible. And a global net zero world looks so different than what we live in today and what we imagine today. Just for starters, the green hydrogen capacity that we have announced in terms of electrolyzer capacity would increase over 20 folds which if this becomes true, would be great for shareholders, of course. But in addition to this increased capacity just for hydrogen production, there will be a lot of other things that would change about the hydrogen market, of course, but just about the global market. I'll touch on a few of them, but the list is here and [indiscernible] you want to ponder them later. International trade, for example, would become really vital to a net zero world, especially in regards to hydrogen some of the world's largest energy markets like China and Japan and Europe would fall short of low-cost energy supply, and they would require imports to meet both electrification and hydrogen demand. And then the concerns but I have below there, raw materials downwards, that really applies to all sectors, not just hydrogen. Raw materials supply from a metals and mining perspective and getting permits for those mines can take 10, 15 years to get those mines from consumption like that conception to actual production or do you even get these projects off the ground and the permit that's recurred to that issues with bringing new technologies to market and the costs that are associated with bringing new technologies online and the risk is well also the amount of power production and power generation that would be required for different technologies and how do we best prioritize this renewable electricity generation for net zero world. So while global net zero is possible, it wouldn't be representative of the market that we have today to discuss in detail. So for the rest of the presentation, I'll be focusing on Wood Mackenzie's base case. But now that we understand the opportunities and challenges for green hydrogen in the market today in terms of supply, what does the e-fuel potential look like? So on the top right here, when we look at that 70 million tons of low-carbon hydrogen projects that I spoke about, we can sort it by what the end product from those projects is going to be. And so we can see that the majority of hydrogen planned for projects is going to be consumed as hydrogen as an end product, although ammonia also have a good share of today's projects. But you can see that except methanol, there's just a little bit less traction in the market today. But when we look at our forecast out to 2050 of how hydrogen demand and its derivatives are going to increase over time. we can see that hydrogen is still mostly going to be consumed as hydrogen with over 50% of hydrogen production consumed as hydrogen. However, hydrogen will also be derived into ammonia, methanol and other fields for varying sectors. Among you will play a role in decarbonizing fertilizers and power, maybe some going into shipping, methanol would be used for petrochemicals and maybe also shipping. And then other e-fuels would likely be SAP, which we would use in aviation which we don't see it reaching a ton of traction until about that 2040 when green hydrogen costs come down to the point where staff could be competitive as a 100% fuel. And considering all these sectors that I have here that hydrogen can play a role in decarbonizing there are going to be multiple decarbonization solutions in addition to hydrogen that can help decarbonize these sectors for the most part. There are a few exceptions to that. So for existing sectors that demand fossil fuel generated hydrogen today, like the refining and the fertilizer and the chemical sector, they require the hydrogen molecule to produce their product. And they don't really have another option for decarbonization. They need that hydrogen molecule. For other industries like steel or power hydrogen or its derivatives will be used as a heat source or a fuel source to replace fossil fuel heat sources that are currently used today. But in those scenarios where you require heat hydrogen isn't the only fuel that can be combusted for heat. There's a potential for a larger mix of solutions. In steel, for example, you could use an electric furnace or use hydrogen. Both are an option and both are explored today, both sit at different spots in the technology readiness level and the commercialization, but both our options. I think transportation gets quite interesting as there are many options from e-gasoline to EVs to fuel cell electric vehicles and then shipping an aviation or 2 sectors where WoodMac's e-fuels just particularly methanol and ammonia and sulfur, of course, playing a role apart from the traditional sectors of refining fertilizer and chemicals that we already mentioned. And so what we're looking at here on the left is WoodMac's forecast of demand by sector over the next 10 years. Existing demand sectors have an edge. So those existing demand sectors are the one, refining and methanol. And they have an edge over other sectors today because of the policy support, competitiveness of hydrogen versus other low carbon solutions, technology maturity, et cetera. And if we think about these sectors in terms of physical or infrastructure barriers, to me, the story becomes a lot clearer. Existing sectors that are using fossil-based hydrogen today have no additional capital investment to displace the green hydrogen. Green hydrogen would be a drop-in solution. But when we think about other sectors that aren't using hydrogen today, there is not only the cost of hydrogen itself to decarbonize, but now there would also be an additional cost to upgrade equipment retrofit buy new ships or powertrains, et cetera. And in terms of existing demand, I've already mentioned that it's rather limited, just demand in general and the support for demand is limited as well from a policy perspective. And only in Europe, are there policy and targets that are aiming at decarbonizing ammonia, methanol and refining sectors. And these targets and policy support for the demand sectors are still very low. So there absolutely needs to be a push. Now that we have that hydrogen production policy in place, there needs to be a push to get that hydrogen demand policy in place as well. And I put some of the names here of off-takers that have been -- that have made varying levels of commitment to the sectors that you see here. And these commitments might be as little as a memorandum of understanding and or as important as a contract going out to market, looking for bids on bring ammonia as a Japanese utility had made. But generally speaking, there are just over 20 offtake agreements of these varying levels of commitment that have been announced today compared to over the 1,000 low-carbon hydrogen projects that have been announced. So there needs to be more demand support. And as I mentioned, I think shipping and aviation sectors both have a lot of promise for e-fuels, but they do require a bit more support in the near term in terms of goals for decarbonization. Some of the companies that have listed here, both shipping and aviation, they're pushing towards lower emissions. Shipping companies are including methanol and ammonia ships in their order books, which even if they were to just use conventional ammonia and methanol that's still derived from fossil fuels, it would actually reduce emissions compared to the bottom of the barrel fuel oil that they say but the end goal would be the more methanol. And then the aviation companies here, and there's names that I'm sure that you recognize they've committed in one way or another to using SAP in air travel or freight by the end of the decade. So there is promise of decarbonization in these sectors. And lastly, I want to touch on cost as green hydrogen cost will ultimately drive e-fuels cost. And what I'm presenting here is levelized cost, which is the sum of all of the costs of an asset, which it would incur over a lifetime divided by the production of that facility over its lifetime. And this is the most common way to discuss the cost of hydrogen production. And what I represent here is a graph of scattered dots from many industry sources, whether that be developers, bank, funds, NGOs, consultancies, not MAC data, but I meant to show this as a representation that the market agrees that hydrogen costs are going to decrease over time, most likely half by 2050. The main drivers to these decreases in cost will be increased manufacturing capacity of electrolyzer equipment, which will result in automation, manufacturing improvements, economies of scale that will all contribute to a CapEx reduction and there will inherently be an optimization of these systems, too, as more of these projects come online since there are a few operating today. But most importantly, the cost of electricity, which is the main driver for LCOH these days will come down over time as renewable assets also improve their own efficiency and expand their lifetime. And I'll also display some of the WoodMac data that we have here on what a facility would like -- would look like if it considered our purchase agreements or PPAs with and without the production tax credit, which I view as the GCS piece of policy that hydrogen has seen to date. And as you can see, both low-cost electricity and the production tax credit are required in the near term to make green hydrogen competitive within this parity range, which represents the cost of gray hydrogen today. The dash lines represent the PTC, but you may know that the PTC is only applicable for 10 years after a project has begun construction as long as that construction has begun prior to 2033. But I've extended it to create a visual representation, but I also think that it could be likely that the PTC gets extended as well just as the ITC was extended for renewables in the IRA. Lastly, what is cost of hydrogen without discussing what the price is going to be. However, price is very difficult to discuss, which is why I have it here qualitatively instead of quantitatively. Understanding revenue streams is the most important component to financing hydrogen production projects because without understanding the price at which you're going to sell and the markets you wish to sell into, you want to understand the revenue, you have a higher risk with your project and hydrogen will just have a tough time taking off, which is frankly, the whole idea behind the loan program office, DOE funding hydrogen hubs. But we've talked about a few sectors today. And in some cases, you're displacing a feedstock that already exists, fertilizers, petrochemicals refinery to replacing that green hydrogen. In that case, there's no other option for decarbonization. But in end, you sector with no other option and already thin margins, and a highly commoditized products such as the food that you buy every day with ammonia, you used this fertilizer for your food. How can you encourage the carbonization who is going to pay the green premium? And my opinion is that the displacement cost in these current facilities is the cost of green hydrogen and that it will be difficult to find buyers to pay that green premium. Therefore, there needs to be policy behind the uptake of hydrogen into hard debate sectors. And I think this production tax credit is moving in terms of getting this cost down to parity. For other sectors, like heating or transportation, you're displacing more than one option with hydrogen like natural gas or electricity, you could be displacing with hydrogen. So the green premium for those and new sectors will be different than the price that you pay for any other sector because the parity is different. And when you're using hydrogen as a fuel or as a feedstock to make it another fuel, it gets even more complicated. But if you don't have to modify your end-use infrastructure, if you can create some kind of drop in e-fuel, then there might be a willingness to pay a premium to decarbonize, which will result in some cost savings. And Esben will speak more on the price in just a few slides, but first, we'll speak about e-fuel production. So Esben, over to you. I don't know if it's just me, but I can't hear you. Can you make sure that you're unmuted. Sorry, everyone. I think Esben is having some technical difficulties, but we should be back in a moment. [Technical Difficulty] I'm looking in the questions, and I see somebody ask what is the losses on hydrogen. The losses was meant to represent the losses from global trade as we expect to see hydrogen, participate in this international trade, particularly in the seaborne trade and exported from countries that have the upper hand for production domestically to countries like the EU, Japan or South Korea who are looking to import, there's going to be some kind of boil-off gas and loss through that trade. So that's what the losses portion represented, but it wasn't meant to be losses with respect to power supply. And yes, the slides will be made available to participants.

Bridget, well, Esben is getting reconnected. I think we can start going through some of these questions just quick and see if he can get his audio fits back up. But how do you foresee the price of green hydrogen dropping over the next 5 years or 10 years?

Sure. So as I said, I think the cost of green hydrogen is going to come down as the cost of capital comes down and also as the cost of electricity comes down, so in the near term -- in the next 3, 4 years, there have been just tons of announcements, especially in the past year with -- within the U.S. with the IRA, electrolyzer manufacturers talking about increasing their production capacity. And of these giga work facilities that they've announced actually filling them out, and there's no shortage of orders on the books for electrolyzer vendors as well. So with this build-out of these big walk facilities that are coming online all over the world, capital costs will, of course, come down. In addition to that, power prices were a bit tumultuous this past due because of the energy crisis but of course, PPAs and renewable energy prices with continued incentives and continued rollout is going to come down over the next 10 years in addition to seeing these efficiency gains from renewables themselves and an increased lifetime of the facilities from 25, 30 years to about 40 years. And those will both be the main drivers of green hydrogen cost reduction in addition to any policy and subsidy that's announced, of course.

Can people hear me now?

Yes, I can hear you.

Thank you. I don't know what happened. I didn't do anything, but certainly, I was off. Anyway, one of the key decisions you want to make when you decide on which e-fuel process you want to develop a project for is whether you want to redact your green hydrogen, with nitrogen or CO2 or maybe both. If you opt for the nitrogen option, of course, one of the realistically the only project you will be able to produce is ammonia. But there are some simplifying attachments to that decision. And one is that the nitrogen can easily be made either using an ASU or pressure swing absorption process both processes that are readily available and industrial improvement. There is a concern you need to address about when the ammonia you produce is being used, whether there will be some loss formation and how to address that. But this is something that there's also technology available for handling. If on the other hand, you're up for the option where you have CO2 as co-feed, there's a whole slate of products that you can produce, but you will also be facing a number of challenges. One of the challenges that the source of the CO2 may have a huge impact on project economics, including sales price. And therefore, it will often be the case that you would have to have a certificate for your CO2 source in order to sell your end product good sales price. Another challenge that you will be facing is that if you go for the direct air capture route where you capture CO2 simply from the air, there aren't really any industrial references and that, of course, entails some uncertainty, not least on the economic aspects, how much will the thing cost? This slide is really a slide that I adopted from Wood Mackenzie. Thanks for that, Bridget. We, however, both felt that it fitted better into the section that I'm presenting. So I'm presenting it here. It is really showing in this diagram, the overall material balance of the various processes that you could consider some of the various prices you could consider. In the case of ammonia, you can see this is the process where you need the least amount of hydrogen for production of a given amount of e-fuel. And the reason for that is, one of the reasons is, of course, that all the hydrogen you are feeding into the process is ending up in the final product. So you are just essentially boosting the mass production by adding nitrogen. In the case of methanol since this -- some of the hydrogen you're feeding to the process will be lost for water consumption. But on the other hand, you get a rather high mass contribution from CO -- from CO2 essentially. And this that, overall, the amount of hydrogen you need for a given amount of fuel is more or less the same as ammonia, slightly higher, but not a lot. But if you then go to a process like [indiscernible] process or production of e-diesel, then you will be facing the reality that you will both be losing hydrogen for water production, both in the first step where you produce syngas and the second step where you have the fish trust process itself. And moreover, it's very hard to avoid that there will be certain amount of side products formed as well. And then also, in the first place, creates a loss of hydrogen,but on the other, also creates a more complicated product slate that you have to handle. So moving now to the next poll. We are now focused on the material question, how much is -- how does the material balance look but it's maybe more interesting to look at the energy balance. So if we now take the question, there's a certain amount of hydrogen energy contained in the hydrogen that you're feeding into the process. In an ideal world, what would be the possible outcome of energy in the form of product. So for example, in the case of ammonia, what is the ratio between the heating value of the ammonia you produce relative to the heating value of the feed -- hydrogen feed to the process. And I should, for the sake of precision, I should say that when I talk heating value, I mean the average between lower heating value and higher heating value, it actually has an impact on the results. And I think it will be very interesting to see what the audience thinks about this question. There are 2 aspects to this. One is what is the chemical or what is the process where you have the best preservation? Is it ammonia, methanol gasoline sustainable aviation fuel or diesel and the second component of the question is, in this process, that is the highest heat recovery? How much is the heat recovery that you can attain? Maybe we can move on to the next slide. We can see that it's actually almost equally distributed between the 3 options. But here comes the result. You can see that the process where we had the highest theoretical recovery is ammonia, and that comes in at 88%. So that means that the heating value of ammonia divided by the heating value of hydrogen is 88%. Of course, there will be a certain estimate there will be a certain yield in such a process. No process has 100% yield. But here, I put a yield of 99%, which is probably even -- it's probably even better than 99% in most cases. And this means that you get a realistic recovery of 87%. I should mention that what I'm talking about here is the heat recovery in the product. It's not necessarily equal to the energy efficient, I'll explain that in a minute. But in conclusion, what you can see from this table is that ammonia and methanol have high, what I call natural efficiencies, higher natural efficiencies than the alternative processes we're considering in this presentation. A few comments to address to this, efficiencies should always be seen in the light of which alternatives that exist. So you can look at 71% for production of sustainable aviation fuel and say, hey, that's not a lot. But if it's that's the best available on the market, it may still be quite attractive to the market. The second point I want to mention is that the termination of actual energy efficiency requires detailed study of a specific project. So even though you theoretically can preserve 88% of the heat in the hydrogen it may be required that you add some extra energy in order to make the reaction proceed. And this is where you need to do a detailed engineering study to find out what exactly the energy efficiency is. But what you can say for sure is probably going to be slightly lower than these values shown here. I attended, I said webinar yesterday where [indiscernible] had done an analysis of an ammonia process, and they arrived at 85%. So there's a rather good consistency of these data with that data. This slide is the one I have look most forward to present because it's also been the slide that has triggered the most discussions among the group of people developing this set of slides. Of course, when you develop a e-fuels project, you need to address the issue of what is your project revenue, product revenue. And please note that I didn't say sales price because we think in the case of green processes, there may be revenue either from sale, but it could also be from some kind of subsidiaries. So we call all of that green premium. Then a few words on how we establish these prices. Essentially, the green prices were looked at were found by looking at the prices we have seen globally for the last 1 to 2 years and they have been fluctuating within the ranges shown here for those 4 components. For ammonia, it was a little bit more complicated. I will revert to that in a second. Then we had to make the assessment of what the green premium you could attain would be. And actually, that's quite simple for diesel and jet fuel because a market already exists because these products can order green diesel and green jet fuel can be produced by hydrogenation of vegetable oil. So there is already an existing market, and you could simply go in and look up what the prices are. And what you found here is that there are very, very high green premiums for these prices. In fact, for jet fuel, we see green premiums exceeding 200%. And diesel is in the order of 150%. We then use those as a basis for estimating the green premium that you would be able to attain for gasoline. We think it's fair to say that gasoline and diesel having more or less the same price you would also probably have more or less the same green premium. For ammonia and methanol, it's different kind of chemicals. But what we looked at here was partly possible CO2 penalty is being incurred Tier 2 taxes, which are already popping up in a lot of places. And also the added value, you have added market value you have of selling a green product. And also with a look into what we see in the traditional fuel market, we decided to set the green premium at 40% to 80% compared to average green great prices. I think that seems like a rather modest assumption when you keep in mind the 200% we're seeing for jet fuel. Then I promised to elaborate a little bit on how we calculate the green ammonia price. And it was not reasonable to look at the green ammonia price over the last 1 to 2 years because that has essentially been fluctuating between, I think, USD 300 and USD 1,500. So that's -- we couldn't really use that for anything. So what we did then was we located some data that are publicly available for both the high-price regions such as Illinois and bulk production area as reported by Texas A&M and then we did a linear regression of these data and use the values that we get from 2023 to define the low and high range for ammonia. And this then resulted in the price ranges shown here. Then what we did was we superimpose the cost for hydrogen production and we use the Plug Power's model to estimate those. We did 2 estimates, 1 with subsidies and 1 without subsidies. The one with subsidies, and you can see how we are accounting for that in the common space here. The one with subsidies is the dotted line and the one without is blue. And we actually see a picture which is very similar to what Bridget presented for green hydrogen. So in conclusion, green premium or subsidies are presently required for most green projects to attain attractive economics, either you need to be able to produce the hydrogen at some kind of discounted manner or if you produce it at, let's say, unsubsidized cost, then you need some kind of green premium for your products. Also looking at the curve, we can see that with current market prices, jet fuel and ammonia seems to be the most attractive places to develop projects and this is also indeed what we're seeing from the market that those are the majority of e-fuel projects that we hear about are really related to sustainable aviation fuel and ammonia processes. There's 1 disclaimer, as you remember, and that is that ammonia and methanol have actually, for many years, exchange that being the most expensive chemical so for the last year and the way we calculated methanol came out as a lower price commodity than ammonia. But if we had done this 5 years ago, it might have been reversed. So it could easily be that we will see more methanol projects pop up in the future if the methanol price increases. The final issue we want to address here is the complexity and technology readiness level of the various processes. Starting with ammonia, it is really from a project development point of view, by far, the simplest process. And one of the reasons is that you don't have to address the issue related to byproduct formation. The ammonia project process Lurghi and Casale is, in principle, a rather complicated process, but as a project developer, you just get somebody who knows how to do that, to do that for you. And then the project itself is rather simple where I just have a lot and ammonia refrigeration. Also, the process for production of nitrogen and hydrogen are very well known and well established, well referenced. If you move to compared to methanol you can see the methanol loop is actually simpler than the methanol loop and probably also less costly. But it does complex -- does make the projects more complex that you are producing in our byproducts. And there's also potentially an added complexity depending on your way of producing CO2. Both of these processes are fully proven. If we then move on to the process for production of e-gasoline, you can see that's essentially a methanol process with just an extra synthesis that where you convert your methanol into gasoline. But then again, you need some kind of separation process to generate gasoline with the right product characteristics. And in that situation, you also end up with some off-spec hydrocarbons, which you need to figure out what to do with LPG. Maybe you can sell it as a side product. Another option is to recycle it and through some kind of reform and produce additional product that way. And the most complicated of the process we are considering here is really the processes based on the Fischer-Tropsch. Sustainable aviation fuel or e-diesel processes, where you have essentially 3 consecutive synthesis step, first reverse water gas shift step where you produce syngas. Secondly, the Fischer-Tropsch step and thirdly, hydrotreating of the generated alkanes from the Fischer-Tropsch process and a separation step where you divide the product into your desired product slate. Naphtha is really a byproduct, which is hard to avoid. Kerosene or diesel can be made either one or the other or a mix depending on what you need but you will typically need to address the issue of what you do with the naphtha you co-produce. Again, you have the option to recycle it. So summarizing, starting from the left, ammonia has a very high thermal efficiency. It's a fully proven simple process. We get 0 byproducts during production, which, of course, gives us the possibility to get a very high yield, and we also get CO2 emission upon product consumption because there's no power in the product. The downside to this price is really that it is rather unclear what the green premium is. If we compare them with methanol, it's almost as simple and almost as efficient and there's 1 added benefit to the methanol process, it's very likely future marine fuel and people have already started selling on methanol. So it's probably going to succeed as an green fuel earlier than ammonia that some people are also talking about. But one thing you should realize if you're producing methanol is that you will be facing competition production of green methanol from biogas processes. And again, we see a rather unclear premium. And as common for all of these 4 processes, CO2 certificate is likely required for you to attain a good sales price for your end product. Gasoline, as mentioned, is more complicated than methanol was still fully proven. It has the advantage that it plays into an existing infrastructure. You're simply producing a drop-in fuel, so you can get rid of your product many, many different places around the globe. Again, the green premium is rather unclear, but I think it's a very, very safe bet to say that you can probably get more or less the same green premium for gasoline as you can for diesel. And then finally, we have diesel and SAF, the Fischer-Tropsch process. They again have the advantage that they play into existing infrastructure. And particularly for sustainable aviation fuel, we see a very, very high green treatment. The question is then probably how long will such a green premium last if it lasts if not forever. And also for the field-based process, you have the issue that you're co-producing naptha that could be sold as a coproduct, but it could also be that you would that would complicate your project a little bit, but then you could also recycle it. And again, in diesel and sulfur, you have to be facing competition from a processes. So that was all we had planned. We're moving on now to Q&A.

All right. Looking at the time, we will jump right into the Q&A. So question number 1 is, do you believe that regulatory push like IRA providing also subsidies for blue hydrogen could result in a slowdown in green H2 focus, knowing that blue is much cheaper than green right now, the economies of scale expected from the green ramp-up might be slowed down, resulting in slower price drop?

Should you want to take that one?

If you like.

Yes. Of course, there is always competition from blue processes. But I think the both are needed to achieve the net zero goals. So it's -- there's also some kind of synergy between the 2. Do you have anything to add, Bridget?

Yes. Yes, I do. From a project perspective, green hydrogen projects are just dominating the pipeline. Blue hydrogen, you're totally right, is cheaper today to produce. However, I'll say that when we're talking about blue, of course, CCS is involved and the CCS portion that as the storage is -- can be kind of tricky. The transportation and storage of the carbon that you capture, you need to be either co-located next to a storage basin that was able to take that carbon and sequestrate or you would need to participate in some kind of transportation and storage hub. And CCS is very similar to hydrogen is still recent in its infancy. So while it might be more economical, it does face its own challenges and green is certainly the popular favor in the short term and in the long term.

Awesome. And Bridget, next question is for you as well. What are most efficient H2 transportation means by 2030, pipelines, trucks, large sea vessels?

That's -- it's a great question. It's a tricky one, and it's very much dependent on what you're trying to do with your product. If you're trying to move hydrogen or you're trying to move a derivative, the answer would be different. If you're trying to move in like the Continental U.S., let's say, compressed hydrogen pipeline definitely makes a lot of sense, trucking is what we're seeing today, and we're seeing that even on top of green hydrogen that can add $1 to $2 just a truck hydrogen from and production is quite used. When we're talking about [indiscernible] ammonia probably will win out just because of the existing infrastructure for among its more commonly traded. But it totally depends on your geography where you're coming from where you're going to and what end product you want the hydrogen ads. For example, if you're transporting ammonia, but the end users hydrogen for transportation, there's going to be a lot of losses associated with recracking your ammonia back into hydrogen and then doing that purification process that fuel cells mean. So it depends on geography and it depends on end use.

Great. Thank you. Esben on Slide 23. Are these processes available/proven at green hydrogen scale versus SMR?

Slide 23, let me see. I presume yes, we have Slide 23. Yes, they are definitely it's methanol processes and ammonia price. They are definitely fully proven. It's essentially the same process as we have always had. The only thing is for the methanol process, the syngas characteristic feedstock may be a little bit different, which would maybe trigger some use of different catalysts, but the process itself is fully proven and the catalyst that you would be using let's say, adaptations of already existing catalysts. So I would say this is fully proven, yes, also in whatever scale you could imagine.

Thank you, Esben. Bridget, don't you expect that at least in North America, blue hydrogen ammonia/methanol will be the preferred new capacity of choice compared to green until the 2030s? And that includes converting most all grades of blue.

Sure. So in North America, I guess I'll touch on the U.S. specifically, the U.S. and Canada both have a natural advantage. Just to having natural gas resources in the U.S., in particular, too, through the IRA, there was not only the production tax credit, but there was also the increase in the 45Q, which makes Blue hydrogen look attractive as well. In the short term, we're definitely seeing project development for blue hydrogen projects move just as swiftly, if not more swiftly than green hydrogen projects. However, like I said, there's also this consideration with the sequestration portion of carbon capture. It depends on where the project is that all of the projects or all of the facilities that are out there today, producing green hydrogen those are each going to have to be evaluated on a specific use case to see the assets, if it's worthwhile to implement the carbon capture and storage, capture on the fluid gas for sequestration, participation in some hub, see if those economics are worthwhile considering where that green asset is at today and how much life is left in that facility. For newbuilds for blue hydrogen facilities as well, we're seeing projects, new build projects like OCI's blue ammonia facility in Texas, they're both the supplier and the offtaker. But that project has been moving pretty swiftly and is looking good. However, like I said, there are some issues with CCS, just as there are some issues with hydrogen. I think green and blue in the short term for the U.S., I kind of see it as a 50-50 split but globally speaking, any country with natural gas resources like the U.S., Canada, Middle East will dominate blue hydrogen, but they won't necessarily have hydrogen the dominant hydrogen carrier.

May I just add a little bit to that question also. I think legislation is going to play a huge role here in what we see. And there was also a little bit a topic of the previous question about the same matter. So there have been data published that the actual impact, the greenhouse impact of blue processes, it's 95% of what we have of great processes and that -- I don't believe in those results, but it is true, however, that blue processes have a general higher natural gas consumption that green processes. And this means that you -- even though you can reduce your CO2 emissions from the process itself by all the way to up to 95% and there will still be a contribution from fugitive emissions during natural gas construction. And the fact of the matter that when you increase the natural gas consumption, you actually get a large penalty there, which sort of eats up a lot of the gains you have from the blue process. And I think it will be more to come on this matter. But for sure, we can say that new processes and reprices are not equal when it comes to greenhouse gas impact.

Great. Thank you. Esben, the next question is for you. Do you see ammonia's toxicity being a barrier to its widespread adoption?

Of course, it's a concern that needs to be addressed and there may be local people who are, let's say, needs to be comfortable with that in the area where we decide to build an ammonia plant. I would, however, say that this is something that we have handled for many, many years. And I think it's just a matter of having safety in place in the right way. And then this has been proven for many years that this can easily be done.

Thanks, Esben. Bridget, next one is for you, is if SAP is one of the most economically viable e-fuels in the near term, why is demand forecasted to not take off until after 2040?

So I guess the slide that demonstrated the price was -- Esben slide, on the slide that demonstrated the demand was my slide. So we might have a conflict of opinion there. I'll say that the demand that I forecasted for SAP is based on the market announcements that we're seeing today, where most hydrogen production projects are looking to produce hydrogen as its end product or ammonia has its end product, and we just see very little project development for SAP as its end product that's probably -- that is the reason why I don't expect to see SAP come online until 2040 in addition to the fact that green hydrogen costs come 2040 are going to be low enough where penetration into some of these more niche markets makes more sense in my opinion, but I'll also -- Esben respond to that question as this pricing forecasts raise.

Yes, I'm here. I don't have anything to add. Okay. Do you have any more questions?

Yes. Last one, Bridget, maybe another one for you, but if we use CO2 as feedstock, will it impact our ability to qualify for PTC?

That's a great question. My response would be if you're talking about green hydrogen generation, that's when the production tax credit is applicable then if you're using CO2 as a feedstock to combine with your green hydrogen to make an e-fuel, that would be a separate process that would be divorced from the award of the PTC for your project.

All right. And I will close on a final question, address to both of you. Is it better to focus on biofuel or e-fuels. Esben, if you want to go first?

Yes, I would like to go first, and that's actually 1 more question in the chat I would like to reply to it if possible. But anyway, I think biofuels is with its hydrogenation of vegetable oil, it is a much simpler process than production of e-fuels from Fischer-Tropsch process. So I think it's going to be a matter of whether you can attain feedstock or not. If you have readily available vegetable oil, then it is a very attractive process. But many places, this feedstock is not readily available, and then the e-fuels process definitely comes into play.

My response here is that it's -- I hate the question is if this or that because ultimately, it's going to be both. Biofuels already is dominating the market today where e-fuels could also be participating and biofuels isn't projected to really take off because of this food versus field talent. There's just a limited amount of feedstock, whether it's waste feedstock or actual agricultural feedstock but fuels and biofuels, people both play a role as the ultimate product that they produce, it won't make a difference to the end user. But from a production standpoint, I think e-fuels has more space to grow than biofuels does as it's not limited because of agricultural waste feedstock.

And then the question in the chat. Was whether it's possible to use hydrogen as fuel for airplanes? And I can confirm, yes, it is possible. Block power actually just recently demonstrated that, and I encourage everybody who is interested in that to go and visit our web page where we will -- where there will be more information about this demonstration.

Great. Well, thank you both very much to our presenters. I know there's a few questions in the chat about the slides being available. This recording and slides will be available post webinar, and you all will receive that, and it will be through the same link that you join today's webinar. So with that, a final thank you to our presenters and all of you that attended today, and we hope to see you on our future webinars.

Have a great day.