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Saturday, July 12, 2025

Low existing demand for low carbon hydrogen—An opportunity for T&T

by

474 days ago
20240323

CEO of the En­er­gy Cham­ber of T&T, Thack­wray “Dax” Dri­ver, ad­dress­es the need for T&T to move quick­ly re­gard­ing the low ex­ist­ing de­mand for low car­bon hy­dro­gen.

T&T’s Min­is­ter of En­er­gy, Stu­art Young, has been at CER­AWeek, prob­a­bly the most pres­ti­gious glob­al an­nu­al gath­er­ing of en­er­gy in­dus­try lead­ers.

One of the main talk­ing points at the event this year, has been the is­sue of low ex­ist­ing de­mand for low car­bon hy­dro­gen in ma­jor mar­kets.

This sit­u­a­tion rep­re­sents a ma­jor op­por­tu­ni­ty for T&T: I know at first sight this might seem coun­ter­in­tu­itive but let me ex­plain.

While the im­por­tance of low car­bon hy­dro­gen in the en­er­gy tran­si­tion is uni­ver­sal­ly ac­knowl­edged, the in­dus­try is fac­ing a “chick­en and egg” prob­lem; there is not much ex­ist­ing de­mand for low car­bon hy­dro­gen in the ma­jor in­dus­tries that need hy­dro­gen as a feed­stock, so the po­ten­tial up­stream pro­duc­ers of low car­bon hy­dro­gen do not see much of an in­cen­tive to in­vest in its pro­duc­tion, but with­out the guar­an­teed sup­ply of low car­bon hy­dro­gen the po­ten­tial buy­ers are not in­vest­ing in up­grad­ing fa­cil­i­ties to bring in new low car­bon hy­dro­gen in ex­change for the ex­ist­ing “grey hy­dro­gen” from nat­ur­al gas (where the hy­dro­gen is split from the car­bon atoms in methane).

With­out the in­vest­ments go­ing in to scale up low car­bon hy­dro­gen pro­duc­tion the an­tic­i­pat­ed fall in costs, as hap­pened when wind, so­lar and oth­er re­new­ables ramped up, is not get­ting the op­por­tu­ni­ty to take place.

This means that low car­bon hy­dro­gen costs will re­main high and un­less there is a clear mar­ket ad­van­tage over com­modi­ties pro­duced with tra­di­tion­al “grey car­bon” it makes lit­tle sense for in­dus­tries us­ing hy­dro­gen as feed­stock to make the shift.

So, how does that cre­ate an op­por­tu­ni­ty for T&T?

Well, there are three im­por­tant fac­tors that put T&T in a unique po­si­tion, and which cre­ate an op­por­tu­ni­ty for us to take ad­van­tage of the cur­rent un­cer­tain­ty:

1) Lack of avail­abil­i­ty of tra­di­tion­al “grey hy­dro­gen.”

In stark con­trast to most places try­ing to de­vel­op low car­bon hy­dro­gen, petro­chem­i­cal pro­duc­ers in T&T are fac­ing a sig­nif­i­cant short­fall in the avail­abil­i­ty of hy­dro­gen to­day.

In the Unit­ed States (the main fo­cus for low car­bon hy­dro­gen de­vel­op­ment) petro­chem­i­cal fa­cil­i­ties can ac­cess as much nat­ur­al gas as they pos­si­bly need as feed­stock to pro­duce tra­di­tion­al “grey hy­dro­gen.”

And the nat­ur­al gas prices are low: prices are down be­low US$1.70 per mmb­tu at the Hen­ry Hub in Louisiana at the time of writ­ing this ar­ti­cle.

While gas sales con­tract prices in Trinidad are not reg­u­lar­ly pub­licly re­leased, pub­lished da­ta from var­i­ous in­dus­try re­ports and state­ments from min­is­ters would sug­gest that the gas pur­chase price is high­er that this for any petro­chem­i­cal plant in Point Lisas to­day.

And per­haps even more sig­nif­i­cant­ly plants are sim­ply not able to ac­cess all of the nat­ur­al gas they re­quire to pro­duce “grey hy­dro­gen.” So, un­like in oth­er mar­kets, in T&T there is an un­met de­mand for hy­dro­gen of any type and plants are there­fore very in­ter­est­ed in ac­cess­ing any hy­dro­gen that might be avail­able.

It is not a ques­tion of sub­sti­tut­ing tra­di­tion­al hy­dro­gen with low car­bon hy­dro­gen, but rather adding new hy­dro­gen.

2) Past in­ef­fi­cien­cy means there is po­ten­tial low car­bon elec­tric­i­ty avail­able.

Un­like most oth­er coun­tries, T&T has had more elec­tric­i­ty gen­er­a­tion ca­pac­i­ty that it needs.

This un­usu­al sit­u­a­tion came about be­cause of the de­ci­sion in 2010 to can­cel the con­struc­tion of the alu­mini­um smelter, though the mod­ern com­bined cy­cle plant to sup­ply the smelter, the TGU plant in La Brea, was still con­struct­ed.

This pow­er plant sup­plies the ma­jor­i­ty of Trinidad’s base load low­er, with the oth­er less ef­fi­cient sin­gle cy­cle units be­ing brought on­line as need­ed, and es­pe­cial­ly dur­ing evening pe­ri­ods when de­mand for elec­tric­i­ty ris­es.

Putting a com­bined cy­cle gen­er­a­tion unit on ex­ist­ing sin­gle cy­cle units would count as a low car­bon source of en­er­gy once it is linked to a new hy­dro­gen elec­trol­yser (pro­duc­ing hy­dro­gen from split­ting oxy­gen in wa­ter mol­e­cules rather than car­bon in methane mol­e­cules).

The avail­abil­i­ty of sin­gle cy­cle gen­er­a­tion units in Trinidad there­fore cre­ates a great op­por­tu­ni­ty to pro­duce low car­bon hy­dro­gen.

And the large-scale so­lar project un­der con­struc­tion can al­so pro­vide new green elec­trons dur­ing the day (com­pli­ment­ing the new com­bined cy­cle source that would typ­i­cal­ly kick-in dur­ing the evening).

So, iron­i­cal­ly our past low lev­els of en­er­gy ef­fi­cien­cy can be­come a ben­e­fit to im­prove the eco­nom­ics of new low car­bon hy­dro­gen.

3) Our com­modi­ties are al­most all ex­port­ed.

One of the main dri­ving forces be­hind low car­bon hy­dro­gen de­mand is the new car­bon bor­der ad­just­ment mech­a­nisms (CBAMS) that have been put in place in the Eu­ro­pean Union and like­ly to be adopt­ed in oth­er ma­jor mar­kets in the next few years.

These mech­a­nisms tax spe­cif­ic com­modi­ties at the point of im­port, based on their car­bon in­ten­si­ty.

The prin­ci­ple be­hind these im­port tax­es is to dis­cour­age com­pa­nies from “off­shoring” pro­duc­tion to mar­kets that don’t al­ready tax car­bon. One of the com­modi­ties set to be taxed un­der the EU CBAM is am­mo­nia.

Most am­mo­nia pro­duced in the world is not ex­port­ed, but rather sold on to neigh­bour­ing fa­cil­i­ties for fur­ther pro­cess­ing, es­pe­cial­ly for fer­tilis­er pro­duc­tion.

So, in the USA most am­mo­nia is sold do­mes­ti­cal­ly, con­vert­ed in­to fer­tilis­ers and sold to farm­ers in the USA.

Trinidad is one of the few places where our am­mo­nia is main­ly ex­port­ed by sea to in­ter­na­tion­al mar­kets.

This means that Trinidad am­mo­nia pro­duc­tion is more like­ly to be im­pact­ed by CBAMS and hence makes low­er car­bon hy­dro­gen an at­trac­tive op­tion to help re­duce po­ten­tial im­port tax­es.

These three fac­tors mean that Trinidad presents a unique op­por­tu­ni­ty for low car­bon hy­dro­gen de­vel­op­ment, while the rest of the world is grap­pling with find­ing ways to de­vel­op the mar­ket.

In most coun­tries low car­bon hy­dro­gen needs sig­nif­i­cant gov­ern­ment sub­si­dies to make the de­vel­op­ment pos­si­ble.

As the pre­sen­ta­tions at CER­AWeek made clear, gov­ern­ments in some of those mar­kets, es­pe­cial­ly in the Unit­ed States, are cur­rent­ly work­ing on sub­sidy pack­ages, but they are not there yet.

There are things that need to be put in place to en­sure that we can take ad­van­tage of this op­por­tu­ni­ty but the da­ta I have seen does not sug­gest we need spe­cif­ic heavy Gov­ern­ment sub­si­dies.

Es­sen­tial­ly the sub­sidy has been “pre-paid” through our past in­vest­ments in sin­gle cy­cle gas fired pow­er gen­er­a­tion.

One thing that is re­quired is the quick adop­tion of a na­tion­al reg­u­la­to­ry frame­work for mon­i­tor­ing, re­port­ing and ver­i­fi­ca­tion (MRV).

This will be vi­tal for com­pa­nies to be able to take cred­it for any car­bon re­duc­tion ini­tia­tives, in the con­text of CBAMS and car­bon mar­kets. This is­sue will be a ma­jor top­ic of dis­cus­sion at the up­com­ing Caribbean Sus­tain­able En­er­gy Con­fer­ence on June 10 to 12 2024.

The unique po­si­tion that Trinidad holds pro­vides a sig­nif­i­cant op­por­tu­ni­ty to move fast and en­ter the low car­bon hy­dro­gen mar­ket quick­ly.

Ex­ist­ing am­mo­nia plants in Point Lisas do not need sig­nif­i­cant cap­i­tal in­vest­ment to be able to blend in vol­umes of hy­dro­gen from new sources (up to some­where in the re­gion of 10 to 20 per cent of cur­rent hy­dro­gen).

If we can rapid­ly jump on the unique op­por­tu­ni­ty that ex­ists, we could make a small per­cent of low hy­dro­gen avail­able and take a lead­ing glob­al role.

It makes sense for T&T to move quick­ly.


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