Interview

Hydrogen Century

John Ostergren, CSO at Smiths Group, forecasts significant growth in hydrogen and carbon capture technologies, further contributing to the global path towards net zero.

Significant progress was made in the world of hydrogen last year, as energy suppliers and users sought cleaner, more sustainable alternatives, with the technology consistently emerging as a promising solution to decarbonise.

According to the International Renewable Energy Agency, global pure hydrogen production currently stands roughly at 75 megatonnes (MtH2) per year – similar to Germany’s annual energy consumption.

Meanwhile, momentum also gathered around carbon capture, utilisation and storage (CCUS). Data and analytics provider Wood Mackenzie forecasted that 2024 would be a strong year for CCUS, with key project milestones, regulatory developments in major countries and new technology deployment.

John Ostergren, Chief Sustainability Officer at the Smiths Group, a FTSE100 engineering company operating across the energy, industry, security and aerospace sectors, told ESG Investor that these trends would only keep growing.

“What I see for hydrogen and carbon capture is continued growth at pace, and a real shift in focus from policy and finance toward projects and execution,” he said. “We can see that already in the trenches, so to speak, of our commercial transactions. Our pipeline has doubled in less than a year, which is quite indicative, and I expect that trend to continue.”

Expanded investment in the sectors will deliver on commitments made at both corporate and national levels, Ostergren explained, ultimately contributing to the global journey to net zero.

“There will and must be significant growth over the next 10 to 15 years on hydrogen and carbon capture, and we will see that pull through in the form of real projects,” he added.

Last year, Smiths Group reduced its operational greenhouse gas (GHG) emissions by 12%, increasing its total energy efficiency by 8%. The group’s main contributions towards the energy transition have been made through its John Crane unit, which develops mechanical seals, seal support systems and seal face technologies.

“John Crane has a particularly significant role to play in the climate transition – both from an emissions control standpoint, and for the enablement of new energy solutions such as hydrogen,” said Ostergren. “There’s a heavy focus on projects in North America at the moment, largely related to the US Inflation Reduction Act.”

A recent example is the Canada Net-zero Hydrogen Energy Complex – a C$475 million project in which John Crane is involved, and which will fund a C$1.6 billion landmark net zero hydrogen complex in Alberta.

“This is Canada’s largest project in the space,” Ostergren explained. “We will be supplying the mechanical seals and filtration systems for it, as we already do for a significant and fast-growing portfolio of hydrogen and carbon capture commercial opportunities globally.”

Rise in demand

John Crane’s net zero and decarbonisation strategy is organised across four different levers:  energy efficiency; green electrification; low-carbon fuels; and carbon removal.

“Each of those plays through our business portfolio, where we are what we call a ‘green enabler’,” said Ostergren. “With limited exceptions, we are not the company that you would hear about at the at the top line of a project, but we are critical to the enablement of its success.”

On hydrogen and CCUS, the company’s project pipeline has more than doubled in the past 12 months, the CSO reiterated – attributing the growth to increased interest from investors in the sector.

“We see growth across geographies globally, and we’re excited about the future,” he said. “We see those investments both as needed and coming. It gets a bit more complicated when you get down to the individual project-level finance, but the macro view is that it’s a global phenomenon.”

Part of the reason for the rising demand for hydrogen is the range of applications as an energy source for sectors and processes that are hard to electrify.

Due to come to life in 2026, the NEOM Green Hydrogen Company (NGHC) is tabled to become the world’s largest green hydrogen-based ammonia production facility, running on renewable energy. The mega-plant will produce up to 600 tonnes per day of carbon-free hydrogen in the form of green ammonia as a cost-effective solution for transportation and industrial sectors globally.

This week, the UK and Ireland branches of the Budweiser Brewing Group also secured a planning permission to develop a large-scale renewable hydrogen production facility alongside its brewery in Lancashire.

“Hydrogen exists today in the global economy, but the changes in scope and scale of its production will occur over the next 10 years or so to build out the paths toward net zero delivery,” said Ostergren. “As we scale hydrogen production from the traditional applications that we know to the new energy future, the value will need to come from its performance and reliability. The systems should continue to perform over extended time periods.”

Moving with the times

As hydrogen and CCUS technologies continue to develop, Smiths Group aims to keep its investor base engaged and informed of their role in its business strategy.

“Making sure that existing and future investors understand the value we bring as a green enabler is as important to us as our strategy,” said Ostergren. “We do have a focus on making sure that we communicate as well as possible the value of what we do in the space, which we our investors are interested in. This is an important metric of our success and does allow us to do more.”

Smiths Group recently organised a capital markets day at its John Crane research and development (R&D) facility in Slough, which was joined by 40 delegates from the investment community – including investors and sell-side analysts, who came to learn more about the unit’s work on the energy transition.

Aside from ongoing shareholder support, the business has received a £1 million grant from the UK government to support its R&D activity – all of which is critical for investment planning and project delivery, Ostergren explained.

“One of our largest investors recently requested meetings with our Flex-Tek and John Crane teams to learn about their role in enabling the energy transition, including work to reduce carbon emissions in the steel production process and improve energy efficiency in the US housing market,” he said.

Despite their rise in popularity, hydrogen and CCUS technologies have faced their share of controversies. Last year, the Corporate Europe Observatory drew attention to the “dirty truth” about the EU’s hydrogen push, arguing that it came with serious and widely known challenges and risks – including the fact its large-scale production requires vast amounts of land, water and renewable energy.

“The applications of hydrogen and carbon capture are proven – it’s something that has been done for decades and years,” Ostergren maintained. “It’s a question of how do we do it at scale, and with the necessary efficiencies to cross the tipping points for the broader economic deployment needed for sustainable net zero delivery.”

Meanwhile, carbon capture technology has been described by some as a “PR fig leaf designed to help big oil delay the phase-out of fossil fuels”, known for being used to drive more oil and gas extraction – a process known as enhanced oil recovery, whereby liquified carbon dioxide pushes oil and gas out of rock formations and reservoirs.

“It is true that enhanced oil recovery was the original use case for carbon capture, but this has allowed the industry to develop the proven capability to do it,” said Ostergren. “What’s changed is the focus on the sequestration as the delivered value. Everyone’s aligned on the fact that this should be the main goal of that application in the longer term.”

Decades of experience in the field have also shown that CCUS was both feasible and practical, the CSO highlighted.

“There is, and will continue to be, a significant focus on getting the cost down on the ability to sequester CO2 for that purpose,” he added. “Historically, it was related to energy production, and there was value to the product coming out of the ground. In the new energy world, the economics have to work for carbon sequestration. This does put pressure on all of us involved with that activity to make sure we do it as efficiently as possible.”

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