Is Mankind Ready for the $20 Trillion Hydrogen Challenge? Find Out in Lex’s Latest Newsletter!

Dear reader,

It’s all very frustrating. The sun converts 600 million tons of naturally occurring hydrogen into energy every second. But here on earth you have to tinker with an electrolysis plant to produce modest amounts of green hydrogen to burn in your experimental home boiler*.

A Lex in depth Great read analyzed this week’s challenges. We believe hydrogen will play an important ancillary role in the carbon transition for applications such as ironworking and electricity storage.

Camilla Palladino of Lex calculated that a zero-emissions world could need 500 million tons of hydrogen per year. This would require an investment of $20 trillion by 2050. So far, we’ve invested 0.15% of that amount.

To comment on our coverage, which this week has focused on energy, email me at Lexfeedback@ft.com.

Reader Peter Nicholas already has underlined that $20 trillion looks less daunting when hedged at a rate of less than $1 trillion a year. This is less than fossil fuel subsidies in 2022 as calculated by the International Energy Agency.

Eat a liability in small chunks and it’s amazing how quickly you can whittle it down to size. One method is to invest in electrolysers. Nucera it does them and is reportedly preparing for an initial public offering. The company, which Lex is worth just under 3 billion eurosis a joint venture between Germany Thyssenkrupp AND De Nora of Italy.

Hydrogen only became an interesting substance outside the energy industry a couple of years ago. Lithium has been at the knee of the chemical bee for a bit longer as an ingredient in electric car batteries. Part of its halo is now illuminating the soda ash.

In all honesty, many FT business writers, myself included, didn’t know what soda ash was until this week. That changed with the news that Turkey US Soda could bring a much-needed £7bn IPO to the depressed London market.

We scribes now stand at the water cooler nonchalantly remarking, “So Vanessa, did you know — as I did — that soda is actually soda ash and is the tenth most important inorganic compound in the world?”

Sodium carbonate is used for purposes including the processing of lithium for electric vehicles. US Soda boasts low cost production. This always gives a miner a big advantage, as the chart below shows. Trona is the mineral from which soda ash is derived, by the way.

Sodium itself is discussed as a useful ingredient into low-cost EV batteries. Chinese companies like CATL, JAC engines AND BYD they see it as a viable technology and are already incorporating it into cars.

Sodium is more abundant than lithium. But energy cells that contain it have a lower energy density, as the next two graphs illustrate:

Lex thinks nuclear will be an inevitable part of the net-zero energy mix, despite our concerns about waste disposal. It’s hard to see where else the baseload power will come from when the sun isn’t shining or the wind is blowing.

We buy the topic for small modular nuclear plants of this kind Rolls-Royce, GE, Hitachi and NuScale they are developing. These will no doubt trigger protests. The flames of public opprobrium currently tickle the feet of energy companies for other reasons.

UK regulator Ofgem announced new energy price caps. Instead he should have cracked down on the “looting” of energy companies, screaming unionists and consumer rights activists.

Truly? Lex’s analysis shows that companies like Scottish power AND edf typically make losses on the domestic electricity supply. They do much better at generating electricity, that’s true.

Stretch kvetch

The other major theme this week was continued financial stress. Early in the rate hike, a colleague of Lex’s dismissed modest talk about soft landings. He said no previous cycle had avoided financial dislocation and this would be no exception. He was right.

Central bankers and their supporters want to extend deposit guarantee insurance in the belief that it will ease strain on the financial system. I strongly disagree in an FT column. Officials always want more power and in this case it would come at the cost of more moral hazard.

Flaky and overleveraged US companies such as Diebold Nixdorf AND Encourage I am thronging in Houston, the new benchmark for a Chapter 11 bankruptcy. This is the venue for a growing number of “restructuring support arrangements”. These set the terms of a capital rejig in advance.

UK readers will see elements of our local prepack governments in these deals.

The most controversial bankruptcy of the United States is Purdue Pharma. The Purdue group bears heavy blame, in my view, for the opioid crisis that has killed thousands of Americans and ruined the lives of thousands more.

A federal judge this week released the liability stamp for Purdue. This paved the way for the company to pay out $6 billion to claimants and abatement programs. Lex thought this was the best pragmatic solution.

Financial strains meanwhile linked a few disparate individuals in our coverage: poor Americans, UK CFOs, and the entrepreneurial Issa brothers.

Value Dealer in the USA Dollar general issued a profit warning, a signal that it should focus on core customers who have reduced their expenses.

About a quarter of FTSE 100 companies, inclusive BAT AND Vodafone, replaced their CFOs this year or plan to. Which reflects how hard the work has become due to economic disruption.

The Issa are using one of their businesses, Asda supermarkets, to buy assets of another group of petrol stations FOR EXAMPLE, for £2.3bn. A simultaneous injection of capital and the sale of property should make the heavy debts of their empire a little more manageable.

What’s the big idea?

These three caught my eye in Lex’s coverage this week:

• Absolutist prophecies they are usually wrong. We were looking at predictions that new technology will completely replace old technology. The last of these concerns artificial intelligence. We highlighted the woefully inaccurate claim that e-books will replace printed ones, which they still are doing well for publishers like Bloombury.

• Multiple friendships make you invite to the best parties. The business example of this theory is a Taiwanese contract manufacturer Foxconn. Numerous partnerships mean it has figured sequentially in the PC boom, the smartphone surge, and now the land grab in artificial intelligence.

• European defense stocks are ethical investments. Just new thought, but a point that is worth emphasizing at a time when Russia is pounding the population of Kiev with missiles and drones.

Things I enjoyed this week

About Ukraine, the FT published a brilliant display of the private army of Gazprom workers whom the Russian company sent to fight. Gazprom’s blurring of peaceful private employment with violent military service is staggering.

Lex’s Sujeet Indap and FT colleague James Fontanella-Khan engagingly delved into a different power struggle: ructions between upper heads to the investment bank of Wall Street Central view.

Outside the office I’m having fun watching the swifts, recently returned from Africa to northern Europe. These are the fastest birds in level flight. Small hawks, called hobbies, can catch them, but mostly intercept dragonflies. You can see how in this amateur video.

Enjoy your weekend however you choose to spend it.

Jonathan Gutri
Lex’s boss

*Do not do it. It could end badly. In an explosion. And a divorce, which would be even more expensive.