Another thing to contemplate regarding the global LNG... If LNG at $18/mmBtu is high enough to shut down ammonia production in Europe, this could be an opportunity for green ammonia elsewhere on the planet. For example, Australia is building up green hydrogen resources, electrolyzers that run on solar and wind power. Australia can use some of that green hydrogen to make ammonia and ship green ammonia to Europe and Asia. In doing this, Australia would help secure the global ammonia supply while offsetting reliance on natural gas resources to produce ammonia. Thus, green ammonia is a vehicle for wind and solar to impact the global LNG market and reduce reliance on fossil fuels.
The issue here is not so much about long-term deep decarbonization, but rather how can wind, solar and batteries ramp up on a year by year basis to keep the global economy stable and to avoid incentivizing the fossil industries to ramp up production. No doubt the high price of gas is motivating the gas industry and coal industry to invest in more productive capacity and more LNG capacity. These investments will lock in higher fossil fuel production for years to come. It would be far better to ramp up all renewable investments in such a year so as to alleviate a tight gas market within a shorter amount of time than can be resolved by increased gas and LNG investments. It is a race to close the global energy gap, and we need wind and solar to win that race every single year.
By the way, I've heard that wind generation is down about 10% this year across Europe, and that this a factor contributing to high demand for LNG. I think green hydrogen is actually a way to prevent this sort of short fall. Suppose, Europe had 12% more wind capacity and that this wind capacity was match GW for GW with electrolyzer capacity. This means that when wind is producing at normal levels, the extra 12% of wind is fully consumed by green hydrogen generation. But when the wind is blowing with 10% less power, the electrolyzers switch off allowing the 112% wind capacity to contribute a full 100% of what was expected. Granted this would still mean that Europe would need to net import more ammonia or hydrogen from a place like Australia to make up for the electrolyzer downtime, but Europe would not need to elevate its import of LNG and pay through the nose for it. Indeed, I think that some of the best policy support that European states can provide for the wind and solar industries is to subsidize the capex of electrolyzers. At lower net capex, electrolyzers will increase demand for more wind and solar generation whenever the wind is blowing or the sun is shining, but it will dial back demand for power whenever the price power become marginally unprofitable. Thus, Europe incentivizes a dispatchable surplus of wind and solar. Such a scheme would protect the European economy from crushingly high energy prices. Indeed, nations could call this a strategic wind & solar reserve, of comparable importance as a strategic petroleum reserve.
The issue here is not so much about long-term deep decarbonization, but rather how can wind, solar and batteries ramp up on a year by year basis to keep the global economy stable and to avoid incentivizing the fossil industries to ramp up production. No doubt the high price of gas is motivating the gas industry and coal industry to invest in more productive capacity and more LNG capacity. These investments will lock in higher fossil fuel production for years to come. It would be far better to ramp up all renewable investments in such a year so as to alleviate a tight gas market within a shorter amount of time than can be resolved by increased gas and LNG investments. It is a race to close the global energy gap, and we need wind and solar to win that race every single year.
By the way, I've heard that wind generation is down about 10% this year across Europe, and that this a factor contributing to high demand for LNG. I think green hydrogen is actually a way to prevent this sort of short fall. Suppose, Europe had 12% more wind capacity and that this wind capacity was match GW for GW with electrolyzer capacity. This means that when wind is producing at normal levels, the extra 12% of wind is fully consumed by green hydrogen generation. But when the wind is blowing with 10% less power, the electrolyzers switch off allowing the 112% wind capacity to contribute a full 100% of what was expected. Granted this would still mean that Europe would need to net import more ammonia or hydrogen from a place like Australia to make up for the electrolyzer downtime, but Europe would not need to elevate its import of LNG and pay through the nose for it. Indeed, I think that some of the best policy support that European states can provide for the wind and solar industries is to subsidize the capex of electrolyzers. At lower net capex, electrolyzers will increase demand for more wind and solar generation whenever the wind is blowing or the sun is shining, but it will dial back demand for power whenever the price power become marginally unprofitable. Thus, Europe incentivizes a dispatchable surplus of wind and solar. Such a scheme would protect the European economy from crushingly high energy prices. Indeed, nations could call this a strategic wind & solar reserve, of comparable importance as a strategic petroleum reserve.
