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Every time we've had an energy crisis, it seems to be a driver for new things. Hydrogen has now taken a big leap forward. Suddenly it's more forefront in your average person's mind, that there is a real role for hydrogen to play in this new energy economy that we're going through.

Announcer

Welcome to the Decoding Innovation Podcast series, brought to you by the EY-Nottingham Spirk Innovation Hub, where we explore the innovative technologies, business models and ideas that are shaping the future of industries. During each episode, Mitali Sharma, a principal in the EY-Parthenon strategy practice, meets with stakeholders at the cutting edge to discuss innovations in their space, challenges they need to overcome and their outlook on the future.

Mitali Sharma

Hello and welcome. I'm your host Mitali Sharma, and today's topic is hydrogen economy. To talk to us all about it is our guest Andrew Horvath, the Global Group Chairman for Star Scientific out of Australia. Andrew is also the founding member of the SEC, Sustainable Energy Council of the World Hydrogen Advisory Board. Welcome to the show, Andrew.

Andrew Horvath

Thank you. Pleasure to be here.

Sharma

Before we get into Star Scientific and the whole hydrogen economy, would you mind sharing your background and your journey so far with our audience?

Horvath

Certainly. So, my personal background is political and economic. I came into the hydrogen world through my father. My father was a nuclear physicist working in fusion, and ever since I was a very young child, instead of watching television, we’d go out and talk about stars and things like that. So, I always had a love for the concept of hydrogen. I personally always thought, growing up through the 60s and 70s, that within the 70s we would at least have hydrogen cars or hydrogen being used in broader energy applications. So, as I got older, I had to make a choice between politics and what I ended up doing, and my now wife of 34 years told me that if I go into politics, she can't be my wife. So, I made a wise choice and I moved into this sphere and basically took what my father was doing and turned it into an international business.

Sharma

Andrew, you've been involved in the hydrogen economy for quite some time. So, perhaps we can start by grounding in the basics. Could you tell us a little bit about the hydrogen economy history? How do we generate energy from hydrogen? Basically, why should we care?

Horvath

OK. Hydrogen’s origins or the origins of how to make hydrogen was in the 1800s. As that progressed, people could see that they could use hydrogen to bind with other chemicals. Eventually it was used in everything from iron ore to all sorts of mining applications with its chief use. But really, it was chemical manufacture that came into it.

As we began to discover more about the universe, we rapidly discovered that effectively everything runs on hydrogen, or a form of it, an isotope of it.

The entire universe is based on that singular building block of everything. We contain an awful large amount of it as human beings, and every living creature does. That energy source that has been used by the universe, though, is a tough one to capture. So, as I mentioned, my father was fascinated in fusion as we are in Star today, we still have a fusion program today.

It was really trying to replicate what's happening on our sun, to try and gain that mass amount of energy. In the 70s, hydrogen started to become more prevalent as we started to go into that first big energy crisis that we had in the early 1970s. I still remember being a young boy sitting in my father's car lining up, even in Australia, on odd and even number plate days to get fuel because you couldn't get any petrol or gasoline back then. So, every time we've had an energy crisis, it seems to be a driver for new things. Back then, batteries were a no show. They just weren't good enough techniques to store vast amounts of energy in batteries. However, you can store a ridiculous amount of energy in hydrogen. The problem with hydrogen has always been the cost of manufacture, when you break it down into the economics of it.

However, the manufacturing techniques we use today are a throwback to the 1950s. They've been around forever now. Yes, we have better materials, yes, we have better manufacturing techniques, we have more purity of materials, some of the catalysts that can be used in manufacture of hydrogen. But effectively, the concept of putting electricity into water and making hydrogen and oxygen isn't too different as it was in the 1950s to now. Now, as we've come along and climate change started to become the central issue of politics and especially, the youth; it started to become more prevalent that we had to do something. Electricity started to take a greater hold. But there's a great deal of issue with electricity. The wind doesn't blow all the time. Sun doesn't shine all the time.

In Australia, for example, we've just gone through three years of a La Niña event. That's happened in various parts of the world, so it's not a predictable science, solar. Neither is wind. They're useful, they make energy and should be captured where it can. But how you store that has become the issue. Hydrogen has now taken a big leap forward because people realize as the Ukraine war has started and energy has become a bigger issue.

Suddenly it's more forefront in your average person's mind, that there is a real role for hydrogen to play in this new energy economy that we're going through. I suppose that's where Star Scientific picked up the ball about five years ago and started to really look at something that we've discovered in line with the fusion research.

Sharma

I think we'll get into that specifically in a little bit. But again, going back to the basics, there's different colors of hydrogen. There's a green hydrogen, blue hydrogen and gray hydrogen. Could you identify what's what for our audience?

Horvath

Oh certainly. Gray hydrogen is the hydrogen that's been used through the ages. It's made through dissociation of methane. Methane has a lot of hydrogen in it, and you end up with a huge amount of CO₂. So, it's obviously not the best solution to stop CO₂ by going in to produce more of it.

You then go to different colours of hydrogen. Effectively as you go through, they're less and less and less carbon-intensive until you get to green. Green hydrogen is using energy solely from green sources. At the moment, solar and wind would be the most prevalent, but wherever there's a green source of energy going in, breaking down water to hydrogen and oxygen, that's classified as green hydrogen. Hydrogen for your listeners is hydrogen. It doesn't matter where it comes from, it still is the same atomic structure. There is no difference whatsoever in hydrogen. So, it really is about how much carbon is associated with its manufacture.

Sharma

Interesting. As you talk about or think about hydrogen economy, what part of the economy would be more amenable to being powered by hydrogen?

Horvath

We believe firmly here that there is a mistake being made at the moment by a lot of the governments around the world. We have a new government in Australia and they've gone headlong into zero emissions by X period of time. When you hear them talking about this, they talk about green steel, they talk about mass amounts of where these big energy things are, aluminium manufacture, things like that, where there are huge energy inputs. The issue with that is green steel, for example, is a couple of 100 tons per hour of hydrogen to run. We look at it differently. We believe heating industry is the key. If any of your audience look around the room they're sitting in, they'll find 95% of everything they're looking at has a heat component. Pretty big one, actually. We look at things like food, beverage manufacture, plastics, bottling plants, all these packaging facilities. All of those require heat that is not on a very, very large level. Most of them are somewhere between the 75⁰C to 150⁰C range. That is where we see we must slot in first. So, if you can tackle the food industry, you've tackled a good chunk of what's going on and you've also brought it to the consumer's attention that between product A and product B, this product has a very low carbon value because the energy that used to make the product is very low. So that's where we've tried to tackle the initial entry.

You then can look at things like the conversion of existing power stations. In Japan, there's a very high percentage, well over 60% of their power stations have an extremely long life left in them. Many billions of dollars have been invested by investors and everyone says knock them down. We think that's nonsense. We believe that where you have to go next is to replace those boilers with something using hydrogen and therefore create steam. And just let the plant run like it was designed to do, minus the pollution, minus all the storage of polluted components, minus all the coal shifting. So almost two-third of the plant would be redundant, and you would not have all that energy. So those sorts of things, we believe, are the answers.

But we really believe going in to direct where heat is used in manufacture is the key. It’s smaller amounts of hydrogen being required. It's easier to not have to change the entire plant over, but just change the heat component of the plant, one boiler for another, for example, and not have to change that investment that's already seeded in the plant. To convert a plant into becoming completely electric that a lot of people have tried and said is a hugely costly enterprise. It's massively costly. If you can do a plug-and-play solution where you can then convert that plant and realistically the plant is now zero emissions energy, then the rest of what they do can be handled slowly and predictably, as they change over to as close to zero as they can get.

Sharma

That incremental approach does seem very logical, and this is a perfect segue to get into Star Scientific. So, tell us a little bit more about Star Scientific, what the basic technology is and the journey so far.

Horvath

Certainly. During fusion research, fusions are a complicated beast, we were in a very unique form of fusion called muon-catalyzed fusion and part of that required a great deal of materials development. So, we developed a very high-level materials development team. Now, when you're doing that, you're experimenting with a wide variety of different materials that you can activate in the way we do to create neutrons, which is the output of fusion. About five years ago, I got a phone call and my lab team said, look, we've got something very interesting here.

If we take this particular catalyst that we've built, and we apply hydrogen and oxygen to it, we get water immediately, but it becomes incredibly hot. We take the gas away, it stops. We put the gas back, it starts. We went through, OK, someone must have discovered this by now. You know, the normal sort of things you do in science, and rapidly determined that no one had and we had a patentable object for a start. Second thing we determined was we had a product that did not degrade over time. So it was a true catalyst. There's no replacing what we do. We named it HERO®, for the emphasis of what it could do for the planet. It's Hydrogen Energy Release Optimizer, HERO®. And we looked at this and we started to develop it pretty quickly. So, HERO® can go from zero to around 800⁰C in about three minutes. It has the ability to stay there all day. It is a coating, so it can be as large in terms of surface area as you want. It's a surface area-derived product. If you want a lot of energy, bigger surface area, smaller energy, smaller surface area. And the rest of it's controlled by the speed and feed of what you're trying to heat, your working fluid. If you're heating water, quicker the water moves, more volume of water, more heat you need to apply a particular temperature to it. So it becomes a very simple, small, elegant device that can move about 90% of the energy of that reaction going from hydrogen and oxygen back to water, which is a double step down in energy. About 90% of that can go into your working fluid. So that gives us the ability to create very, very unique model. So as I said with the food plants, 85⁰ is, it's all about speed and feed and the amount of HERO® that's there. But you have a device that's 25% of the size of a standard boiler in doing it. The way we've designed the heat exchanger application is it's a single pass. There's no multiple pass-throughs to get the temperature you want. You pass it through once and you will have the temperature you want.

Sharma

Could you share with us what is the source of hydrogen?

Horvath

It's purely water. It's pure water. That's the best possible way to do it. If you want zero emissions out of it, you have to break it down from its purest form. And really hydrogen and oxygen in water is all there is in water. So purified water, which is why it's so good that we produce absolutely pure water to put back into those systems. We break down water into hydrogen and oxygen, and we use those components, gain the heat out of the step, change back to water. And then we just take it back through the cycle again.

Sharma

That's fascinating. Tell us a little bit about your rationale of actually going to a non-combustible source.

Horvath

The non-combustible source is important. Burning hydrogen in our view is a big mistake. Hydrogen does not produce infrared energy. It produces UV energy. Anyone holds their hand under a black light realizes there's no heat there, as opposed to an incandescent light or something that's producing infrared energy. The flame shapes are really important in hydrogen. The tip of the hydrogen is where you get most of your temperature. For an example, you hear a lot of these people talking about hydrogen turbines, “We're going to burn hydrogen.” When you talk to people at conferences, you get, “Well yeah, initially we're going to burn 5% hydrogen, the rest will be methane” and then it will be “Maybe in 20 years we'll burn 35% hydrogen.” The reason they're talking like that is you only get a third of the energy out of the thing because you can't get all the energy out of it if you're relying on UV to be the energy transmitter. And that's the big issue that you're getting with burning hydrogen. It is a waste of hydrogen. You're going to have to make a lot more to get these things to work. It embrittles things when it burns, so it embrittles metal very badly when it burns. You have to also still have a NO₂ solution, your nox solution for pollution, for nitrous oxides. Because if you are burning it in air, you're burning nitrogen at a high temperature and you're ending up with NO₂. You still need to have the filtering systems in there. HERO® doesn't require any of that because we're using pure oxygen, pure hydrogen, and because we're not burning it. We are taking the excitation energy of that step change from hydrogen and oxygen to water. We take that excitation energy and move it from point A to point B, which is your working fluid. So there is no burning in that.

Sharma

So, what is the challenge in the way you're going about doing this that's in front of you, in terms of scaling it?

Horvath

It's a surface area material. So, the challenges have been what material to code it onto. They have been some of the challenges that we've gone through and we've solved most of those. The type of heat exchanger that we had to design, which is an active site heat exchanger, which is very unusual, those sorts of challenges we've had to overcome. Right now, the last challenge we're overcoming is regulatory. And we're going through that very nicely with the Australian regulatory authorities which are following the ISO. Once we get those stamps, we're effectively OK anywhere in the world. Every place will have a little tweak they'd like and that's fine. Maybe it's a monitoring tweak or something else they'd like to add. That's not going to be a problem.

Sharma

And in terms of scale, you said it's scalable from very small to huge. What's the optimum size?

Horvath

There isn't one. It really is surface area. So it's fit for purpose. If you need to produce 2 GW of steam, enough steam to drive those turbines, you can do that. It's just more surface area. It's how HERO® is designed. It's the same type of heat exchanger, same single-pass mechanism, but it's more surface area, so you're activating more hydrogen and oxygen over that. There your question is, where do you get that quantity of hydrogen? A 2.7 GW plant that we studied here would use about 170 tons an hour of hydrogen. That's a lot, granted, but when you do the math behind it, it's doable. You have to bring the energy amount per kg that you're using from 56 KW per kg down to something much lower in the 30s that starts to make it possible. But there are technologies that can bring it below that yet. When you start to get into those worlds, you're actually right up against coal for energy value at that point, and you can make enough of it. Yes, you need your wind and you need your solar, but you can use all of that to store energy in the form of hydrogen. And having that stored, you can have your 7–10 days of use, even if it is cloudy. You can wait for those boost periods when you can boost up the amount of hydrogen you're storing.

Sharma

Can you double click on that a little bit? You said it's always being cost and the economics. So, if you can get into maybe the efficiency of the system and how that impacts cost, that would be great.

Horvath

Sure, so on the HERO® side, it's extremely efficient. You're moving 90% of the energy across. So the HERO®’s side is actually very cheap to run. All of this boils down around the world to how much is hydrogen per kg. You've seen the Biden government step in with a US$3 per kilogram rebate if you can make it out of green sources and that they're trying to drag that cost back to make it usable. We see it as the inefficiency of old technology is causing the cost issues. So right now, your average is between 50 and 56 KW per kg. That is going to make up to US$8 a kilo for your hydrogen, which is ludicrous. It's too much. You need to bring it down to that US$1.50 range, that US$2.50 per kilo. There are ways of doing that. There are a number of very smart electrolysers starting to come on to the scene now. We have one in our labs working everyday and that system is already in the high 30s. So that's a dramatic reduction in the amount of energy you need. It also is a very efficient system in the way it works in compactness of size, the material it uses, the recyclability of those sorts of things, it's all been built into that. But there are smarter systems coming that will literally bring hydrogen under the cost of natural gas.

Sharma

Tell us about this journey when you started and now, and how you scout for potential partners and how you're bringing it together?

Horvath

Star has always made all its own prototyping. It's always, we have a very large engineering shop. We make all our own gear for quality control and we did that because of the nuclear side of what we were doing with fusion. That became very important. If you have a slight error, it can cause you a big problem. So working with that, we've maintained that, but when you look at electrolysers and things such as this, there are many other clever ideas out there. We have looked around the world and we have looked from bigger manufacturers who have come up with something clever that could make with what we're trying to do, down to the guy who was sitting in his garage. He goes, “Eureka, I have an idea” and we've found a couple of them. And the unit I'm talking about in the plant at the moment came from that — two people in a garage. Those sorts of people can't apply for government grants. It's too much paperwork. When you see these government grants given, I'd ask your audience to look into them a little bit more. You'll discover very rapidly that the government grants are given to the big corporations because they've got a team of lawyers who know how to fill out a government grant for. Your average guy at home can't fill one of these things out. You can't supply the info. You can't do it. So, we went out there looking for people like that. We watched social media carefully, but we also have a very, very unique shareholder group. While Star is a public company, it's not listed. It has a group of shareholders that are strongly environmental. And they have been interested in this for a long time. So, they will bring us people and say we've found someone that could be really interesting. Now admittedly, eight times out of 10, it's nothing. But those two times, we grab those and we say, first thing we say is this is your product, it's not ours. You get the benefit out of it. You do all of those things. We, however, can help you develop this into what we need and we can license it, manufacture it, do everything necessary to bring your vision to life. Because we have the equipment, we have the talent, we have the people and we have the experience. So, we've done that with a number of things. Star has a division called Black Swan. And Black Swan is kind of the skunkworks of staff. It is the background where we hold secret inventions, some from outside, some from inside, and we develop those things. So that's our partnership lineup. Now we're looking at things such as the turbines. We're not turbine manufacturers, we're never going to be turbine manufacturers. You go to people who have vast experience in this and you say “You have that bit, we've got your heat source, let's get together and work on it somewhere.” So that's what we're doing. Again with the steam turbine manufacturers, what is the ideal way to hook that system up? What's the ideal way to reheat the steam? Currently, in very large turbine plants, powerplants, they take the steam that needs reheating all the way back to the boiler. Well, we could put a HERO® unit right there next to the turbine and do the reheating on the spot. You could up the plants efficiency by 10% just from canceling that round trip. Our partnerships tend to go out to the technical side of the people out there who are going to be using us and how we can integrate with them, as well as trying to find those unique minds who haven't got a hope in hell of getting their product off the ground. And we've been pretty successful at doing that.

Sharma

Tell us a little bit about your first customer experience when you were thinking in terms of what should be your minimal viable product.

Horvath

We originally went in looking at the power generation market, because we thought the smartest thing to do was keep these big plants operating. They're already connected to the grid, vast amounts of investment. It's smart. The issue there became hydrogen, whether you get 170 tons an hour of hydrogen at a reasonable cost to make it worthwhile. And then we started to look across the range of the units and it became very apparent to us that we were operating test units from 80⁰ right the way through to 800. And we were going, “Ok, where does this fit? So, we got in bed with a little group who was looking for a green energy solution to some of the food manufacturing. Now we're placed on the Central Coast, we're very lucky. We're right in the middle of the food hub. We didn't know it, but we are. But down the road from us is our first customer. Half a kilometer down the road there's another five. So, we formed this hydrogen hub, food hub and we went to the federal government, said “Can we have some funding?” and they've been pretty good about that. State government. First time we had, we had three customers come through the door and say, “Let's see your plant, let's talk about it.” The next time we did it, we had 25, the next one we had 47 in the food hub. Now I think it's well over 60. You've got all these people from greenhouse growers who produce for the fast-food chains right the way through to making pasta sauce and mustard. All these guys are in that local area. The first customer experience was one of them who said, “Listen, we'll be your pilot. We're a mega international food company. We have a big plant here. We want this plant to go green. The mother company wants to do this if we act as your pilot, which we need for the regulatory process. If this works, then the rest of the global food chain that we operate, is that your beck and call. So that was the first real “OK, let's sit down and really talk about how this works.” And they came back four times because they kept going, “We can't get our head around that. You're replacing that big boiler we have with this small thing over here.” And eventually their technicians, as we signed NDAs and MoUs, and we allowed them in a bit, they started to go, “Oh, right now we see what's going on here” and they brought university people in who looked at it and you know every university professor has walked in there as just grinning going “Wow, how did you discover this stuff? This is amazing.” As everybody's discovered it, they went “OK, we really want to move with this now and get this installed so we can have this, our Australian products, green energy, but then the world's an oyster as far as that firm is there. Now obviously they've got a lot of other very big firms around them who are watching this. We've all become part of the food hub. So they come inside and say, “Once you've got them sorted and your regulatory side is sorted, we want you in our factory too.” And that started to happen around the world. We had a 40-hectare greenhouse complex in Hungary. The other day, they said, “When can you be here? We want this heated 24/7 and we need it to be green.” But really, it was getting the manufacturers to understand that they weren't changing the entire plant. In fact, one of the things we tell them is if you don't tell your employees you've changed, they won't know.

Sharma

When you think about the talent pool that you go after, where do you get that talent?

Horvath

Industry and university, a lot of our talent pools come directly out of university, very smart young people. But you need people in industry who have seen a project through, you need those people. So there are a lot of the gas industry that can work well with us. A lot of the boiler industries can work well with us. We've got experts in those fields, we've got experts in the different fields that we need, chemical engineering, for example, and things. But really the talent pool has to come up from underneath, from the universities. Even talking to some of our young people, they've got this inane sort of thought occasionally in their head that it seems to be someone else's problem. We're working on this great idea, but we really need that politician to do something about this. And you go, think about what you're doing in the lab every day. You're doing something about it. Wouldn't you prefer 100 more of you doing something about it as opposed to one politician who's there for six years or something, you know? I don't get the mentality around that, and that's what's being taught to them. And I really think that's a shame. We need to teach innovation.

Sharma

Your HERO® technology was patented. I guess my question is, patents last only for a specific period of time. I know in the US, it's about 20 years. What's your philosophy around protecting your intellectual property or are you moving beyond that in terms of creating a solution?

Horvath

Definitely. Look, you have a patent period, but there are other ways to protect your IP copyrights and other one. There are phases of the copyright that will allow you to protect for almost in perpetuity. There are other ways to do things too, though. There are certain manufacturing cycles that we're never going to release. With HERO® if someone were to steal HERO® tomorrow and try and start it, they get it to work once and that would be it. They never get it to work again, and that's because there are specific things built into it to make sure that unless things are done in a certain way, it isn't going to function the way they think it is. So, you build these things in for your own protection. It's one of the reasons we don't want to sell HERO® units out there. We're going to try and use that and sell the energy as much as possible. And we're going to put as much security around the HERO® system as we can. Every HERO® unit is AI-controlled. We'll know long in advance if we need to go and hold to something, and we will learn from that and fix it. So HERO® will be ever evolving. That's one of the things we pride ourselves. We evolve really quickly at start.

Sharma

And that's the perfect way to end this segment. Thank you so much, Andrew, for your time today. This has been a fascinating conversation.

Horvath

It’s a pleasure to speak with you.

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The Decoding Innovation Podcast series is a limited production of the EY Nottingham Spirk Innovation Hub based in Cleveland, Ohio. For more information, visit our website at ey.com/decodinginnovation. If you enjoyed this podcast, please subscribe, leave a review wherever you get your podcasts and be sure to spread the word.

 

The views of third parties set out in this podcast are not necessarily the views of the global EY organization or its member firms. Moreover, they should be seen in the context of the time they were made.

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