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It's a historical change. Akin to the transition from the agricultural age to the industrial.



Tomoho Umeda for the "Uwaga Wodór!" podcast - interview transcript


– In the next episode of the “Attention Hydrogen” podcast, we have a special guest for you, one of the most influential figures in the Polish and European hydrogen world – Tomoho Umeda. Tomoho is the founder and CEO of Hynfra, a member of Hydrogen Europe and the European Clean Hydrogen Alliance. He is also the co-founder and board member of the Polish association Hydrogen Poland, as well as a lecturer at the Master of Business Administration, Hydrogen Technology Management at Collegium Humanum.


I’d like to add two more items to this extensive list: I also have the honor of chairing the Hydrogen Technology Committee of the Polish Chamber of Commerce, and – something that nobody knows about yet, so you will be the first to know – we are also a new member of the Japanese Hydrogen Association, the so-called JH2A. In fact, there is a whole lot of our activities, institutions, various organizations in which we participate, but this is absolutely necessary to build awareness of and support each other in building this completely new sector.


– Let’s start with a question about megatrends, about what is currently driving the development of the hydrogen market. The first most important trend is simply environmental protection with all its related laws and regulations, in Poland and elsewhere in the world. This is associated with financial conditions, such as the cost of CO2 emission fees. However, in addition to this megatrend, there is another, equally important one, which grew stronger three months ago, namely the desire to wean off fossil fuels from countries that are politically unstable. How do you see those megatrends and how will they influence the development of the hydrogen economy?


I like the concept of megatrends, but what’s happening is an epochal change, akin to the transition from the agricultural age to the industrial age. This is exactly that type of change. Why is it so? Please note that all that you’ve said: climate issues, financial issues, or the emission-related burdens, and the geopolitical destabilization of the hydrocarbon market, it all coincides in time. This is the moment when the hydrocarbon market actually went over its peak. It’s shrinking and will continue to shrink moving forward. We’re also witnessing a tremendous shift in the overall structure of the supply chain and the balance between the eastern world – shaped by China – and the western world shaped by our Euro-Atlantic community. These processes have been going on for a while now, they have not emerged recently. The very idea of decarbonization in the European Union, ratified by Poland as well, dates back to 2005. It’s since 2005 that we’ve been aware about the need to decarbonize. The question is what has been done to achieve this goal.


– That's a rhetorical question I think.


Yes, if we’re complaining about our lack of preparation today, we should not be surprised. If anyone is surprised, it means that they have not participated in the political life of this country since 2005. So, these are all massive processes that may be called megatrends, but this change is actually an epochal shift. We wave goodbye to the old world based on the existing value chains, on the existing logistical hubs and geopolitical dependencies, including those based on the trade in hydrocarbons. This world as we know it is disappearing right before our eyes, and everything that’s associated with it – the power of those countries that are transport hubs, the importance of various straits and pipelines, the struggle for those straits and pipelines, and all the related conflicts – is disappearing as well. All of this belongs to the old world and, slowly and steadily, will lose its importance as the revolution unfolds, and completely new phenomena will set in, with completely new centers of influence on what’s happening globally around us.


– Who would like to see change, and who prefers to keep the status quo, the old order? I don’t think it’s only Russia, but also other powers in the world?


I really believe that this new order, this new world is a better one. Why? Because it’s more democratic, where access to resources is evenly distributed. In the new world, the energy markets that drive the economy will be fragmented. A village in the middle of Africa will be equally independent energy-wise, and independent of those external conditions, as Warsaw and New York for that matter. It’s a very egalitarian, very democratic world, offering development opportunities to centers that have so far been deprived of such opportunities, either because they were located far from important trade routes or it was not in the interest of certain players that controlled those resources to allow the regions concerned to grow. So, this decentralization of the world, or as we often say today: the deglobalization of the world, is, in my opinion, a positive phenomenon that is worth striving for.

Understandably, attempts to stop the process are being made by all those who’d like to have control over this kind of centralized world system, where those key goods are gathered in a very narrow portfolio by the few, who in this way can control the reality. I guess this is probably what motivates me the most to act in this area – not the money, not business, not technology, but the political and social change that is associated with this revolution. This is what keeps me going.


– How do you see the position, role of and opportunities for Poland in participating in this new world?


Of course, Poland has the same opportunities, a level playing field with any other country, but one thing should be noted. Suddenly, it turns out that the famed LCOE, that is levelized cost of electricity for renewable energy, is becoming the key element that will determine how competitive an economy is. In Poland, we have quite decent conditions when it comes to the possibility of generating energy from renewable energy sources, but these are not be best imaginable conditions. We’re not Portugal, we’re not Chile, we’re not the United Arab Emirates. We’re not part of the sun belt countries that have a lot of sunshine and solar radiation. We have good wind conditions in the Baltic Sea, but not as good as, for example, in the northern part of the North Sea or in the North Atlantic. That said, this certainly means for us that we must somehow compensate for this difference between our LCOE, i.e. our levelized cost of producing green energy, and the final cost of products that we will produce based on this green energy.

Here’s a great deal to be done by our central government, especially to develop tools that will help us compensate for those deficiencies and optimize the value chain, because at the end of the day practically everything that will exist in this economy will be powered by renewable energy.

You have to remember about this when talking about net zero, about decarbonization. Net zero means that there is no oil market, no gas market, no coal market, and the entire economy is powered by clean energy, nuclear or renewable, in any proportion. On the other hand, in Poland this means the need to generate 1000 TWh from renewable sources, and at the moment we obtain only 30 TWh of such energy. This is what we have to achieve.


– There are two approaches on this path to a net zero economy. One is a top-down approach, with a central role of the state acting through large state-owned companies. This approach accepts the so-called transition stage, namely a low-emission economy, for example based on blue hydrogen, and it seems that in this approach the problem is not the money, but the time needed for implementation, the long decision-making process, and dependence on political and legal conditions. On the other hand, the opposite, bottom-up approach, involves processes initiated by local authorities or private companies, with many fragmented, smaller investments. Here, the biggest barrier is economic considerations: how to ensure that the project is financially sound. Which of these approaches you like more, and which will be more helpful in negotiating this path in the shortest possible time.


As I said before, after all we’re talking about a certain egalitarianism or democratization of this market. Indeed, the market will be built in a bottom-up process.


The system that we’ve had since World War II, i.e. the structure of our energy and industry, is such that it cannot be decarbonized one-to-one while retaining the same layout or shape of the infrastructure. I’m talking about the 1000 TWh required in the system, and I’m being absolutely serious. I’ll be more than happy to discuss with anyone who has an opinion, as there are some who say it will be 500, while some say 700 TWh. I’m saying 1000 and there is no way to connect 1000 TWh of renewable energy to any transmission system that could handle it. Forget it. The transmission and distribution system will have to take a completely different role. An internally self-sufficient, in fact an off-grid, stand-alone system, will be the key component of the energy system. And it will apply to industry, local authorities and households, while the transmission or distribution system may play a kind of supporting role. Today we cannot think about this change, this transformation in such a way that we will be relying on the power system that we have today, and we will use it to connect all those renewable energy sources. This is simply not possible.

That said, it will be a huge role for the state to unlock opportunities for firms, local authorities and citizens to be truly self-sufficient and independent of this destabilized system that is stepping off the scene as we speak. Let's look at production companies in Poland, for which energy, heat or gas are an important component of the production cost. Today, they operate in a completely unpredictable business environment. They’re unable to obtain a loan, as their margins are usually tight, while their operating costs have increased not just by a few percent, but by several tens or indeed hundreds of percent. But they can help themselves by resorting to their own energy sources, not based on grid connections or distribution network operators. They can be fully self-sufficient.

This is crucial and if I were to recommend something to Polish decision-makers today, I’d say the should focus on it, as there is nothing more important today in terms of maintaining our economic development or saving our economy than a huge acceleration of the process of securing companies, securing local authorities, and securing citizens against this situation that is now destabilized beyond repair.

If anyone really believes that in a year from now gas prices will return to their levels observed two years ago, they’re wrong. Unfortunately, this is not going to happen, the ETS will continue to grow, gas prices will continue to be destabilized, if only because we do not use Russian gas, but we have a very complicated gas mix. So either everyone will start saving their future themselves now, or the conditions will be getting more and more difficult.

The European Taxonomy is a separate, but essential issue. Our entire economy is based on the fact that most of the production companies are part of the supply chain for the Western economy, for Western firms. If they (Polish companies) are not competitive in terms of production costs and do not decarbonize due to the European Taxonomy, they will simply start to fall out of this supply chain en masse.

Now, referring to the initial question about this centralized model, that is the transformation of state-owned companies ... In the world that is now emerging, they won’t be able to operate in their current model. I’d recommend that decision-makers take this into account when planning their transformation, because so far we’ve seen a completely opposite trend of industrial consolidation.


– Well, for sure, there are also issues related to revenues for the state, related to the activities of state-owned companies, and the fact that these revenue streams may decrease in the future.

I’m afraid the state is facing a much ghastly vision: not just diminishing revenues, but bankruptcy of individual entities amid rapidly aggravating conditions. If we’re aware of what the European taxonomy is, what its implications are, and what actually happened after February 24, i.e. how rapidly this change and this transformation have accelerated, then if someone has any delusions that we will burn Norwegian coal and gas, and things will be as there were before, I’d suggest that the people who cherish those delusions take care of themselves and their own backyard, so to speak. I’d recommend that they deal with their delusions and simply save their businesses, their organizations, their local government units, because this is something we have to start doing today, we cannot wait for a year, two or three. These decisions must be taken now, and I mean it. Time is against us. I know this is not easy, because you have to jump headlong into unknown waters. You are afraid of breaking your neck, and of course everyone is watching who will pluck up courage and jump first, and live. We’re actually observing it, but these investment processes take some time, and they do not happen from month to month. It’s a several year process, so if someone chooses to wait several years to see if others have succeeded, it will be too late for them.

– We are curious to see who will be the first to jump into those waters, where many other decision makers from other countries have been swimming for a long time now.


I'm curious, too. I’ve been dealing with hydrogen since 2014 and for all this time I’ve tried to convince our various decision-makers and companies to become seriously interested in it. Especially so as taking part in various international bodies such as Hydrogen Europe and acting strongly in Japan, I had the opportunity to see that this is no longer a song of the future, but something that is taking place now. Regrettably, at home I was constantly being confronted by the belief that it’s a song of the future, that if renewable hydrogen will be used on a mass scale, it will be no sooner than in 20 or 30 years. Even in 2019, such opinions were published in the media by serious professors, so I’d say this is a mindset issue. For some reason, until December 2019, when the New Green Deal was published, Poland was, figuratively speaking, behind the hydrogen curtain. It was impossible to convince anyone to bring this topic to the fore, to start doing something in this field. Very few entities in Poland were really interested in it. By participating in the work of Hydrogen Europe, preparing the provisions of the New Green Deal in the field of hydrogen, I can say that there were practically no Polish entities there – either those that would proactively participate in the work or even those that would listen to know what’s going to happen in a while. Little surprise then that this New Green Deal was just like a lightning bolt from the blue for everyone, and only then did feverish running began, with questions thrown around to find out what hydrogen is all about.


- So it can be summarized that municipalities and companies that see the need for a rapid change should build the entire hydrogen ecosystem around them, starting from renewable energy installations, to electricity storage and electrolyzers to hydrogen production, through to facilities for storing hydrogen which could then be used as an input for the production of ammonia. I assume that Hynfra, the company you founded, is to help those municipalities and companies to create that entire ecosystem?


Yes, this is exactly the idea behind our first project of this type, which we want to develop in Sanok. We’re currently at the pre-development stage, that is we’re preparing a feasibility study. A big hand to Sanok, as they are dealing with a really difficult matter. What’s important here is that decision-makers speak the same voice, regardless of their party affiliation or position. It’s important that everyone is equally aware that this jump needs to be made. Either all of us learn to cooperate at the local level, on a politics-free ground, or we will all fail together.

This is probably the toughest bit, as there are still many people out there who think that things will somehow turn out right, that it’s impossible to tip over something that is supposed to be untippable, that it’s impossible for that European Taxonomy to work, because it would mean turning the entire Polish manufacturing industry upside down. Well, that's the point: to acknowledge it.

Adapt or be tipped over. It’s really ruthless, but then again we live in ruthless times. The war being waged in the East is just as ruthless and so is the climate change and climate disaster. There will be no prisoners in this struggle. People should finally understand it and start acting together to ensure this change happens as soon as possible. Each month of waiting is lowering your strength and odds of staying afloat. It’s important to communicate and educate about it, as without this awareness we’re all going to lose.

- The project in Sanok is extremely interesting and certainly extremely important in the entire process of building the hydrogen economy in Poland. But Hynfra as an organization that thinks even bigger. You have recently announced that you have a whopping EUR 4.5 billion in your pipeline of projects you are working on. It's no secret that you operate not only in Poland, but also in other countries in Europe, and beyond. Could you please tell me a little more about your plans and how you achieved all of this despite being a fairly young organization.


80%, or EUR 3.6 billion, of this EUR 4.5 billion is our three green ammonia projects. We have one project in Poland and two abroad – in Portugal and Oman. They are at a pre-development stage, but basically all the pieces of the puzzle are already on the table: we have technology, financing, we have an offtaker to guarantee all those projects, we also have a certification partner. We have a very strong support from local authorities, especially in Portugal, so these projects are moving forward at a speed. It seems that we’ll be commissioning them in 2028/29.

This is our “tier one”, namely the projects we are already implementing. We also have a “tier two” batch, that is projects that we haven’t started to develop yet, but we’re preparing for it. And the value of this batch is EUR 7.5 billion. These are the main ports in the world where we want to build green ammonia installations. We do this in ports to ensure – in the first place – easy exports, but also because we believe in ammonia as the new fuel for maritime transport.

We don't have to go around looking for those projects, today they really come to us on their own. We are being approached by stakeholders who propose new locations – now we’re going to Indonesia, Israel, Brazil, and perhaps will do one or two projects in the Mediterranean.

We’ve just entered the market with an investment round to raise EUR 300 million for the development of those projects and so far it all looks very promising, everyone understands this megatrend, as you call it. We know that there is a huge overliquidity in financial markets, and that surplus capital is looking such projects. So, from our point of view, it all looks optimistic.


- We hope that the energy transformation and this start from scratch for everyone will be an opportunity for Polish companies to stand out in the world, to become exporters of innovative hydrogen technologies. Hynfra is a great example here. Tell me what is so unique that Polish companies can offer to international buyers, how we can distinguish ourselves, what makes you the preferred partner for those projects, why you and not your competitors from the West or from other corners of the world? What are your strengths?


It's mostly people. In Poland, we have the best specialists in many different fields and if I were to say where our competitive advantage comes from, it’s from those people, the team we have put together, their talent pool and experience. As someone said, we’re a startup that employs people of a non-startup age. We have a team of seasoned managers, engineers and chemists, who have unique expertise in their respective fields. The process is our secret and a competitive advantage, but we have people who have knowledge and experience in such processes, therefore we’re able to offer better efficiency, better parameters and higher profitability of our installations. This is the true source of our competitive advantage.


- Now for the last question we wanted to ask – why Poland? Why is Hynfra developing its business in the “Vistula Land”? We know you have Japanese roots ...

I was born in Poland, in Warsaw, I’ve lived all my life in Warsaw, I grew up here, I skylarked here. But my family, my late dad, was in fact Japanese. He came here in the 1960s, and my grandfather had come here before, exactly 100 years ago – in 1922 – as a Buddhist monk. I would need to spend the next two or three hours telling you the story, but it’s already described in books and shown in documentaries, so I refer you to those sources. I personally feel Polish. I grew up here, I live here, and I intend to keep it that way. I have contact with Japan, it’s an important place for me, an important source of inspiration and culture. I know Japanese, I work with the Japanese, we even have an office in Japan. However, if I had a choice to live here or there, the choice is obvious – I live here and my home is here.


- Thank you very much for this candid interview, for giving us both the macroeconomic and microeconomic perspective, and simply for telling us about Hynfra. We wish you all the best – may the strong hydrogen economy of the future be built by the Polish company.


Thank you very much for your questions and for having me.


We kindly invite you to listen to the episode: https://lnkd.in/eMiVCeNe

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