Cracking the hydrogen economy

Meir: Hi, everyone! I’m here today with someone who has legitimately changed my mind in our past conversations—one of the sane and thoughtful voices in the hydrogen conversation. So, without too much pressure, Gary, why don’t you introduce yourself, tell us a bit about Celadon, and then we’ll dive into hydrogen itself.

Gary: Thanks, Meir. I’m Gary Ong, founder and CEO of Celadon. We know each other because Celadon was Maniv’s first hydrogen investment, and we’re working to make hydrogen useful for specific applications—whether that’s mobility, manufacturing, or other areas. The idea is that to make a hydrogen economy happen, you can’t just make hydrogen cheap and hope people use it. You need to make it useful for specific applications and be customer-focused.

At Celadon, we focus on improving the efficiency and durability of electrolyzers and fuel cells to use in industrial applications. The company came out of Argonne National Lab, and we’re based in Chicago.

Meir: We’ve had a lot of episodes about batteries, and hydrogen comes up often. So, what’s the problem with the hydrogen economy today? What role can hydrogen serve, and what’s holding it back?

Gary: To put it bluntly, I see hydrogen as a "desperation technology." If we could solve nuclear fusion, or find another large-scale solution, we wouldn’t need hydrogen. But for now, if you’re trying to decarbonise sectors like high-grade heat, or where battery capacity and scale are big problems, hydrogen becomes your next best option. It’s not the most efficient or the easiest, but it’s one of the only options until something better comes along. Hence, desperation.

Hydrogen, compared to batteries, didn’t get the billions of dollars of research investment that batteries did, thanks to companies like Tesla. From 2010 to 2020, hydrogen was essentially defunded. Now, with renewed interest, we’re seeing people trying to fix issues around efficiency and durability.

Meir: What’s holding hydrogen back?

Gary: When you look at any technological transition, you need to start with high-value applications that give you good profit margins, then move down to mid-value, and finally to the low-value, mass-market applications. Think of Tesla’s progression from the Roadster to the Model S and finally to the Model 3.

For hydrogen, there was no clear "Roadster" equivalent. Hydrogen is a commodity—you can’t differentiate between a $1.50 hydrogen molecule and a $15 molecule. There’s no social value or marketing appeal like there is with electric vehicles. So, you have to find high-value applications for hydrogen to penetrate the market. The problem isn’t hydrogen’s end use—it’s market penetration in the early stages. Without those first few success stories, you can’t get to mass adoption.

Meir: Let’s clarify that hydrogen is already being used today, primarily as "grey hydrogen," which is derived from petrochemical processes. The focus now is on "green hydrogen." How do we transition to green hydrogen?

Gary: Exactly. Grey hydrogen is used today in petrochemical refining, steel reduction, and ammonia synthesis, which is primarily used for fertilisers and explosives. Green hydrogen would decarbonise these existing uses, but when people talk about a hydrogen economy, they envision expanding its use into sectors that need decarbonisation across the board.

Meir: Batteries and hydrogen differ in behaviour and energy density. So, when we talk about hydrogen, is it primarily a carrier of energy, not a source?

Gary: That’s right. Hydrogen is a carrier, not a source of energy, unless you’re talking about natural hydrogen, which some are exploring. But for the most part, hydrogen doesn’t exist freely on Earth, so you have to create it by splitting water, storing the energy in hydrogen, and then releasing it when needed. You can think of it as a gaseous battery.

Meir: So, producing hydrogen involves splitting water, and the energy cost is tied to the energy required for that process. Can you break down the costs of producing hydrogen?

Gary: Sure. Electrolysis is about 50% efficient today, so you need roughly 50 kilowatt-hours of electricity to produce 1 kilogram of hydrogen. At U.S. industrial rates of around 6 cents per kilowatt-hour, that’s about $3 just in electricity costs. If you can lower electricity costs to 3 cents, you’re at $1.50. But some proponents suggest that with an abundance of renewable energy in the future, electricity will effectively be free. I’m skeptical because supply and demand will always play a role, and someone will buy that cheap electricity before it becomes free.

Meir: We’ve seen that more renewables don’t always lead to dramatically lower electricity prices. What about hydrogen transportation? That seems like a challenge.

Gary: Transporting hydrogen is tricky. It’s a gas, so ideally, you’d use pipelines, but hydrogen can cause embrittlement in steel pipes. So, you need special materials, and even then, hydrogen pipelines are expensive—about $1.5 million per mile. Without significant demand at the other end of the pipeline, it’s hard to justify building them. The alternative is trucking hydrogen or using high-pressure cylinders, but both are costly.

There’s also the option to convert hydrogen into ammonia or other carriers for easier transport, but that only works at large scales.

Meir: What about hydrogen use cases? What challenges do you see in building business cases around hydrogen adoption?

Gary: One of the big challenges is risk aversion in legacy industries. Even if hydrogen is available, many companies won’t switch from natural gas because of tight margins and low-risk tolerance. Another challenge is pricing transparency—there’s no standard market price for hydrogen. Until you have clear pricing, long-term contracts are hard to secure.

Also, switching from grey to green hydrogen can double costs in industries like ammonia production. Until green hydrogen is cost-competitive with gray hydrogen, companies can’t afford to switch.

Meir: Are there industries where hydrogen makes more sense?

Gary: Yes. Shipping, for example, is interested in using hydrogen for auxiliary power units. Shipping companies are incentivised by customers willing to pay a premium for green shipping. The cost of shipping is a small portion of the overall product cost, so even doubling the shipping cost has minimal impact on the final product price. In contrast, in industries like ammonia, the cost of hydrogen is a major component, so doubling that cost is a non-starter.

Meir: You’ve mentioned some technical challenges. What about the micro level—what are the technological issues with hydrogen production, transport, and use?

Gary: On the production side, electrolysis is only 70% efficient at best, so you lose a lot of energy in the process. Durability is another issue—electrolysers and fuel cells need to last for years, especially in industrial settings, and right now, the technology isn’t there.

Hydrogen compression is also challenging. To transport hydrogen, you often need to compress it to 700 bar, which is costly and inefficient. Ideally, we’d produce hydrogen at higher pressures to avoid costly compression steps, but that introduces other technical challenges.

Meir: What about the end use—how does hydrogen compare to traditional fuels in terms of energy efficiency?

Gary: If you burn hydrogen, you’re limited by the Carnot efficiency, like any combustion process—about 40%. If you use a fuel cell, you can get up to 70% efficiency by directly converting hydrogen into electricity. In the long term, fuel cells could potentially reach 90% efficiency, but we’re not there yet.

Meir: Let’s talk about the broader energy storage market. How does hydrogen fit into the grid compared to batteries?

Gary: The big issue with batteries is duration. Batteries are great for short-term energy storage—up to about four to six hours. But for long-term storage, like seasonal energy storage, hydrogen makes more sense. You can produce hydrogen in the summer, store it, and use it in the winter. Batteries can’t do that efficiently over long periods.

Meir: And for military applications, hydrogen has clear advantages, right?

Gary: Yes, in remote or contested environments, the cost of transporting fuel can skyrocket. Hydrogen offers the potential for energy independence in those scenarios, reducing the need for vulnerable supply lines.

Meir: Let’s wrap up with a quick-fire question. Is hydrogen the saviour of society or just a useful part of the energy mix?

Gary: It’s a useful part of the energy mix. I’m skeptical of any grand claims that one technology will solve everything, but hydrogen has a place—especially in industrial applications. Best case, hydrogen replaces diesel in heavy industries, and while you won’t see hydrogen in your daily life, it’ll power parts of the economy behind the scenes.

Meir: Gary, thank you for changing my mind and for this insightful conversation.

Gary: Thanks, Meir. Great to talk to you.

Meir: Thank you to producer Naomi Lazaroff for making this episode happen. If you liked her work and can tolerate mine, please rate and subscribe to Anything That Moves wherever you find your podcasts. Once again, for feedback or to reach out for investment, please go to maniv.com and click contact us. You can also find us on LinkedIn or Twitter at Maniv Mobility. Thanks for listening