Ep 21 Decarbonizing small and remote grids with hydrogen with Mathieu Geze

[00:00:00] Hi everyone, I'm Ben and I'm Yiou. Welcome to Sustainable Energy Asia Podcast.

[00:00:07] Today we're receiving Matiu Gose, APEC Director at AGF Energy, a French IPP Specialized in Hydrogen and Small Remote Grid in the Capitalization.

[00:00:16] Matiu is based in Indonesia where he leads different man-affords as the AGF Energy in Indonesia and in the APA region.

[00:00:24] As always, grateful if you could take the time to read and comment on the show. It helps listeners to find us.

[00:00:31] Thanks and I'll know you at the show.

[00:00:34] Hi Matiu, welcome to Sustainable Energy Asia Podcast. I know you've been living in Indonesia for more than three years now.

[00:00:42] So we're brought to you there in Indonesia and how's your experience so far?

[00:00:47] Hello Eou, nice meeting you. Walk brought me to Indonesia three years ago at AGF Energy. We decided for me to be localized in Jakarta.

[00:00:57] So I'm in charge of Asia region and Director for Asia. We are in seven countries.

[00:01:03] So Indonesia is one country among those seven markets and why Indonesia? I would say it's because of the potential.

[00:01:10] When you look at Indonesia, the scale, the island grids and less amount of island grids in eastern Indonesia, it's quite a unique context for HDF Energy

[00:01:20] and because we are targeting this kind of geogragesical context. So that's why we decided to be there.

[00:01:27] I know you are in Singapore for example. There's not a lot of internal debate whether we should put a regional office in Singapore or not because most players are doing that.

[00:01:36] But we are project developer and IPP and for us it makes sense to be close to our clients and our clients are the utilities, the ministries.

[00:01:47] And it's really important to be reactive with them and to show that we believe in the market. So that's why Indonesia, Jakarta was the obvious choice for HDF.

[00:01:57] Great. So that's now talked about HDF Energy. Let's start from the company's history and maybe you can let us know the business model.

[00:02:09] So HDF Energy is French as you can hear. I'm French. We are a company dedicated into hydrogen projects as a project developer.

[00:02:20] Hydrogen is versatile and we are also versatile. We can be a project developer of power plants of infrastructure for ports, data centers, heavy mobility.

[00:02:32] So we really try to address the whole potential of hydrogen as developer. In addition to that, we are also fuel cell manufacturer.

[00:02:41] For example, we will inaugurate our plants in Bordeaux in May this year, multimedia what fuel cell plants.

[00:02:49] So we are both project developer fuel cell manufacturer.

[00:02:53] Again, I'm in charge of Asia region. In Asia, we have many developing countries. So except I'm a kid shot but except Japan, South Korea, Singapore, China and the other side.

[00:03:04] The other countries are developing countries.

[00:03:07] So we cannot have the same strategy than in Europe. It will be I would say changing for us to try to promote all type of application for hydrogen because most of them require subsidies.

[00:03:18] So we will focus in Asia on a sector where the needs for subsidies is limited and we do believe that the power application is the right approach for us because if we target the right context, we don't need subsidies.

[00:03:32] So again project developer fuel cell manufacturer and in Asia, a focus as a project developer of power plants and IPP.

[00:03:41] And this is where we are going to focus on. So we'll talk about the specific context of remote grid and the application that you have on renewable in the first part and then maybe after we'll focus a bit more in Indonesia and the local context.

[00:03:54] So if we start with remote grid, can you explain what are the main challenges of balancing generation and conception in isolated islands? And also can you explain why

[00:04:06] the generation such as coal or gas are really generally difficult to integrate and why in a lot of remote grid actually we end up with 100% generation by diesel fuels.

[00:04:20] This topic is quite important. It explains why we started our development in Asia by Indonesia, why also gone main offices in Philippines?

[00:04:31] But it's important also to answer that question by saying is not only in Indonesia, not only in Philippines, not only in developing countries.

[00:04:39] Well I'm French, I will give the example of France which you look at island grid in front and there are many between Indian Ocean, Pacific Ocean, Caribbean Sea.

[00:04:49] Most of those grids are based on fuel oil, a few of them on gas but most of them on diesel and giant.

[00:04:57] And we see the same in Japan when you look at island grids in Kusho, Okinawa, Little Islands managed by TechCour, all of them are based on the diesel-jump set, same for some little islands in Taiwan.

[00:05:12] So that is important to tell, it's not based on the stage of development of the country or the capability of the utility is a question of geography and how systemability is to develop infrastructure and supply chain.

[00:05:28] So when we look at island grids, most of the time it means that the scale of the grid is limited. There is no key number but most of the time I would say in Indonesia it's below 100 megawatts.

[00:05:41] We are even in Japan, Taiwan is really megawatts. When we look at this scale it becomes complicated to amortize the infrastructure requires to bring the gas for example.

[00:05:55] When you want to transport gas you need a dedicated ad hoc infrastructure locally, when it is to produce a few megawatts or even 20 megawatts, 30-50 megawatts it's super complicated to amortize that infrastructure and in addition to that it's also complicated to handle the logistics because it's super obvious and simple.

[00:06:15] So we are going to take the boat to make a huge detour to feed that island. It's quite costly if you want to optimize the scale you need a huge storage capacity locally so at the end of the day we see that it's not sustainable and that this is a worldwide context again from France, Japan, Spain and so on.

[00:06:33] To review the main challenge of those islands grids is to address these logistic and fast-ructuring issues and the easiest way to produce electricity in such islands is to transport diesel and to use diesel to make electricity because it's quite simple I would say project oil to handle and to distribute anywhere.

[00:06:56] Then we can mention why not renewable in AdWiz to address the electricity, mix and decarbonization needs. What we see globally is when the utilities can use hydro or geothermal they will do it and in Indonesia it is the case but when you don't have hydro or geothermal resources locally you need to if you want to decarbonize your grid you need to rely on solar and wind and this is termitant and the end-termitancy will bring strong instability to the island.

[00:07:26] So we can use the grid and that is a challenge for the utilities and again not only in Indonesia, not only in developing countries globally and I was giving the example of Japan earlier.

[00:07:38] And that triburing us to one of the solutions that you're promoting in the region which you call renew stable it's a solution that's combined renewable generations so we can be wind solar and we use two storage components

[00:07:51] one being the battery storage and the other with hydrogen system so electrolyzer storage component and then the fuel cell can you expand a bit more on what are the benefits of this solution to overcome the challenge to decarbonize those more grids.

[00:08:08] So the main challenge again to decarbonize the grids for the utilities is to handle the entire latency so that's why we see mainly diesel in island grids so far as project developer and IPP to make the utility comfortable.

[00:08:22] We need to commit on the stability of the electricity we will deliver to the grid and for that we need to be able day and night to deliver a stable power to the grid.

[00:08:34] In order to do so we will combine different technologies on one hand solar or wind then batteries but also hydrogen and each technology will address different bits and time of the day so the solar will deliver electricity when there is the sun obviously and we will over size the PV plant in order to feed the batteries and the electrolyzer.

[00:08:59] The batteries will address the picking hours so the couple of hours at the end of the day where the electricity is quite extensive while the electrolyzer will make hydrogen with water we will store that hydrogen and during the whole night we will deliver electricity to the grid through the hydrogen it can be a couple of days whether it's bad.

[00:09:24] So as developer and IPP to deliver the stability to the grid day and night at a high availability in order to make the utility comfortable on the stability of the system will come back to the technology.

[00:09:37] And it's interesting because we do see a lot of solution with intermittent renewables and battery here what is innovative in your solution is you integrate the hydrogen component can you explain why you have the hydrogen also as far as the solution.

[00:09:53] It's a question of synergies among the technologies we believe that there is no ideal solution between batteries and hydrogen in a way that this is not one or the other we believe that could be a synergies when we need to deliver to the grid and electricity.

[00:10:08] They are not at high availability because the batteries have downsides they will have a limited capacity they will have I would say limited amount of cycles to use the batteries degradation of the performance along the time so.

[00:10:25] Again as developer and IPP or role is to beat the poor clients and to commit that it will work for 20 25 years with certain level of performance and if we want to deliver electricity day and night at high availability considering the limitation of the batteries we would have difficulties to do so.

[00:10:45] And that's why when you look at the batteries projects worldwide and for example the one in Australia most of the times the batteries are used to deliver fast answers to the grid for 30 minutes 1 hour to hours but we didn't see so far projects where batteries are used as a base load solutions so that's why we involve also the hydrogen because with the hydrogen we dissociate the generation of electricity from the storage component the storage is the tank with the hydrogen.

[00:11:13] Hydrogen and the production of electricity is based on the fuel cell so the fuel cell will deliver power to the grid as long as the hydrogen is available and hence we can address the utility needs for the whole night or a couple of days.

[00:11:29] We can take a look at the context of Indonesia as a whole how does the power generation mix looks like in Indonesia I'm also curious about who are the main entities that involved in managing the grid in the country.

[00:11:43] So the electricity mix in Indonesia is mainly based on coal roughly 60% on gas 20% and on renewable energies about 20%.

[00:11:54] So we can see that the share of coal is quite big and this is I would say one of the challenge of the country how the carbonizing grid while Indonesia has so much coal resources but we see also that the share of renewable energy is not that small.

[00:12:08] The main entities in the country this is extremely simple in Indonesia we have two main entities on one hand of the Ministry of Energy called the ESDM on the other hand we have PLN so PLN is the national electric utility.

[00:12:25] It is a strong monopoly on the transmission distribution even on core generation they own most of the assets so it's similar to countries like I would say Vietnam, Marlko,

[00:12:38] Mexico and we were talking about the mix it's really important to keep in mind the diversity of Indonesia and OK 60% of coal but as an average and we may focus on that topic when you switch to Eastern Indonesia the share of coal is vanishing because of the logistic and infrastructure development.

[00:13:01] Let's focus on Eastern Indonesia it would be interesting if you can give us a bit of background about this region and why the place of remote grid is particularly high there and basically what are the challenges that this region is facing to decabonize local grids and maybe for you just to explain essentially why do you see there is really a potential for the reduced table solution to play a role in Eastern Indonesia.

[00:13:29] It's quite the good question and despite what I said earlier the challenges to develop renewable energies because of the share of coal in the grid we are at HDF extremely positive and enthousiast on the potential of our projects which is based on renewable energies because we are targeting mainly grids which are not relying on coal.

[00:13:51] And those grids are to make it short in Eastern Indonesia but not only if you look at Eastern Indonesia its full of isolated grids due to the tyranny of distance in Indonesia just as a reminder and analogy sometimes help to understand how the country is big.

[00:14:08] If I'm not wrong Indonesia as a whole is equivalent to the distance between London to Baghdad and when you see such distance and you see that many grids are between 5 to 100 megawatts.

[00:14:23] How could you develop the main grid? How could you develop the gas infrastructure and hence most of the system rely on this origin set which means they rely on the electricity which is very expensive.

[00:14:37] And that is really important to have that in mind on the side we are combining renewable energies batteries and hydrogen so one of the first comment is but that should be super expensive.

[00:14:48] Yes and no indeed it's expensive if you compare to coal plants in Jakarta is not expensive if you compare to diesel, Janset in Eastern Indonesia and again we can do the analogy with the house market.

[00:15:01] What is the price of the house in Paris? What is the price of a house in the countryside of France? The perception of the affordability on how expensive it is will depend dramatically of the context.

[00:15:14] So that's why again we focus on Eastern Indonesia that's why we are positive because hydrogen can play a key role to replace diesel Janset over there while making PLN comfortable on the stability of the system.

[00:15:29] And developing projects in the region what have been the key challenges that you have faced so far and what has been the milestone that you have been able to achieve since you studied more than three years ago.

[00:15:43] So I would say two types of challenges on one hand the challenges as project developer whether it involves hydrogen solar gas coal it would be the same type of challenges and then challenges as developer of innovative solution.

[00:15:57] So for the challenges as project developer it's quite similar to the other players it's like finding the right spot, the right grid, the right context for solution, the coordination among the district provincial and national stakeholders we mentioned earlier that Indonesia is a huge country.

[00:16:17] So indeed there are some challenges whether related to how we can set up the right team to address the country of that scale challenges in time of amount of stakeholders we need to update and follow up with.

[00:16:31] But challenges also related to the land access is an important topic no land, no project you can have the best idea concept in the world if you're not able to secure your land you won't be able to move forward but those challenges are similar for all players and they can be overcome by setting up the right strategies and the right equipment so HDF now has a team of more than the 12 people in Indonesia only Indonesian people accept me and that's why also we are able to address.

[00:17:01] So we have to address those topics then we have challenges which are more specific to us in a way that we propose something innovative which is a power plant based partially on hydrogen storage and how as project developer we can make the stakeholders first comfortable about the innovation.

[00:17:18] We are we have many arguments to make them comfortable but that was among the challenges we had to address and how also this innovative solutions is compatible with the existing regulatory framework many countries are working on hydrogen roadmap updating their regulatory framework to support the development of the hydrogen economy.

[00:17:41] On our side we cannot wait six years for those plans to happen so we need to find way how to make projects happen considering the level of innovation and at the end of the day I would say this is an opportunity because it means that there are very few to not say no player who are proposing the same solution so we can address high level stakeholders quite easily and it's related to the second part of your question what are my students.

[00:18:07] I would say that 2023 was a very dynamic and positive year for HDF in Indonesia we met three milestones which involves both the National Utility PLN and Ministry of Energy because again those two institutions are handling the electricity and energy sector in Indonesia.

[00:18:28] So for PLN we have two key steps like steer we signed the MOU in April in Paris during the trip of the duration from Indonesia institutions to Europe.

[00:18:40] In that occasion we met a PLN president most of the board of directors of PLN and we signed the MOU with them on developing hydrogen projects in Indonesia and especially the renewable core plants in eastern Indonesia.

[00:18:52] A few months later in December during the Cup we signed a GDSA with PLN president joined developments to these agreements in order to develop the renewable core plants in eastern Indonesia.

[00:19:08] This second step for us was amazing again we are a small medium scale French companies which made its first step in Asia three years ago and being able to sign this agreement at the Cup with PLN president is an achievement just to give you an idea of the other companies will sign something on hydrogen that day with PLN.

[00:19:31] There was the CEO of a cooper and the president of L3D a company from Egypt.

[00:19:40] So being part of that group of companies for us was a massive milestone and it shows the positive dynamic we have with PLN.

[00:19:49] And then last but not least we had the opportunities to meet the Ministry of Energy a couple of times during that year which is also important because at the end of the day we need the support from those two institutions.

[00:20:01] So I have to say that's really impressive for a company like this and also really like the way how you perceive challenges and opportunities.

[00:20:11] So now I'd like to ask you this question about how you see HDS energy will be involving in the next five years and what would be the key milestones you hope to achieve in Indonesia and in the region.

[00:20:26] But that's a good question. We are lucky the podcast is recorded obviously so we can listen in five years to see all right or wrong I was first part of the answer is also to explain how it's important to focus on poor application as hydrogen developer again because of the affordability and the fact that we don't need necessarily to subsidize that is really important to underline because most of project developers of hydrogen projects.

[00:20:56] They will look at trading the green molecule and that is the real market of hydrogen on the long run in the way that it's the mass market.

[00:21:05] It will become a commodity sooner or later green hydrogen will replicate what LNG did decades ago.

[00:21:12] This is not a question is just a question of time that will happen it will be driving by US Europe, Japan, South Korea and the Apple for the first years.

[00:21:21] But once green hydrogen will be affordable once the infrastructures will be financed and in place every country should use green hydrogen to decarbonize the sectors.

[00:21:33] But on our side for the first year we decided to focus on power because we can materialize green hydrogen projects on the short term in any countries whether developed or developing countries and that is really important because at the end we need a learning course to make green hydrogen projects happen.

[00:21:51] We will start to figure out scale everywhere at us now where so thanks to that experience from the first year based on the power plants we believe that we will become a key player of hydrogen power plants in Asia and worldwide because we were able to materialize projects on the short run.

[00:22:10] Doing so we bring this learning course that most countries and players need in hydrogen and we will be able to accompany the implementation of the other application related to hydrogen.

[00:22:23] I will give you a couple of examples heavy mobility train vessels hydrogen as a huge role to play many locomotives worldwide based on diesel it can be viable to retrofit some locomotives into hydrogen.

[00:22:39] We expect to become a key player of heavy mobility infrastructures especially train and maritime sector in Asia and then based on this experience heavy mobility power plants which in both again production of hydrogen storage of hydrogen and cohesion into electricity all return experience will help us to become the hydrogen leader in Asia region for all type of infrastructure.

[00:23:06] Thank you Matthew that's excellent.

[00:23:09] Thank you.