Hype Risks in Energy Transition Project Planning – Part One: Novel Hype Risks

Morgan Rodwell, P.Eng. (AB,BC) – Executive Director, Process Technology, Fluor Canada Ltd.

We have all heard the term “Energy Transition” and recognize that it encompasses a wide range of potential capital projects across many industries. This can include carbon capture and sequestration (CCS), carbon utilization (turning CO₂ into a useful product), low-carbon emission hydrogen production, biofuels, biomass utilization, electrification, energy storage, power generation from nuclear or a renewable source, or simply energy efficiency improvements. All with the same goal: produce the products and energy our civilization needs, while reducing the environmental impact, particularly to the atmosphere.

Since 2018, I have been involved in several early-stage projects that fall under the energy transition umbrella. I have worked with various partners from startups and technology developers to major international energy and chemical companies and financiers to providing input to the government. Based on my experience through these engagements, I believe there are two key risk areas that need to be considered when developing energy transition projects: novel hype and project cost risks. In this piece, I’ll cover novel hype risks. For project cost risks, see part two.

Novel Hype Risk materializes when you commit to a novel technology too quickly, and then experience difficulties with resolving the associated technical challenges while trying to meet project cost and schedule targets. Maturing an energy technology from lab/pilot to commercial scale (TRL 5 to TRL 9) can take a decade or longer. Attempting to begin project development while working on scaling-up a novel technology with the intent of meeting a decarbonization target poses a significant and real challenge that is not readily or easily overcome.

There is significant media coverage given to select technologies and solutions, but very little consideration given to the complexities of technologies, the status of technology development or even project-specific circumstances that make a technology potentially viable in one location while render it unviable in another. The caution is to not rush into investing in a technology and underdeveloped concept while ignoring risks and assuming that the unknowns can be easily resolved or managed. The lesson here is that just because there is a lot of hype around a technology or pathway to decarbonization does not mean it is technically ready or will be economically viable in the timeframe required.

It can cost millions of dollars and many years before a new technology is technically proven, let-alone commercially viable. Investors in novel technologies need to recognize that the model of a minimal viable product may not be a good fit in this space, and that pilot facilities and even demonstration scale plants very rarely make money due to their lack of economies of scale, added scope to allow for experimentation in operation, and often low reliability without thousands of operating hours behind them.

Further, what works in the lab may not translate through scale-up and intensification. For example:

• Chemistry that works well in the lab when diluted with reagent-grade materials may behave very differently at the higher concentrations needed to avoid pumping enormous quantities of fluid through very large equipment or when contaminants are present.
• The combination of process material properties and mass or heat transfer limitations can result in very large equipment dimensions. Large surface areas are not a problem in traditional heat exchangers between high pressure gases and liquids, but the same is not true for free-flowing solids in low pressure gas spaces.
• The scientific literature is not all-encompassing. There are chemical pathways and process steps that lack information on physical properties, thermodynamics, reaction, and mass transfer kinetics. This could require several months in the lab or pilot plant to generate the fundamental data needed which takes time and resources.

This is not to say that novel technologies should be ignored when developing energy transition projects. They just require far more due diligence, awareness, and full consideration of the risks associated with implementing a novel technology to ensure the desired outcome is met. As noted by the many public reports on energy transition and achieving net zero, a significant portion of the needed emissions reductions will depend on novel technologies or technologies that do not yet exist.

Even if you are implementing a technology that has been commercially proven, such as blue hydrogen production or flue gas carbon capture, these facilities may be somewhat different from those that organizations have prior experience with. Additionally, many of these projects are large and complex with capital costs ranging into the billions of dollars. As such, there are many risks associated with executing these projects, so the question becomes: how do you estimate the project costs at the outset without any level of certainty of possible outcomes?