There seems to be some conventional or prevailing wisdom about people having to keep to their lanes in different ways. So there are so-called norms for being a worker, being a father, a brother, a son and so on. Overlay that with the dimension of culture, including heritage and religion, you get a different set of different norms that as an individual, you are expected to display.
And so all my life I’ve somehow been defying classifications. One of the big divisions in school I had was between a ‘science’ student and an ‘art’ student. In high school, I defied that classification by doing arts (not just humanities but even fine arts, digital arts, and film) alongside all of the sciences (biology, physics, chemistry). When I entered junior college, I took two science subjects and two arts subjects as my main subjects.
And when it came to college, I just had to go to a school that offered a Bachelor of Science (BSc) in Economics when in most places, Economics was considered a Bachelor of Arts (BA). And then in my masters of economics, despite joining the advanced mathematics course, I also did a module in Economic & Business history.
I often recognise the value and importance of arts despite being an economist and finding it difficult to quantify the value that arts generate. Life in Singapore has become so draining and taxing on the human spirit often because we don’t know how arts play a role in helping us recover and restoring dimensions of our lives that we fail to see or identify. In recent times, as I caught plays from Checkpoint theatre and various films or shorts produced by Singaporeans about life in Singapore, even poetry that is written about life (eg. Government Haikus), I begin to see more and more that we all need arts more than we know. It could well be what will keep us alive.
I was watching Carl Sagan’s explanation of how the Greeks knew that the earth was spherical and how Eratosthenes (then head librarian of Alexandria) calculated the circumference of the Earth without even leaving his home country. It’s a brilliant one worth watching:
Brilliant men in the past would have mastered astronomy, geometry, and mathematics and played the role of military strategists. The ability to make observations in nature and draw interpretations were essential to determine the approach on the battlefield.
Yet, today, with technologies supporting the interpretation of observations and supplying multitude of information to leaders, there’s less of a need for the ‘strategist’. Rather, the tasks of looking and interpreting the various information is decentralised and the information comes together already processed for decision-making.
In such a world, we use resources to displace thinking. Eratosthenes will have to pit his wits against the rocket ships, satellites and scientists with funds for expedition who will say that his calculation yields a figure which is ~2.5% off the mark.
The role of strategic thinking has diminished in importance in the societies which are highly developed and well-resourced. Every now and then, someone comes from seemingly nowhere and overcome an incumbent with all the position, and the resources. A David and Goliath story. In many ways, DeepSeek is an example of that; especially when put in contrast with Sam Altman’s response to a question from an audience at a talk where he said that any worthy competitor to OpenAI will have to invest massive resources and datasets to train another LLM to achieve the prowess of ChatGPT.
I think we need to go back to a culture that appreciates strategic thinking and this sort of brilliance. And believe once again that it isn’t just about resources and overwhelming others with abundance. For those who feels limited by their resources, let the ability to think strategically provide a channel and means to defeat the giants.
Things hasn’t been the most positive for hydrogen the past 2 years or so. Hyzon Motor is on the verge of ‘giving up’, while When one look back, it is a wonder why we felt comfortable ignoring some of the bigger problems associated with hydrogen. It is definitely less ‘trendy’ to tout hydrogen as the solution for the energy transition these days.
One of the challenge about the climate and energy transition is that it is a transition. And that means there is going to be change happening over time; and the challenge is that we don’t really know what the end point is in terms of the technology and pathways even when we know that we’re trying to have a go at net zero.
In the meantime, as we struggle to determine what we’ll use to fuel our aircrafts or vessels, we are making decisions on replacing these equipment, and trying to project cashflows over an asset lifespan or 20-30 years. These all without the certainty of the fuel being available is extremely challenging. So instead, we are more likely to bet on things not changing rather than things changing.
Hydrogen continues to face an uphill battle when it comes to the science, the technology and economics. But there is still good reasons for us to continue refining the technology we have. In the mean time, while we are still trying to decarbonise what we can, we try to leverage the resources that are available more immediately. We can optimise our biofuel supply chains more to achieve lower carbon intensity. Along that journey, we can improve our traceability of feedstocks and biofuel supply chains.
Now, biofuels or any of the new fuels will never be as ‘cheap’ as fossil fuel. And just because they are chemically almost equivalent to the hydrocarbons we dig from the ground doesn’t mean they are the same. This means we will have to continue working at pricing carbon and allowing the real price of carbon to hit all of us. Governments can protect the economically vulnerable not by blocking the transition but ensuring that more and more of that carbon revenues gets directed to support the vulnerable who may not be able to deal with the cost from the transition.
Biofuels could even be a commercialisation pathway for green hydrogen as the hydrogen can contribute to boosting the biofuel yields of organic feedstocks in the FT-Gasification pathway and improve the overall economics of the project when there is access to cheap renewable electricity. It’s almost like blending e-fuels into the mix already. This is a plausible intermediate step for us to encourage more green hydrogen production to sufficiently create more scale to bring down the costs.
The technology surrounding logistics for hydrogen then needs to improve before the end-use equipment would transform. Changing end-use equipment is still the hardest to do. Even if it’s just the heavy industrial users who have to change.
So the good news is that we may still eventually land on hydrogen in some shape or form. It may not be what we are envisioning now, but it’s vital to recognise that the time horizon is probably a lot more stretched out than we think.
As I continued my work promoting the circularity of recovering organic waste and residue for energy purposes (mostly through the production of various biofuels), I begin to see the challenge that this space face.
Right now, EU is putting strict rules around the feedstocks allowed for the biofuels that count towards decarbonisation in their jurisdictions and hence the emergence of ISCC EU standards and certification for the value chains surrounding biofuels (and of course, other renewable fuels). Some crop-based feedstocks are allowed, but most crop-based feedstocks are being penalised by the indirect land-use change (ILUC) considerations – which are being reconsidered at the moment. However, there are some groups who are outright against crop-based feedstocks and considering them unsustainable.
Transport & Environment, in particular, have been rather against the whole idea of biofuels and champion a future that is based on hydrogen. They view biofuels as transition fuels that have no place in a net zero world. Consider the letter crafted to push shipping companies away from biofuels for green shipping just because they claim particular crops have been devastating the environment. They continue their assault on palm and soy industries instead of working alongside to find solutions to help these industries boost yield and reduce deforestation. Consider the achievement of the corn industry in the US, driven by the need to produce bioethanol. Won’t it be better if people work together to realise such improvement and increase the supply of alternative fuels in the world rather than screaming doom and gloom about one feedstock or another?
So what kind of doom and gloom are they perpetuating here, you ask? They commissioned a study by Cerulogy showing that “palm and soy oil would likely make up nearly two-thirds of the biodiesel used to power the shipping industry in 2030 as they represent the cheapest fuels to comply.” Again, the concern is food supply being affected as the resources are directed to energy; and also deforestation driven by these crops as feedstock? Isn’t EU Deforestation Regulations (EUDR) meant to look into these areas? Why not just use the tracking and scrutiny to prevent that damage instead of creating blanket bans? Use an lifecycle assessment-driven approach? And focus our efforts on developing clearer standards for lifecycle assessments rather than trying to exclude solutions before they hit the ground?
Well, if you really want to promote hydrogen, you can also consider the environmental damage from the lack of circularity in the solar, wind and battery materials space. The thing about green hydrogen is that it will require intermittent renewable power and these resources do also take up land space. They may not compete with food crops because they use marginal land; or that livestock can continue to coexist amidst solar panels. Wait, food crops could be grown with other parts of their biomass directed to fuels too! And many of these crops can be directed towards animal feed for feedstocks.
I agree that we probably want to think through a bit how the incentives we create can have very bad unintended consequences. But trying so hard to do that on biofuels is not going to undo the problems introduced by decades of subsidising the fossil industries via various policies. Those distorted incentives are plaguing us till this day.
Why is there such a war against biofuels? I don’t get it.
The energy transition is difficult, not least because people cannot agree on which solution to pursue. People are concerned that the world will go down the wrong path and bring us to the brink of a different disaster instead. Yet we are arguing with each other in front of the ticking time bomb of climate change while the problem of huge amounts of carbon emissions continues.
Behind these ‘energy transition experts’, the energy users are beginning to realise they must take charge of their future energy destiny. There is not going to be a straight-forward answer but they will have to figure out what works for them while decarbonising their energy use. And this is why government and policymakers ought to continue ensuring proper pricing of carbon in their system, and defining standards to track and trace the carbon emissions along supply chains.
The basic operating principles are: (1) ensuring emissions data is tracked and that (2) carbon emissions are priced (it can be paid for by anyone in the value chain as they ought to be able to pass on the price until it hits the ultimate direct emitter so that they are incentivised to lower their emissions). These two principles would already do wonders without complexifying things.
The oil majors want us to find energy transition difficult. They want to be the ones to empathise with the huge challenge ahead of us. Because if we are discouraged and slow things down, we can at least buy more fossil fuel in the meantime. Or we can find ways of paying for carbon dioxide removal directly from their fuel emissions or from the air so that it is fine to continue using fossil fuel. Those are more obviously the wrong paths we don’t want to go down. The more natural gas you use right now that comes from the geological reserves, the more empty caverns available for these players to store carbon dioxide in the future.
It’s not easy to cut through the smoke; and we can definitely be more careful with the process by which we arrive at the ideas we have strong convictions about. But if we can keep to those principles and to try and keep solutions simple, we can get to the answer.
How should research funding be assessed? What makes good spending on research? Should it be about patents filed? Or about the number of significant breakthroughs per dollar spent? How about revenues generated from licensing a technology? Or royalties on the patent? Is that really the best way?
What if a drug that could save many lives was discovered? But then it would take much more investment to get the drug tested and so on? What if the research funding itself wasn’t able to get innovation through to the stage where commercialisation would be successful?
The original question was really hard. And one of the things that my research into intellectual property rights regime revealed is that it never was about the patents system or the risk capital that drove innovations. Often, it’s merely the ability to disclose and disseminate information, especially knowledge that would otherwise have been kept a secret, that would have helped push an overall system towards being more innovative.
After all, the Industrial Revolution happened in Britain during a period when their intellectual property rights were terrible, and a patent was mainly used as a form of marketing rather than a way to achieve a monopoly.
So when National Research Foundation or even our A*STAR tries to properly steward taxpayers money by trying to figure out how to spend research funding wisely, they might want to take note that true innovation is the goal of the spending, and not so much the commercialisation value. The need to enforce some kind of ‘commercialisation’ target could very well destroy the very foundation and philosophical underpinnings of research and discovery. The reason government funding is needed is precisely because the market is unable to offer that same kind of funding directed to those activity – so to demand ‘market discipline’ from those activities will bring us back to square one. The underprovision of innovation and hence market failure. Only this time, it is the government who fails.
This ad campaign by Activista, mainly targeting Space X on Earth day – I believe that was in 2021 – is brilliant. It helps to put things into perspective in terms of how we approach our resources and earth.
The message still rings true today and in many ways, it is saying something about the human heart. Our wandering heart often wants to look for something else to sustain ourselves. Something else that may not be designed to sustain us, but we want to make it what our lives depend upon.
Yes, as a Christian, I’m talking about Christ, who provides the salvation we need when we are wandering about seeking salvation through our work, relationships and other forms of addiction in our lives.
Dr Janeway’s article on False Economies highlights some of the philosophical underpinnings of the modern, capitalistic study of economics that drives the system to behave in ways that endangers the entire economy’s long term prospects at times.
There were so many different themes brought out in the article that is worth more investigation and appreciation. The point that Arrow-Debreu’s work points to the fact that our markets in reality would never be efficient is something that we do not embrace enough of – especially in public policy.
The lack of political courage and unwillingness to be accountable to policy decisions drives the notion that we must ‘leave things to the market’. And today, with the world facing the climate challenge, I do not believe that the market is the solution to deal with the challenge. The political will to align incentives, define standards and mobilise efforts is necessary.
The recent Oxfam study about the rich getting richer faster than the poor being uplifted shows that, indeed, we have enough money to deal with the world’s problems. But far too often, it is either in the wrong hands or working towards the wrong goals. Economics assumes the market would direct resources to the ‘right goals’ but this goal-selection process at present is dysfunctional.
Recently a friend and I was working on some business ideas. We were thinking through scenarios where smart people come up with great business ideas or business models that can generate impressive returns but require capital to do. If the capital markets work perfectly for the specific risk profile of the business (assume that it can be assessed correctly), then all capital should only be able to demand the market rate of return on capital.
We ran some simulations on this. To simplify the whole business and risk, we assume it is a very low-risk infrastructure project that returns constant cashflow across 10 years, one year after the initial cash injection. A project that can bring in >27%, when raising all of its funds from a capital owner, should be split 60-40 if the market hurdle rate is at ~12% for that risk and tenure. This means that though the capital holder is financing 100% of the project, he needs to give up 40% share of the returns to the ones who structured and pulled the project together.
Now, when the project returns rises to 33% over 10 years; and the market hurdle rate remains at 12%, then the capital holder needs to give up 49% share. This means that if the project that the smart guys are able to put together can return more than 33%, then the capital owner needs to give up more than 50% of the returns even though he is contributing 100% of the upfront capital. This is a hard bargain for the ‘entrepreneurs’ organising the resources to strike with capital holders.
This is perhaps how the Thomas Piketty argument about the relative bargaining power of capital gets played out. At the same time, capital can afford to be more patient because the cost of upkeeping capital isn’t as high as trying to upkeep a living person with the wits and capabilities to develop all the ideas and organise the resources. And because capital is more ‘tangible’ and ‘calculative’, it can keep forcing all kinds of cost upon labour side of the equation. In this blog post, labour basically includes the ‘entrepreneurial’ elements as well that is typically somewhat associated with capital.
This is where debt comes in. Instead of getting a co-investor, the project entrepreneur should be able to borrow to finance the project. And the debt tenure can be shorter. A simple solution could be to take out a 4-year debt at 7% interest; this would require the entrepreneur to sacrifice 85% of the project cashflow for the first 4 years, in exchange for the rest of the project’s cashflow. Technically, when structured as a debt, the market interest rate should be lower than the market hurdle rate. Yet because the ‘project’ is new and may not have a sufficient track record, financiers may demand collateral and other risk-management tools to enhance the credit standing. Technically, when structured as a debt, the market interest rate should be lower than the market hurdle rate. Yet because the ‘project’ is new and may not have a sufficient track record, financiers may demand collateral and other risk-management tools to enhance the credit standing. This means that the entrepreneur would have to give out more than he needs to reduce the risks of the capital holder further despite the risk profile of the project.
So, the entrepreneur who does not have any capital to contribute will be seen as having a mouth-watering return since there isn’t any ‘capital at risk’ for the entrepreneur, but the reality is that there is some opportunity cost. Yet if the entrepreneur’s salary is built into the project returns, then he doesn’t have the ‘opportunity cost’. The extra upside would be his ‘supernormal return’.
Over the years, thanks to the multiple pieces of work Blunomy (previously Enea Consulting) had completed on bioenergy in Australia, we have often been cited and also asked questions about the relationship between numbers in our reports.
Since the publication of a piece of analysis Blunomy completed for AGIG last year on Biomethane potential and benefits, I sat down to review and work out a sort of directory to connect together the various work that different clients have commissioned us to do and all now in the public domain.
This is an effort I have undertaken to help generate more clarity in the conversations around bioenergy, especially biomethane resources in Australia. Blunomy continues to seek to accelerate the transition by developing analysis that drives evidence-based decision-making.
We started working on the National Bioenergy Roadmap for Australia back in 2020 and that was an attempt to look into all the bioenergy resources, regardless of what kind of fuel they could produce. The total theoretical potential estimated at 2600 PJ was computed based on the net calorific value of the various feedstock streams available including forestry residue and biomass, with assumptions applied on their moisture content.
In the Roadmap, we assumed a 45% recovery rate under the Business-As-Usual modelling as ‘limited information is available to assess [feedstocks’] current and future, technical, commercial and sustainable accessibility’.
Subsequently, Blunomy started looking into biogas/biomethane in greater detail, studying the biomethane yield of various feedstock streams suitable. Sustainability Victoria commissioned a piece of work around Victoria’s biogas potential, which was published in 2021. The main contribution of this piece of work is the stricter selection of feedstocks and the application of different recovery rates for different feedstock streams. The study eliminated some of the resources from consideration for biogas potential due to high lignin content and also determined that paper & cardboard were more suited for recycling.
Table excerpt from the Victoria biogas potential assessment (2021)
While this work only covered the potential for the state of Victoria, once again, using data from the Australian Biomass for Bioenergy Assessment (ABBA) study, the approach on feedstock selection and recovery rates were eventually applied to more states in Australia to obtain the Australia biogas technical potential that was presented in the Appendix (Slide 36) of the 2030 Emission Reduction Opportunities for Gas Networks Report (2022) published for Energy Networks Australia. In it, we stated that the biogas technical potential of Australia was 506 PJ.
These figures, including the state-level breakdowns, were extensively used by ACIL Allen in their work on Renewable Gas Target for APGA and ENA. They added landfill gas into the mix, something we did not previously include in our studies as we felt that landfill gas was ultimately a subset of the feedstock potential from the waste streams we had already computed in our theoretical potential. Nevertheless, we acknowledge that when considering how much biomethane could be produced per annum in the near to medium term, the landfill gas resource cannot be ignored.
One of the important elements when considering the broad use of biomethane to displace natural gas was the consideration of proximity to gas networks. We got to dive more closely into that in 2023 when AGIG commissioned the mapping work for biomethane resources around their networks in South Australia, Victoria and Queensland. By this time, Blunomy had developed a new methodology to disaggregate the biomethane feedstocks spatially by using land-use data. This allowed us to estimate the amount of feedstock with greater granularity on locations, though the recovery rates were still applied according to feedstock streams.
The report was eventually published in 2024. It contained not just the biomethane potential near AGIG’s networks; we reviewed and updated waste stream figures in some states, included landfill gas resources into consideration, and updated the recovery rates in consultation with more local experts. As a result, we developed updated theoretical and recoverable potentials of biomethane in the states of South Australia, Victoria and Queensland. Those updated figures suggest that waste figures have been increasing over time, and the biomethane potential is likely above the 506 PJ we estimated in 2021.
It has been an incredible journey since the days of the National Bioenergy Roadmap. We had to deal with so many doubts about biogas and biomethane, misinformation and poor understanding of the nature of this biogenic source of methane. As Victoria’s government contemplates their approach to renewable gas in the state to deal with impending gas shortfalls and the need to decarbonise energy use, there is no longer doubt that we need biomethane. It is a question of how to get it into the system quickly. I hope we don’t have to hit up so many walls this time to get it right.
This article was first posted on Linkedin as my first article contribution to the platform. The link can be found here.
