Through the Linkedin learning course by Bob McGannon, I became acquainted with the idea of intelligent disobedience. I think the premise that he lays out is pretty interesting. That the human world is made of many rules and usually, 95% of the time, these rules work but then there is always 5% of the time when it doesn’t. This is when circumstances are extraordinary, when the situation is not as expected by the rule-makers and so on.
The exceptions are what calls for intelligent disobedience. After all, the reason that a person should be put in a job is not because he knows all the rules on the job. He needs needs to be able to follow, but more importantly, he needs to know when to break them. If rule-following is all it takes, then the cockpit of most commercial aircraft technically don’t require pilots. It is the need to take exceptional actions that we need professionals to take certain roles.
Talents are basically known to be the ones who break rules. They don’t get punished for them; in fact more often than not, they are celebrated. Philip Yeo is a good example of that in Singapore. In fact, he probably exhibited most traits of intelligent disobedience in most of his stories of defiance that he recorded in his book, “Neither civil nor servant”. To a large extent, risk-taking involves a lot more nuanced thinking than the manner our Singaporean culture allows for.
The previous two posts are really just preparing me for this final one about returns on capital. We have talked about the aspirations of labour and that perhaps capital should be more like labour, where it is not just trying to get a return to multiply itself, but actually to look to more qualitative returns as well. But how would capital do that?
We see examples of this done using state capital. The government uses its capital to invest into public infrastructure, education or even public housing; all of these drives returns at broad economic and social levels. And this can generate more taxes in the future but the idea of the government isn’t to actually be able to generate more taxes in the future. Having more taxes is good because it can sustain the pace of these investments but the actual return is what the society reap in terms of better standards of living, greater knowledge in the people and so on.
Yet private capital holders are not exactly thinking this way. Private capital holders act as if most of what matters is that invested capital reaps more capital. And imagine if this was applied to the government, that it simply invests more so as to gain more taxes. It might end up investing in more coercive approaches to extracting more taxes. Or to just invest in areas that gives it more power.
If companies starts developing a vision of the future and of the world it wants to build, and define the returns on capital as what gains the world get in steps towards those vision, one could expect businesses to behave differently. In other words, we start investing the way we would want to be able to practice charity or giving effectively. We put our money where there can be most impact and action towards the future we want to see in the world. The returns come when we are able to step into the future that we had envision, not when the money flows back in. In most cases, if that future in our vision materialises, the monetary gains should come in to sustain that vision. If it doesn’t, then something is missing somewhere, and you either find another vision or path to invest into, or harness further resources needed to move towards that.
When money was less easily printed, more of a medium of exchange and unit of accounting than an object of desire or a means of comparing riches across large groups of people, capital was not just a stash of cash. Capital was productive capacity vested in some kind of hardware or tangible ‘thing’. It could be a plot of land, or a buffalo, or a building that can shelter one from a storm.
When you have a plot of land, you’re chasing produce or crop yield. But it doesn’t stop there because crops can decay, so you have to find your market. And even in the market, you have to be clear what you hope to get eventually with the crops you sell, because the money that you hold might get debased quickly or you could be just bartering the crops. So you might think alright, I want to be able to improve yield, so the gains will go towards a buffalo, or some tools. Or you use the crops to pay workers, so you get more help and work the land more intensively.
You ‘save’ by preserving food, or having more children (whom you feed with the extra crops). And so the land, which is your capital chase for returns but what you get in terms of returns may not be more land or more ‘money’ but more goods, a richer experience of life. When humans try to regulate that by creating money, and then try to introduce price stability and the notion that money or at least the value is somewhat more persistent than other things in the world, our perception of how the world works gets skewed.
We accumulate money and try to accumulate even more with the money we get. All the while, it becomes just a meter that is counting scores without changing your life. Sure, you can exchange money for luxuries and a so-called better life. But why not just postpone that and make more money in the meantime? So the game of capital is just chasing returns, almost perpetually. The result is that capital seeks to indebt people; and the central banks ease the problem by printing more, creating inflation so that people will be led to consume, and to actually behave a bit more like when money was less trustworthy.
But this itself becomes a bit of a solution for easing recessions, stimulating the economy – kick-starting some kind of positive cycle that leads to growing activities and expansion of economies. And the whole system goes back to being a dog chasing its tail. The growth in our economy is simply to achieve more growth. And that is starting to behave more like capital again. No wonder capital wins labour in the game, because we’ve all been led to play the economy like capital’s game.
Perhaps if we understand labour a bit better, we can steer capital for the better?
As a strategy consultant in a firm that focuses on the energy transition, we deal with all sorts of topics around it, particularly around supporting technologies, new and greener fuels, etc. Now there is a camp of people who thinks the transition is as good as moving from horse-draw carriage to the internal combustion engine – you don’t need the carriage-makers to change, you simply need newer players producing new goods to displace them. So thinking the brown or grey players can move into green is wishful.
There is another camp that believes the transition is made only when the players who are still in the carbon-intensive side of the game joins in. After all, light bulb manufacturers are still needed as LED takes off – the new LED technology simply adapts to all the legacy connectors which older bulbs had used. Basically, we still needed the components of the carriage-makers to join up into the supply chains of the new players.
When it comes to climate change and all the issues around making sure we preserve the quality of life on earth for the future generation, it is really difficult to think about costs. And it is a bit of wishful thinking to imagine that the current energy crisis in Europe now is an excuse for the oil & gas sector to hang around in its present form. The sector doesn’t have to cease to exist, just not in the same form as it did with the same activities as it did.
How to get them to make the transition, is a much harder question to answer.
The world is messy and complex; and humans make sense of it by creating some sense of order. It first started with creating routines, telling stories, and then we started making things, creating tools, building structures, which changed our own surroundings.
We started changing the environment we lived in, in very profound ways that we didn’t yet realise. We discovered fire and we burnt wood, or leaves, or anything that could be burnt. We then discovered fossil fuel and unleashed lots of productivity, and it sure took a long time to translate these productivity into higher standards of living.
In some sense, by telling the stories about possibilities and changing perceptions, we distorted our own realities. Realities of what will happen to us, about how the world works. Again and again, our assumptions gets busted; either by happenstance or actively resisting our old tales and developing new ones.
Steve jobs was described as having a reality distortion field around him that affected the developers of Macintosh. He manages to convince himself and those around him that those different requirements he put on those around him are possible. Using his charisma and marketing capabilities, he helped to encourage, motivate, taunt his people into persisting through incredible challenges and difficulties.
Distorting reality takes incredible courage; and one could also argue, foolhardiness. The problem of the survival bias is that we don’t see how often the people who follow the strategy fail so miserably they just wither and disappear. We only seem to see those success cases and stand in awe of how they push things through. So at what point are we stretching it? When can we be considered to have gone too far in dreaming? It’s a really tough call.
The idea of the 3Rs were first mooted based on the order of action for each of the concepts. You were to first reduce usage of things that could turn into waste. Reducing packaging, not using disposables when that is not needed, no need for extra plastic bags and layers of bagging. No need for straws when you have a cup to sip from. No need for many other gift boxes, wrappers, or other fancy stuff.
Then you were to reuse if you fail to reduce. Maybe try to take a gift wrapper apart nicely so you can use it to wrap something else. Or reuse packaging into decorative materials and so on. There are limitless ways to reuse things; and they don’t have to be used in the same way they were used the first time. Paper is easy to reuse, as are many plastics that we take for granted and use only once. Single-use is a problem; not the materials in and of themselves.
Finally, recycling as last resort. It is not the first thing that should come to mind but the last. You have no way of reusing and you couldn’t reduce usage so you have to try and recycle it. Of course it doesn’t work when it is too much of a mixture, or too dirty, and the story goes. So a lot of post-consumer or post-commercial waste cannot really be recycled. they eventually get burned in some cases (like in Singapore) or buried (in landfills for most other places).
But what is recycling really? What counts? Crushing them and reforming new materials with them? How about just burning them in some kind of manufacturing plant that requires fuel – like in a cement plant? What to make of paper that gets simply shipped away elsewhere. And when organic waste becomes converted to fertilisers? Are they actually ‘recycled’? It’s really strange what we think of as recycling because technically, if things were left to nature – most of it is simply ‘recycled’, joining the string of things in the world back on the evolution path and lifecycle into something completely different.
This is a the last of a series of 3 articles on hydrogen. You can access the other 2 parts here and here.
Green hydrogen is chemically indistinguishable from natural gas that has gone through steam methane reforming to extract hydrogen. There is a need to properly certify the origin and volumes of these hydrogen produced to verify their carbon footprint (or lack thereof). This is the first piece of the puzzle.
And in order for this certification, standardisation must happen. Sustainable Aviation Fuel (SAF) has more or less taken off because of this ability to standardise at least technically. And then lots of different additional sustainability requirements are layered upon them to ensure that the green credentials and identity are more established. Standards for SAF are still not exactly super stringent from the sustainability perspective but the prescribed standards and associated pathways allow for a completely separate value chain developed from the A1 jet fuel.
Green hydrogen must go through the same; and its derivative products, such as green ammonia must itself be standardised and certified in order to succeed becoming another low-carbon fuel, whether it is for co-firing in power stations or as a maritime engine fuel.
Development of the separate value chain from the grey or brown hydrogen is the second piece of the puzzle. This means that a lot of work must go into the supply chain players getting together, jointly marketing their newly standardised product, and reflecting to the world that there’s actually some kind of established activity and industry with its associated transparency in pricing.
Final piece of the puzzle is in terms of financing. As there is no clear long-term commitments, the projects must first be funded by equity; likely at slightly smaller scale so that the subsequent scaling-up can enjoy the benefits of falling prices of electrolysers or batteries. The equity players who would come in on these projects would be the impact investors, the offtakers of these green hydrogen (including steelmakers, power-to-liquid e-fuel producers, green ammonia producers, etc.). They should be helping with kickstarting these projects because they will need the green hydrogen – and since they will require more of it over time, the cost of production can be averaged down and they don’t have to worry about being locked into higher prices.
Government can step in to fund the first projects using revenue raised from carbon taxes. By pricing carbon, raising its price over time and using the revenues to push ahead greener technologies and applying innovations, the world can move forward with the energy transition.
This is a the second of a series of 3 articles on hydrogen. You can access the other 2 parts here and here.
So hydrogen is not taking off despite it being so integral in the energy transition and the low carbon economy. What is the problem?
Hydrogen often gets peddled around as the wonderful element or molecule (if you think of it in terms of the gas) that will enable us to transition to zero carbon. It can be combusted or reacted in a fuel cell to produce just hot water – which reflects how unpolluting and clean it is. It can be produced by electrolysing water, and the byproduct is just oxygen, which is again wonderful in terms of the way we think about cleanliness.
Green hydrogen today is costly to produce, mostly because the electrolysis process isn’t particularly efficient and very pure water is needed to reduce the deterioration of the electrodes used in the process. Hydrogen is not easy to capture and store by itself as it isn’t really stable in the atmosphere (quick to recombine with oxygen). The cost of producing was about $3-6/kg but of the spike in natural gas prices recently, the cost of grey hydrogen itself already outstrip those levels of green hydrogen costs. The only tricky part is that because the corresponding electricity costs has also risen due to the energy crisis, diverting renewable electricity to producing green hydrogen has naturally become more expensive.
So it seemed that green hydrogen by itself is caught in a bind where its price rises when its ‘grey counterpart’ rises in price; while not exactly falling as much in price when the grey counterpart is cheap. With such features, it is difficult for potential adopter to embrace it wholly at this point. To the extent that demand for it right now is typically short term and no one is able to commit to buying at the high prices over long periods of time as they believe that prices should fall as technology improves.
So we get into a self-reinforcing feedback loop where the lack of adoption keeps prices high which itself keeps adopters at bay. Developers of hydrogen projects are facing challenges financing these projects since they are not able to secure long-term demand for the products of their project. Hydrogen council’s latest update of the market situation indicates that there are many more projects announced but the conversion rate of projects from ‘being announced’ to ‘final investment decision’ remains startlingly low. In fact so low that there seems to be an ever-growing pipeline of projects partly because projects simply don’t get through the pipeline!
There are very specific opportunities where hydrogen production can make some kind of sense at the moment but they remain limited. For example, when large utility scale wind or solar power needs good, longer term storage due to lack of load demand during periods of strong production. Or perhaps renewable electricity production capacity outstrips local supply either due to population departures or long-term planning of power capacities that did not materialise.
Hydrogen can also be useful when the grid is not strong enough to take high productions of these variable renewable electricity and hence the production gets curtailed (ie. they are not allowed to inject into the grid). Hydrogen storage can be viable at scale and it is also cleaner to the extent that it doesn’t have to be replaced as frequently as Li-ion batteries and hence produce less waste from an environmental footprint perspective.
Outside these opportunities, it is difficult to justify producing green hydrogen; and even with such opportunities, it is not clear how long they would last. Curtailment events are undesirable and not exactly what renewable electricity project developers or owners would wish for. Likewise, it doesn’t make sense for more power capacity than required to be built if the local demand is insufficient.
Green hydrogen projects can really only properly materialise when there’s a clear definite demand for green hydrogen. And for this, a couple of things must happen; which I’ll address in my next post.
This is a the first of a series of 3 articles on hydrogen. You can access the other 2 parts here and here.
A while back, I wrote about ammonia; and one of the critical chemical precursor is hydrogen. Historically, the focus of ammonia was about getting the nitrogen in a form usable and useful for making fertilisers. The fact is that nitrogen is plentiful in the atmosphere but it needs to be extracted.
The Haber-Bosch process allows for this atmospheric nitrogen to be extracted using hydrogen, producing ammonia or ammonium salts. These chemicals are then more easily transformed into fertilisers. The hydrogen part of the equation had never been considered a challenge so to speak. While it was rare on its own and not the most stable of gases, it was abundant in fossil fuels combined with carbon dioxide. So practically all the ammonia in the world is produced using hydrogen extracted from fossil fuel.
Extraction can be through steam methane reforming of natural gas (grey hydrogen); or gasification of coal (brown hydrogen). All of these processes emits carbon dioxide. In fact quite a bit of them. Not a problem when you’re producing a small amount of ammonia and primarily targeting agriculture rather than using ammonia as a source of fuel. But a big problem when you’re trying to get away from carbon as an energy vector.
So there’s low-carbon based hydrogen. They come from largely electrolysis of water using renewable electricity (green hydrogen). And if you capture the carbon dioxide from those traditional pathways mentioned above, then you get blue hydrogen. These color codes and names are from McKinsey and a shorthand to describe the carbon intensity of the hydrogen production. Useful for layman, not so much for the people in the industry since the actual carbon intensity is not exactly clear.
Nevertheless, it is interesting that because we are now increasingly looking at hydrogen as an energy vector, ammonia becomes a fuel again. It is being explored for a variety of energy applications: as a maritime fuel being combusted in ship engines, as a co-fired fuel with coal in the coal power plants, as well as a co-fired fuel with natural gas in a gas turbine. All of these allows the coal or gas power plants to continue running with lower levels of carbon emissions and allows them to be utilised through their economic life, and continue servicing the loans rather than becoming stranded assets.
So hydrogen seems really important in the low carbon economy. Yet it is not taking off. Stay tuned to understand the bottlenecks and challenges.
When I read about the stories Adrian Tan shared with Lianhe Zaobao recently, I was almost moved to tears – perhaps also due to the awareness that he lost his mum to cancer earlier and is currently fighting cancer himself. I resonated with his experience when I first went to Chinese High myself. My parents didn’t have to pull any strings to get me there but they did do their part in emphasizing the importance of a good education (though not so much the results), and encouraged me to explore my intellectual interests.
Like how ACS changed the life of Adrian, Chinese High changed my life too. I didn’t feel too competitive in school but I never felt like I was an outsider despite the fact that the students who got to the school were mostly from Nanyang Primary while I was from an unknown neighbourhood school. I made friends, I participated in activities with the rest in school. I didn’t do any better or worse than my classmates. I didn’t have additional tuition or music instrument classes compared to my classmates, but it’s okay. I got into an Arts programme in school and spent so much time in the arts studio slogging away on my arts project. I developed my confidence, awareness of the world, politics, sensitivity to culture, work ethic.
For me, education was indeed a leveller. And though I missed out on further opportunities that a more privileged background would have afforded me, I’m really grateful. It was being in Chinese High and around people who had huge ambitions and big aspirations to change the world that drove me to aspire the same. And that was also what granted me access to scholarship applications, one of which eventually landed me in LSE and NYU.
Yet I’m not sure if Singaporeans today had that same access as me if they were from my background. I’m concerned there are greater disparities between the performance of students from better backgrounds compared to those who don’t. This is a reflection of greater and more intense reinvestment of the privileged family in securing educational advantages for their progeny. It is only natural; but the society will really have to try and even out the playing field more.
