Welcome to another episode of Heat Treat Radio, a periodic podcast where Heat Treat Radio host, Doug Glenn, discusses cutting-edge topics with industry-leading personalities. Below, you can either listen to the podcast by clicking on the audio play button, or you can read an edited version of the transcript. To see a complete list of other Heat Treat Radio episodes, click here.
In this conversation, Heat Treat Radio host, Doug Glenn, speaks with David Wolff of Nel Hydrogen about how the COVID-19 pandemic has affected supply chains, specifically those relating to hydrogen generation. Click below to learn more about what risks the supply chain for hydrogen is facing, how the ongoing crisis may affect supply and employee safety, and what the benefits of on-site hydrogen generation are during this unusual time.
Click the play button below to listen.
The following transcript has been edited for your reading enjoyment.
Doug Glenn (DG): We’re here today with David Wolff from Nel Hydrogen. Dave is the eastern regional sales manager, and we’ve had a couple of previous Heat Treat Radio episodes with Dave talking about on-site hydrogen generation; but in light of COVID-19 and all that has happened there, we wanted to revisit this issue.
David Wolff (DW): It’s been an amazing time, and I think we’re all shocked by the number of unexpected and wide-ranging effects of this COVID-19 event. We talked about discussing supply chain interruptions, which have been unbelievable and sometimes counterintuitive. You go to the grocery store these days and look at the shelves, the toilet paper, the rice, the meat, milk, and eggs, and they’re all empty. People talk about going to Amazon, and even PC monitors are sold out, thermometers and jigsaw puzzles. The most humorous is this world of zoom meetings. Even dress shirts and blouses are selling, but not pants and skirts. It is an interesting time.
I’ve been astounded by the wide-ranging effects on all businesses. I’ve just recently reviewed my recent business charge card bill, and the total amount that I charged in March and April was zero. That’s money that didn’t support restaurants, hotels, gasoline, airlines, and obviously their supply chain suffered. We’re seeing virtually every business running into raw material shortfall caused by shutdowns or logistics issues extreme in the supply chain: yeast for pizza, alcohol for chemicals and cleaners, metal parts for assembled machinery. Here in Connecticut, we have a small but healthy dairy industry, and it’s tragic to see logistics issues causing dairy farmers to dump milk [they] can’t sell, while bottled milk prices at the grocery store are surging upward.
DG: It’s definite that the impact, as you said, and said it well, has been wide ranging, in many ways somewhat devastating and somewhat counterintuitive. It’s hard to tell. But we want to talk specifically today and revisit for a bit on-site hydrogen generation based on what has been happening in light of these changes. What exactly are companies having to look at now that they weren’t having to look at before?
DW: What we hear from companies is that they’re focused on two priorities. They’re focused on employee safety and the control of factors of production, their supply chain. So they want to bring people back in a safe fashion, and that’s requiring an immense amount of accommodation. And then they need to make sure that they have their raw material. Hydrogen is required for most types of heat treating, sintering, as a carrier gas in fuel for analytical equipment, semiconductor processing for chemicals, and for operation of power plants. Without hydrogen, these things do not happen. We’ve lived this through at Nel before.
Ten years ago, just post [Hurricane] Katrina, when delivered hydrogen was limited due to plant outages, Nel Hydrogen, which was then Proton On-Site, was actually contacted by the federal government to prioritize hydrogen generator deliveries to power plants because without hydrogen, power plants can’t operate, and we were under orders to prioritize electrical supply. So we’ve seen some aspects of this before.
DG: Let’s talk briefly about what some of the risks are for delivered hydrogen. What are we talking about here?
DW: There are new supply chain risks to consider. Most of us have seen this pretty personally. We haven’t purchased any gasoline in weeks, that’s why the price is low. In almost all cases, the hydrogen that is delivered to US customers is actually a co-product, or almost a byproduct, of the refinery processing of crude oil. It is not the primary product for the plant, it is a co-product. The excess hydrogen is then sold at relatively low prices to industrial gas providers for purification, packaging, and resale.
So if the gasoline is not in demand, the supply of hydrogen available for sale to the industrial gas suppliers will decline because it’s not being produced. So you have that risk of the basic hydrogen supply. You then have the fact that the hydrogen plant may be lower in business priority compared to other gases when it comes to staffing limitations. Right now oxygen is the focus of all the industrial gas companies, and I’m going to talk about some of the implications of that.
The other thing is that the U.S. supply chain for hydrogen, particularly in cylinders, has multiple steps. A failure in any step will result in shortfalls. For example, because of the cost and challenges of storage, the entire industrial gas industry runs with very lean inventories. You can’t just put industrial gases on the shelf; they need to be packaged or stored in tanks, and the amount of storage is very limited. So logistic hiccups very quickly result in shortages.
Cylinder and tube trailer distribution chains might become frozen because empties are not being returned from customers who are closed. Additionally, for cylinder hydrogen, cylinders have been taken out of hydrogen service and re-serviced into medical oxygen. The suppliers are encountering delays for cleaning and disinfection around delivery of cylinder hydrogen. And discussions about additional waves of COVID-19 and whether people have acquired resistance, and therefore can go back to work, are all delaying a return to a normal situation.
DG: Is it possible that some of the customers might experience limitations, hydrogen supply limitations, different than other customers?
DW: It’s always tricky to guess, but my feeling is that the effect on the hydrogen supply is likely to be noticed by the smallest volume users first, and maybe most acutely. That’s because the cylinder hydrogen logistics are the most complicated, whereas liquid hydrogen is the least. Liquid hydrogen goes directly from the place of manufacture to the customer. And you’re limited there primarily by driver availability and travel challenges, whereas tube trailer and tube bank users depend on an additional stage of trans-fill from liquid to gas.
Now those are the same locations that are struggling to fill oxygen orders for hospitals, and in the industrial gas industry, nothing is more important than a hospital oxygen delivery. There it’s really a question of availability of staff and prioritization. But cylinder filling and distribution is by far the most equipment and people-intensive form of delivery because you’ve got liquid trans-fill, cylinder management, filling, QC, and local delivery all under great pressure because of resources and priorities. And then again, the issue of cylinder availability because every cylinder that can possibly be re-serviced is being re-serviced into oxygen service for hospitals.
Finally, for folks who are using forming gas in cylinder form in kind of low quantities, [there are] likely to be long delays because of the scarcity of the skilled people to do the blending and analysis required for performing gas blending.
DG: You’ve laid out nicely, I think, the potential risks of what’s going on with COVID-19 and how it may impact supply and even employee safety. Let’s do a quick review of the benefits of on-site generation as opposed to having it delivered in tubes or cylinders or whatever, and how does that impact our thinking as far as on-site hydrogen generation these days?
DW: If hydrogen is a raw material for you, hydrogen generation can enable you to make all of your hydrogen at your site automatically with little personnel attention, so it becomes a utility. The only raw material that you depend on to make that happen are electricity and water, which come into your facility in pipes and wires, and of all the logistics chains, electricity and water tend to be among the most reliable. So no trucks, no people, and so forth. And then hydrogen eliminates the space and compliance issues related to hydrogen deliveries and storage.
Finally, and this is not strictly related to COVID-19, but hydrogen generation will stabilize your hydrogen cost. So in a time when force majeure charges tend to crop up during times of difficult logistics, you don’t see those.
DG: Dave, in addition to our two earlier podcasts together, and the eBook, Hydrogen Generation and its Benefits for Heat Treaters, which you can find on our website, where else would you direct people to find more information about on-site hydrogen generation?
DW: I would direct them, if they wish, to go to the nelhydrogen.com website for more details on our equipment.
DG: Any concluding thoughts? Anything else you want to leave us with?
DW: On-site hydrogen can’t be implemented overnight, so it makes sense to plan ahead. If this concept makes sense to you, we’d be happy to have a conversation. The current thinking is, this COVID-19 issue may be with us for months, and there is even talk of waves lasting years. So we will see this again. On-site hydrogen is a solution to many of the long-term problems we’ve identified that are associated with delivered and stored hydrogen. And if there is anything this strange COVID-19 experience has shown us, it’s the importance of supply chains for businesses, their employees, and their customers.
Whether the issue was [Hurricane] Katrina or COVID-19, supply and demand mismatches for hydrogen, or just the diminishing attractiveness of driving the trucks to deliver hydrogen, businesses may wish to control the factors of their own production.
To find other Heat Treat Radio episodes, go to www.heattreattoday.com/radio and look in the list of Heat Treat Radio episodes listed.
