Hydrogen, Batteries, Wright's Law, and the Future
Off-Ramps for 9 January 2025
Welcome to Off-Ramps! Today, let’s follow up Tuesday’s post about the Glasgow Declaration. I’ll highlight four interesting pieces about or related to the world’s ongoing transition from internal-combustion engine (ICE) vehicles to zero-emission vehicles (ZEV) that touch points of my argument there I made only briefly. Please enjoy these on your morning commute, or save them for your weekend.
Don’t Believe the Hype About Hydrogen
In Tuesday’s piece I mentioned the devastating error that Toyota and other Japanese carmakers made when they banked on hydrogen, rather than electricity, even after it became clear that the latter was going to win. Why am I so certain that Japan got it wrong this time?
Partly because they’ve tacitly admitted it, with Toyota belatedly moving forward on battery-electric ZEVs in 2023. But partly because expecting hydrogen to become the fuel of tomorrow’s cars depended on there being a robust international supply chain for clean generation and distribution of hydrogen… and there isn’t, and won’t be, such a chain.
For more, see Robin Gaster’s clear-eyed and devastating critique of the current hydrogen hype cycle. It’s about a year old, but time has been kind to the argument, which is that hydrogen is a solution in desperate search of a problem.
Gaster’s key point is that so-called ‘green’ hydrogen—hydrogen electrolyzed from water by means of sustainably-produced electricity, i.e., hydrogen that on net emits no carbon into the atmosphere—faces fundamental economic barriers that can't be solved.
Since electricity makes up 85% of production costs, even dramatic improvements in electrolyzer technology won't make hydrogen competitive. In other words, hydrogen will only be competitive in circumstances where we already have substantial and sustainable electric energy. And if we have that, why not just use batteries, a technology that is readily available and getting cheaper all the time, rather than trying to build a new transportation and storage network for hydrogen?
Gaster’s report reinforces this view with hard numbers. At the time of writing, hydrogen fuel cost $36/kg in California, making fuel cell vehicles 14 times more expensive to operate than comparable EVs.
Gaster is kinder than I am, by suggesting that hydrogen could succeed as a medium for long-duration energy storage in renewable-heavy grids. But, as the next article in our round-up shows, the incredible rate of progress in batteries means that hydrogen falls short as an energy store as well. Despite this gap, the full report is worth the time of anyone interested in the fine details of energy economics.
Battery Prices Dropping Like They’re Hot
Speaking of batteries, back in October Goldman Sachs Research projected that EV battery prices will fall to $80/kWh by 2026, a drop of nearly 50% from today's levels. If that drop occurs, it would mean that battery-electric vehicles (BEVs) would finally hit cost parity with ICE vehicles in the US, even without consumer subsidy.
At least part of that, of course, is because of producer subsidy, i.e., China’s immense subsidization of the battery supply chain. I mentioned this in my Glasgow piece, but Goldman analysis concurs that Chinese firms process 60% to 80% of key battery minerals, and produce nearly 70% of the world's lithium-ion batteries. So falling battery prices will accelerate BEV adoption globally, and in so doing will accelerate China's dominance over the battery sector, and the ZEV sector generally.
Pay attention to the end of the report, which notes that resale values are affecting current BEV adoption. Consumers aren't just comparing the price of a BEV to an ICE car; they’re also comparing the price of a BEV today versus its price in a few years, when they expect BEVs to be much cheaper. Thus, perversely, even as battery tech improves, fewer consumers are taking advantage of it. It's exactly the kind of market dynamic that China's massive state support helps its manufacturers endure, while Western automakers struggle with the transition costs.
If 2026 is the inflection point for unsubsidized cost parity, market friction will delay that parity becoming universally obvious. That means the next two-to-three years will be critical in determining which, and to what extent, non-Chinese ZEV manufacturers can remain competitive.
Wright’s Law Rules Everything Around Me
Why do batteries keep getting cheaper while hydrogen stays expensive? An insightful piece from
at explains why, and in doing so illuminates something important about technological progress.
Lund’s beef is that everyone knows about Moore's Law, the famous observation that computing power doubles roughly every 18 months, but comparatively few know Wright's Law, which (he argues) was the reason Moore’s Law held for so long. What is Wright’s Law? As Lund puts it: “In 1936, Wright noticed that with each doubling of aircraft production, the cost required for manufacturing a new unit decreased by approximately 15%. This observation has since been validated across many different sectors and technologies.”
In other words, production drives experience which drives efficiency gains. Or, put even more simply, what you make a lot of gets cheaper to make.
This is why batteries have done so amazingly well in the past decades: battery costs fell from $6,035 USD / kwh in 1992 to $244 / kwh in 2016 (and recall that Goldman Sachs forecasts $80 / kwh in 2026): massive investment in production created a self-reinforcing cycle of learning and improvement. In contrast, hydrogen faces a chicken-and-egg problem: without large-scale production, costs stay high, but high costs prevent large-scale production. Batteries got here because they were useful things for consumer electronics, and Wright’s Law got them so cheap they could be used for cars; conversely, there is no obvious use for hydrogen today attracting investment in it, and so no such cycle is likely to benefit it.
Lund’s piece has implications for industrial policy too. China's strategy of heavily subsidizing EV and battery production isn't just about market share: it's about accelerating their learning curves. Meanwhile, Western manufacturers hedge their bets by retaining legacy ICE systems, making the reinforcement loop slower.
Power Moves
Noah Smith makes a provocative argument that could reshape how we think about the energy transition: we need to stop treating electrification as a ‘climate’ issue and start treating it as a ‘national greatness’ issue, part of the foundation on which global influence depends.
America and Canada love to have partisan battles over climate policy. Smith notes that both President-elect Trump and some members of Congress are determined to repeal the Inflation Reduction Act, one of the USA’s attempts to build a better domestic battery industry. He doesn’t note, but might have, that the party expected to form government in Canada later this year similarly opposes Canada’s efforts to subsidize BEV battery manufacture, and its leader has referred to the Glasgow Declaration as an “extreme and radical” “car tax”.
Meanwhile, China has recognized that batteries, motors, and solar cells aren't just green technology: they're the core technologies that will determine supremacy in the coming decades. The manufacture of batteries, motors, solar panels, and vehicles undergirds everything from drones to energy independence. A nation that can't make batteries won't just have expensive cars, it won't be able to field competitive military systems or rely on sustainable energy supplies.
China grasps this reality. While Western debates remain stuck in climate frames, China's "New Three" industries—electric vehicles, batteries, and solar cells—are backed by comprehensive industrial policy. China is not merely pursuing market share; it’s building the manufacturing base and supply chains that will allow them to project power—economic, financial, and yes, also military—in the coming decades. In other words, abandoning these technologies means ceding the future to an illiberal and aggressive regime.
What makes this article essential reading is how it forces us to confront an uncomfortable truth: those who reflexively oppose anything labeled as climate policy are ceding future national power to China. And these are the people poised to govern the USA and Canada. That doesn’t mean we need to stop advocating for climate-friendly measures, but it does mean we need to advocate for them in different language than we’ve used up to now.
The collapse of Japan's auto industry shows what happens when nations misread technological revolutions. Smith argues that we are at risk of misreading one of our own, in a fashion that could not only impoverish ourselves, but also lead to the world becoming grimmer, darker, and less free.
Great article Andrew. Naysayers “affectionally” call hydrogen fuel cells “fool cells.” When viewed in terms of first principles, the energy required to produce the hydrogen makes them an inefficient energy source.
Of course, there are alternative ways of producing hydrogen, but due to its low density, you would still face incredible storage and distribution issues. These are not insurmountable, but they are unnecessary.
Why pursue hydrogen when you already have an electrical grid for electric vehicles? How could hydrogen ever be economically viable in the face of rapid declines in battery prices due to experience curves?
There are still improvements in batteries to be had. Not only can we reduce cost, but we can also adopt dry-electrode coating, improving energy density. Perhaps even develop a “solid-state” battery with no anode, far lighter, smaller, safer, and cheaper than we can today.
We only get there through “experience curves” or “Wright’s Law.” Which could be the logic behind China’s subsidization of the industry. They are gaining experience far faster than the West. China is likely to do the same in humanoid robotics and microchips.
In general your points about hydrogen fuel are right on. But there are two areas where it seems to me that hydrogen fuel is essential: ships and planes. You cannot power huge transoceanic ships or planes with battery power.