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Rolls Royce And Hydrogen Isn’t Interesting – Synthfuel Would Be Though

Tim Worstall
Tim Worstall trader
Updated 18 Jul 2022

Trade Rolls Royce Shares Your Capital Is At Risk

Key points:

  • Rolls Royce is testing jet engines on hydrogen
  • This could well work but it's not the big event for RR
  • The big event would be when people use green hydrogen to make synthetic jet fuel
  • The technology to do this is well known. It's just how cheap can it get?

There's a certain long term worry about Rolls Royce (LON: RR) shares, which is that if the world takes this net zero business seriously then there's a possibility that the jet engine business faces an extinction level event. Yes, there are other businesses within Rolls Royce, the modular reactors business looks fascinating, there's still a marine engines business around somewhere and so on. Work has been done on fuel cells, but the core of the business is still those large scale jet engines.


Actual “net” zero isn't a problem here for that idea is that society needs to be net, overall, no emissions. Which means that emissions – say the 2% from aviation – can continue offset elsewhere. But that's not what people are talking about, rather, each sector must become zero emission. That this is to get the wrong end of the stick is another matter – business must deal with the reality around it.

So, Rolls Royce is looking at batteries and electric planes for short distances. There's now also this news that they're looking at hydrogen. As Reuters reports, and as The National does. “Rolls-Royce said on Monday it would begin testing this year on a hydrogen-powered jet engine.” There's no particular technical problem with a jet engine running on hydrogen, the base idea will definitely work. It's all of the surrounding work that will matter. The generation of green hydrogen, storage, lifting capacity and so on.

Rolls Royce share price
Rolls Royce share price from IG

Also read: How To Buy Rolls Royce Shares.

That is, running a jet engine on hydrogen is easy enough. Running an airplane system on it is one of those tasks which may not actually be achievable. And if it is it's going to be at great cost and requiring the redesign of all airframes and airports. This may not be the best way to do it.

All of which is lovely tech stuff and perhaps not all that much to do with Rolls Royce shares – except it is, because this is the technological problem Rolls Royce faces. If large jet engines are going to be kiboshed by climate change worries then Rolls faces an existential problem. Yes, it's packed with good engineers and there are other business lines there but what happens to jet engines happens to RR.

At which point there is the one long term signal that Rolls Royce would be a strong buy. It involves this hydrogen as well. But not to feed into an engine, rather, to feed into a chemical plant. We know how to do this – collectively, as a species, it's called the Fischer Tropf process. Been around at least a century. It does though rely upon cheap – and to be green, green – hydrogen. But if we've got that we can make synthfuel, jet fuel using carbon from the atmosphere. At which point then we can run the usual airframes, with normal fuel tanks, to feed standard and Rolls Royce jet engines.

And the thing is, everyone's already saying that hydrogen is to get ever cheaper – look at RR testing it in an engine right now.

This is the thing to look for in the long term. If synthfuels from green hydrogen become a real thing – to repeat, we can already make them, it's how cheap do they become – then the business model of Rolls Royce will become exactly what it is now. And that should produce a significant rerating upwards of RR shares.

Tim Worstall
Tim Worstall is a freelance writer specialising in economics and the financial markets.