Hydrogen production capacity is set to skyrocket in 2023 as countries and businesses such as Nel ASA, Ceres Power Holdings PLC (AIM:CWR, OTC:CPWHF) and ATOME Energy PLC (AIM:ATOM) enable an accelerated shift away from fossil fuels.
Global annual output capacity topped 109 kilo-tons per annum (ktpa) worldwide last year, a 44% increase on the prior year, research from GlobalData suggests.
Hydrogen output is also set to climb as high as 71mln tons by 2030, as industries speed up the shift towards greener fuel.
Hydrogen has emerged as a potential suitor to replace carbon-emitting fuels across various industries due to its adaptability, which could see it burned to heat homes or even liquified to power aircraft engines.
H2 can offer a green source of energy, since it emits water when rather than CO2 when burned, although hydrogen can only be as clean as the fuel used to produce it through electrolysis.
As of last month, 93% of both active and pipeline hydrogen projects were 'green hydrogen', the new data showed, meaning the fuel was produced using clean energy. Hydrogen made using fossil fuels – from coal gasification or steam methane reforming – is termed ‘grey’, and has been the dominant form of manufacture, or can be ‘blue’ if the CO₂ emitted during the production of grey hydrogen is sequestered via carbon capture and storage (CCS).
Proposals have been made to introduce a hydrogen-blend into the UK’s mains gas supply, with the government suggesting late last year that all boilers in new build home may have to be ready for the shift as early as 2026.
“Despite the challenging global economic conditions, the number of investments in low-carbon hydrogen increased from 600 to over 1,700 between the fourth quarter of 2021 and the fourth quarter of 2022,” said GlobalData analyst Andres Angulo.
Over 393 hydrogen-related deals were also closed, representing a significant increase compared to 277 deals registered in 2021.
The value of hydrogen-related merger and acquisitions reached US$24.4bn, representing a 288% increase compared to the previous year, while venture finance deal values grew more than fivefold to over US$3bn.
However, the number of deals decreased after the second quarter to levels below those seen in the same quarter in 2021, which Angulo said “could have been due to the companies trying to strengthen their core business and diversify the investment risk given the global economic situation”.
Companies are developing low-carbon hydrogen using electrolysis, with new capacity of more than 1,065 gigawatts (GW) now in pipeline, according to the data, which was being produced by a wide range manufacturing companies such as Nel, Hydrogenics Corporation (TSX:HYG), ITM Power, HydrogenPro, Enapter, Ceres Power, and Plug Power (NASDAQ:PLUG).
Organisations with the most low-carbon hydrogen capacity include US-based GHI, which is building storage capacity in salt caverns in Green Hydrogen International; and several organisations in Egypt including the Suez Canal Economic Zone, the New and Renewable Energy Authority and Egyptian Electricity Transmission Co.
Small-cap developers listed in London include ATOME Energy PLC (AIM:ATOM) and Hydrogen Utopia International PLC (LSE:HUI, AQSE:HUI, OTCQB:HUIPF), which are ploughing ahead with green hydrogen facilities in Paraguay and Poland respectively, while HydrogenOne is a specialist fund investing in clean hydrogen. Another is Hydrogen Future Industries PLC (AQSE:HFI), which is developing new proprietary production systems aimed at lowering costs further.
Angulo concluded that the high proportion of active and pipeline hydrogen projects being of green hydrogen reflects “the increasing manufacturers' electrolysis capacity and the number of EPC contractors participating in bigger green projects. This, in addition to the renewable energy development, will create a momentum that will accelerate the cost reduction across the entire hydrogen value chain.”
***Update: Data was corrected by Globaldata. Previously, it said it was expected that hydrogen production capacity can reach 4.5mln tons per annum by the end of 2023, representing 165% growth compared to 2022.