Despite a challenging year for alternative energy share prices, the hydrogen market continues to attract investment through late 2021 into 2022, with governments and analysts still confident in the long-term opportunity.
While the frenzied ‘hydrogen hype’ from 2020 is “clearly behind us”, JPMorgan said on Monday, with the past year seeing several stocks significantly underperform the market, the investment bank reiterated its support for hydrogen as a long-term investment.
This is due to the fact that the aspirational political momentum “has not slowed down”, with policy frameworks “slowly but surely establishing the conditions for the emergence of a low CO2 hydrogen market”.
Governments and companies
As of January 2022, 26 countries have national hydrogen strategies in place, of which half were launched in the past year and many include electrolyser capacity targets, while corporate developments have not slowed down (see below).
Today saw plans set out for London's newest hydrogen company to float on the AIM junior market, with Clean Power Hydrogen, which makes membrane-free electrolysers, unveil a £50mln fundraising as part of its initial public offer.
READ: Green hydrogen versus blue hydrogen (and turquoise and grey hydrogen) - an explainer
Among important state-level developments in past weeks, December saw the European Union publish its new ‘Gas & Hydrogen’ proposals to follow up to the ‘Fit for 55’ package from last July.
In the new proposals, legislative proposals were outlined to decarbonise the EU gas market by facilitating the uptake of renewable and low carbon gases, including hydrogen, with an aim to significantly reduce natural gas use in homes and businesses.
A key element of this transition is establishing a competitive hydrogen market with dedicated infrastructure.
In November, the Hydrogen Council and McKinsey published an updated state of industry report entitled 'Hydrogen for Net Zero', which was notable for its higher hydrogen consumption scenario than the oft-quoted 'Scaling Up Hydrogen' report from 2018.
The new 2030 and 2040 hydrogen consumption figures are 20% and around 100% higher than the original report, with renewable H2 (green or turquoise) expected to take 60-80% of the 2050 market, although blue/biomass is also expected to be bigger in 2030.
Industrial demand is expected to account for more than half of 2030 clean hydrogen consumption, two times more than transport and 10 times that consumed for heat and power.
H2 in US and Asia
While the United States currently lags Europe and Asia in clean hydrogen development, JPMorgan said “the gap is closing”, helped by a positive policy landscape driving the H2 transition.
Major new legislation, including the Infrastructure Investment and Jobs Act, is set to bring billions in funding for clean hydrogen deployment, the analysts noted, with the US Department of Energy’s hydrogen shot initiative seeking to reduce the cost of clean hydrogen by 80% to $1 per 1 kilogram in a decade.
The US$550bn climate provisions in the Biden Administration’s Build Back Better act, if passed, could provide further support.
Looking to Asia, hydrogen proliferation is being driven by the de-carbonization rhetoric and while elevated costs for green hydrogen remain a key hurdle, the JPMorgan analysts believe “economies of scale and technological advancement will make hydrogen application economical in 10-15 years”.
In the meantime, they noted that China still lacks a national H2 strategy, tet, local initiatives and clusters, as well as businesses are “driving the momentum”.
The JPM analysts said they “remain cautious" on the European H2 electrolyser original equipment manufacturers, “given rapidly increasing manufacturing capacity globally could depress industry utilisations and thus margins", with a 'neutral' rating for ITM Power and continental rival Nel ASA at 'underweight'.
Hydrogen market developments since the fourth quarter of 2021
- Mass transport group Go-Ahead agrees major green hydrogen transport supply deal
- Hydrogen Utopia International, a partnering of Powerhouse Energy, shares surge higher as it began trading on London
- Hydrogen fuel cells and electrolyser maker Ceres Power reported progress with its major commercial partners in the new year
- Atome Energy, which plans to produce, market and distribute green hydrogen and ammonia, also plans to list on AIM
- Getech Group signed an agreement to develop a hydrogen production, storage, and distribution facility in Scotland
- EQTEC in December expanded a deal to develop additional infrastructure in Deeside, including production of hydrogen and other biofuels
- In November, BP confirmed it is planning to build a green-hydrogen production facility in the Northeast
- Centrica, Melrose Industries, Hyundai, Kia and HydrogenOne Capital Growth all invested in fundraising by pioneering UK clean hydrogen producer, HiiROC, which has developed a way to convert natural gas or biomethane into clean hydrogen
- The UK government committed to investing £9.4mln to build a hydrogen storage production facility just south of Glasgow
- AFC Energy PLC (AIM:AFC, OTC:AFGYF, ETR:QC8) received a first order from Swiss partner ABB for a 200kW hydrogen fuel cell charging system for electric vehicles and said it had already made commercial use of its experience working in the Extreme E racing series
- Rolls-Royce inked a deal that will see it develop hydrogen fuel cells to help reduce emissions for data centres
- Aussie-listed SRJ Technologies Group said in November that it has made progress in developing a hydrogen compatible pipe technology - a key potential need as pure hydrogen is the smallest molecule on the periodic table and can easily pass through certain materials
- Petrochemicals giant Ineos announced plans to invest £1bn in reducing greenhouse gas emissions from its Grangemouth refinery using blue hydrogen
- In October, Australia's Global Energy Ventures set out plans to corner the green hydrogen market with its 2.8 GW Tiwi Islands export project in Northern Territory, Australia where it plans to load hydrogen onto its own compressed-hydrogen ships
- That same month, a group of companies, including France's TotalEnergies, Air Liquide, and VINCI joined forces to launch a fund dedicated to clean hydrogen infrastructure solutions