The European Union’s announcing €5.4bn of funding for the first multinational hydrogen project is a “positive catalyst” for subsector developments in the second half of the year, according to JPMorgan.
Late last week, the European Commission announced approval for the public funding for the Hy2Tech project, under EU state aid rules and part of the REPowerEU plan announced in May to diversify the bloc's sources of energy following the disputes with Russia after its invasion of Ukraine.
The important project of common European interest (IPCEI) involves 35 companies and 41 projects from 15 member states and is expected to see total investments of €14.2bn.
The aim of IPCEI Hy2Tech - the first IPCEI) in the hydrogen sector - is to develop innovative technologies for the hydrogen value chain to decarbonise industrial processes and mobility.
Although it comes with the European hydrogen market still in its early stages, following Russia’s attack on Ukraine, the project will play a part in starting to help the EU diversify energy supplies, said European Commissioner Margrethe Vestager, as well as contribute to decarbonisation targets, while the research and development will be “widely disseminated” and benefit other companies.
The JPMorgan analysts said providing a large dollop of funding to support the hydrogen transition in Europe and accelerate scaling parts of the hydrogen supply chain “stands as a positive catalyst for kick-starting the H2 transition here in Europe”.
Further EU funding announcements are expected in the third and fourth quarters of the year, JPMorgan said in a note to clients on Tuesday,.
“Although policy momentum in the US again appears to have potentially stalled, the IPCEI announcement further supports our view that H2 investment is quickly accelerating with larger project FID approvals likely over the next 12-18 months.
“We also expect greater concern regarding European gas supply from Russia will also help accelerate investment in green H2.”
Within the European hydrogen subsector, JPMorgan said it remains “more cautious given low barriers to entry & thus margin pressure, so we continue to recommend investors take a relative approach to the space”.
IPCEI Hy2Tech projects
The Hy2Tech programme has four main strands: the development of hydrogen generation technologies; the development of hydrogen fuel cell technologies; the development of technologies for hydrogen storage, transportation and distribution; and the development of technologies for end-users across a number of applications, especially mobility.
As an example of the first, Elcogen, an Estonian SME, is developing an electrolyser with a reduced amount of critical raw materials and an optimised manufacturing process.
In hydrogen fuel cell technologies, Netherlands-based Nedstack is developing fuel cells for fixed and maritime use, with the aim of increasing fuel cells' efficiency and applicability.
For storage and transportation technologies, French company Arkema (OTC:ARKAY) is developing materials for hydrogen tanks with bio-based inputs, which is said can drastically reduce the manufacturing time and cost, while being fully recyclable and increasing safety.
In end-user developments, Daimler (ETR:DAI) Truck is aiming to create trucks powered by liquid hydrogen.
Other recent hydrogen stories for UK companies:
- Rolls-Royce starts trials of an engine that runs on hydrogen ahead of its possible use in business jets by the middle of the next decade
ATOME Energy gets site clearance underway on an electrolyser project in Paraguay, with hydrogen production on track to commence in the first half of next year
Powerhouse Energy and partner Hydrogen Utopia propose to jointly develop waste-plastic-to-hydrogen facility in Ireland
AFC Energy signs a contract to deploy its hydrogen-based fuel cell generator at another UK construction site
Shell begins construction on a green hydrogen plant in the Netherlands that will be Europe’s largest once it is operational in 2025