Tuesday, 14 January 2020

Green Hydrogen Could Transform the World


The more I read about the potential for hydrogen as a fuel of the future, the more convinced I become about this gas transforming the global economy.

As everyone must surely be aware by now, we urgently need to move away from fossil fuels such as coal and oil due to the effects of global warming and climate change. The scenes from Australia over the past month or so have been truly horrific and a real wake-up call to the rest of the developed world.

There are many positive signs of progress such as an upsurge in the use of renewable energy such as wind and solar over the past few years but now there is an increasing focus on green hydrogen (made from renewable energy) as the most promising environmentally-friendly fuel - the only emissions being water.

Last years G20 summit in Japan had a strong emphasis on hydrogen. It was there that the IEA's report was launched "The Future of Hydrogen" concluding that the time was right to tap into the potential of hydrogen saying:

"The report finds that clean hydrogen is currently enjoying unprecedented political and business momentum, with the number of policies and projects around the world expanding rapidly. It concludes that now is the time to scale up technologies and bring down costs to allow hydrogen to become widely used".


Many Applications

1 Heating Our Homes. In most of the developed world including most European countries, the vast majority of energy is used for heating and hot water. For example, here in the UK around 90% of homes use gas central heating. Hydrogen offers an very attractive alternative to natural gas (methane) which is carbon free as well as more efficient than using electric. The added advantage is that the existing gas infrastructure could be used to supply all the homes with clean hydrogen gas subject to the appliances in our homes being adapted.


A year long ground-breaking trial has just started at Keele University where 20% green hydrogen is blended with natural gas. If such a blend were rolled out across the country it would reduce CO2 emissions by around six million tonnes - equivalent of taking 2.5 million cars off the roads. ITM Power supply the on-site integrated hydrogen energy system.

Worcester Bosch have designed a hydrogen-ready boiler which can currently run on gas but then easily converted to run on 100% hydrogen.

2 Balancing the National Grid. As we build out more and more wind and solar, we may get to the point where we are generating more energy than the grid can handle. Already we are seeing offshore wind farms having to be temporarily shut down during windy spells. Instead of wasting this excess energy, we can use it to power the electrolysis of water to create green hydrogen. This can then be stored for future use.

3 Industry. A global supply chain for hydrogen could be used to de-carbonise heavy industry such as steel making and cement which together currently account for around 15% of global GHG emissions.

4 Transport. Hydrogen is ideally suited as a replacement for fossil fuels in the transport sector. London is set to deploy hydrogen powered buses this year. The USA, Japan, S Korea and China have all announced ambitious plans for the mass roll-out of fuel cell EVs over the coming decade. Hyundai have contracted to build 1,600 HGVs in partnership with Swiss company H2Energy.


Germany already has hydrogen-fueled trains and plans to have 40 running by 2022. The UK is not far behind with plans to retrofit existing trains with hydrogen tanks with added fuel-cell and battery. In collaboration with Air Liquide, Paris plans 600 hydrogen taxis by the end of 2020.

Recently, Orsted have joined forces with other companies to develop a 2MW hydrogen electrolysis plant in Denmark which will produce green hydrogen to power 20 to 30 buses. Orsted's head of green hydrogen Anders Nordstrom said "Renewable hydrogen could potentially form a cornerstone of Denmark's ambition to reduce GHG emissions by 70% in 2030 and of the transition to a world that runs entirely on green energy".

Several car companies have started to invest heavily into hydrogen car production including Hyundai (Nexo), Toyota (Mirai) and Honda (Clarity). The hydrogen fuel-cell vehicles offer the advantage of greater range and faster refueling compared to electric vehicles.

Conclusion

So, I am thinking that green hydrogen could be a massive game changer with potential to transform the global economy and play a part in the transition from fossil fuels to clean energy to halt global warming. Some companies will be in a position to benefit from this transition but it's early days and therefore not so clear which sectors will take the lead. This is why I have added several potential beneficiaries - the likes of Air Liquide, Orsted, AFC Energy and ITM Power to my green portfolio over the past year.

Investing in equities involves ownership of the organisations you hold in your portfolio. I really don't want to be a part owner of the fossil fuel companies that are making the planet uninhabitable for future generations. The climate scientists are saying we are currently on track for another 2C of warming by the end of this century and suggest the rest of the planet will become like Australia these past few weeks - phew! There's not much time left to turn things around so instead I choose to buy into those companies that are doing their bit to make the world cleaner and more sustainable.

As ever, this article is merely reflects my current thinking on climate-related issues and the companies mentioned are a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!

6 comments:

  1. Interesting read, I had no idea there were already hydrogen powered vehicles in use. I will take a look at the companies you have mentioned for further research.

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    1. Thanks weenie. Yes, these hydrogen fuel-cell vehicles have been in production for some time on a relatively small scale but I suspect they could overtake the battery EVs in time. There's even a small-scale project in Wales run by riversimple and their Rasa which I have been interested in for a while.

      https://www.riversimple.com/

      I'm not so clear on the availability of hydrogen filling stations which is the big barrier at present.

      and a link for the wider picture...

      https://www.businessinsider.com/hydrogen-fuel-cell-cars-teslas-biggest-threat-2019-12?r=US&IR=T

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  2. Just posting a comment to say that I am 100% in agreement. I am not surprised that you dont get many posts on this subject, in the main, people would rather put their heads in the sand and grab as much money as they can from any source regardless of the cost to the planet.


    I have been going on about climate change for years, 30 years ago I gave a presentation on how the US could ween itself of oil by taking a 50x50 mile area of Nevada and putting solar panels on it. Panels were not efficient as they are now then either.

    There are a few challenges with creating hydrogen from electrolysis because the electrodes do not last long enough to make it economically viable but I have read somewhere that there is some breakthrough in this area. If that problem can be solved then hydrogen will be an excellent store of captured solar energy.

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    1. Thanks BTS. I suspect many are still in denial but I also think last year was a breakthrough for climate and many, many more people are more aware of the threats posed by the climate crisis. It's to your credit that you have been switched on for so long.

      I believe there has been some progress on the difficulties you raise and the likes of AFC Energy and ITM Power are tapping into more efficient and lower costs of producing hydrogen from electrolysis - maybe that is why the hare price of each is moving up so quickly? Solar and wind are ideal sources of energy to make the green hydrogen.

      The pressure is being turned up on the fossil fuel industry and imho clean hydrogen will play an increasingly important role in decarbonising the global economy over the coming decade or so.

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  3. I'm with you on this one. While non carbon electricity generation has proved immensely valuable, there are too many energy requirements where electricity is poorly suited. The most obvious being transport: if I need to refill my car with petrol in the middle of a long trip it takes a few minutes, while re-charging a battery of an electric car would take several hours and the underlying physics limits the scope for improvement. While the technology to refuel with hydrogen needs developing that is something that should be achievable (though I imagine there will be some physical constraints due to the lower energy density of hydrogen compared with a hydrocarbon).

    But this is an investment blog, so there is a presumed subtext that an investor who believes the future is in non-carbon energy (which should mean anyone with an informed concern for their planet) might want their investment strategy to reflect an anticipated growth of hydrogen. I suspect though that the listed companies working in this area are exactly those on your blacklist of ones to avoid, energy companies like BP or Shell. There are no doubt smaller specialist companies available for investment through AIM – and to be honest this is early stage and the immediate prize is developing the technology and establishing intellectual property rights – but that isn't for the average investor.

    Jonathan

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    1. Thanks Jonathan and agreed, hydrogen is ideally suited as an alternative to fossil fuels to power transport. HGVs, shipping, trains and maybe airplanes before too long. Once the benefits are fully realised, it should not take long to install the refueling stations, indeed I believe this has already started in France and Germany.

      Investment wise, there are some large companies already ahead in the race to commercialise green hydrogen - the likes of RWE, Siemens and Air Liquide and also the oil majors are working in collaboration with niche smaller companies so all this bodes well for the future. The Spanish oil company Repsol has recently announced it will be a zero carbon company by 2050 so it will be interesting to see which of the oil majors will follow - the mounting pressure is becoming intense and will become more so this year for sure.

      For now the likes of Shell, Exxon and BP are to be avoided but if they were to adopt a really genuine change of business model and adopted a responsible attitude to the threats posed by climate change then of course they would become investable again.

      This could be a seminal year for the big oil companies.

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