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".
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.
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!