There's a massive shift happening, in regards to energy. You'd have to be living in a cave wearing a blind fold and earplugs not to know about it.
It's truly, once in a generational movement, that means we will have to stop relying on traditional fossil fuel based energy and switch to clean renewables.
Why the Change?
When fossil fuels are burned for energy they release carbon dioxide, a greenhouse gas that absorbs and radiates heat.
The build up of this heat has led to the earth's temperature rising, which has led to extreme weather conditions such as droughts, heat waves, heavy rain, floods and landslides becoming more frequent.
In order to limit global warming to 1.5 degrees Celsius countries have set targets to become Carbon Net Zero by 2050. This means they will have to invest in so-called renewable energy, which does not produce carbon dioxide.
According to Bloomberg's New Energy Outlook – which looks at long-term scenario analysis on the future of the energy economy – achieving net-zero carbon emissions by 2050 will require as much as $173 trillion in investments in the energy transition.
What Type of Renewable Energy are there?
There are 7 types of renewable energy
- Solar
- Wind Energy
- Hydroelectric
- Ocean Energy
- Geothermal Energy
- Biomass
- Hydrogen
In August the UK government released a report called their UK Hydrogen Strategy so we can assume they are taking its role seriously and with the UN Climate Change Conference taking part in Glasgow at the end of this month (COP26) it will come onto more peoples' radar.
A Quick Guide to Green Hydrogen (and how getting some exposure to it could be beneficial to your portfolio)
Green hydrogen has been hailed as a clean energy source for the future. But the gas itself is invisible, so why is it being described using different colours?
It all comes down to the way it is produced.
Hydrogen emits only water when burned. But creating it can be carbon intensive.
Image: International Renewable Energy Agency
There's different ways hydrogen is currently produced and they have been categorised in colours but green hydrogen is the only variety produced in a climate-neutral manner, meaning it could play a vital role in global efforts to reduce emissions to net zero by 2050.
Green hydrogen also referred to as “clean hydrogen” is produced by using clean energy from surplus renewable energy sources, such as solar or wind power, to split water into two hydrogen atoms and one oxygen atom through a process called electrolysis.
Renewables cannot always generate energy at all hours of the day and green hydrogen production could help use the excess generated during peak cycles.
The government states, "Hydrogen is one of a handful of new, low carbon solutions that will be critical for the UK’s transition to net zero. Working with industry, our ambition is for 5GW of low carbon hydrogen production capacity by 2030 for use across the economy. This could produce hydrogen equivalent to the amount of gas consumed by over 3 million households in the UK each year.
This is a big uplift considering very little green hydrogen is produced in the UK at the moment.
So to help generate interest the government have announced new funds and policies that will, "set us on the pathway to
meet this ambition, including £240 million for government co-investment in production capacity through the Net Zero Hydrogen Fund (NZHF), a hydrogen business model to bring through private sector investment, and plans for a revenue mechanism to provide funding for the business model".
Hydrogen Demand
BloombergNEF’s (BNEF) New Energy Outlook 2021 (NEO) unpacks three distinct scenarios labelled Green, Red and Gray that each achieves net-zero while relying on a different mix of technologies.
In BNEF’s Green Scenario, which prioritises clean electricity and green hydrogen, wind and solar grow to 15% of primary energy in 2030, and 70% in 2050.
Mackenzie Wood states that today, "Green hydrogen only constitutes 0.1% of global hydrogen production, with only around US$365 million invested in 94 MW of capacity, though the pipeline of new projects is 3.2 GW and growing fast.
That shows the interest the technology is attracting in China, Japan, the US, Europe and Australia, but so far, it’s only scratching the surface. If the pieces fall into place it could be huge. We think hydrogen could displace 1400 Mtoe of primary energy demand by 2050 under a 2-degree scenario, 10% of global supply, with green hydrogen the majority of that. Scalable, commercial green hydrogen would answer a lot of questions around global decarbonisation".
SUMMARY
Hydrogen is readily available, it doesn’t produce harmful emissions, is environmentally friendly, non-toxic, renewable and even fuel efficient. Compared to diesel or gas it can produce more energy per pound of fuel. This means that if a car is fueled by hydrogen, it can go farther than a vehicle loaded with the same amount of fuel but using a more traditional source of energy.
However the downsides are it's difficult to store, it's hard to move around, it's highly flammable and it is currently expensive. So is it really viable?
The answer may be down to investment, as most of the downsides are largely predicated on cost.
Any technology first has to be used on an industrial scale for it to become economically viable. The same applies to electrolyzer technologies (the method used to produce green hydrogen). Currently, electrolyzer prices are down 50% as compared to five years back.
Generally, green hydrogen production costs have fallen by 40% since 2015 and are expected to fall by a further 40% through 2025, states a report by IHS Markit, partly due to state-funded research and development, but also large investment projects.
Countries that have already published national hydrogen strategies are e.g. Australia, Chile, Germany, Portugal, Spain, Japan, South Korea, New Zealand and the U.K.
According to the investment banking company Goldman Sachs, green hydrogen could supply up to 25% of the world’s energy needs by 2050 and become a 10 trillion-dollar addressable market by 2050.
Ineos has announced that it will invest €2bn (£1.7bn) in green hydrogen production in Europe this decade, touting the package as the largest ever single investment commitment in green hydrogen from Europe’s private sector.
Sir Jim Ratcliffe (the UK's richest person in 2020) and CEO of Ineos said, “Europe is crying out for more investment in green hydrogen and [our] announcement today shows our determination to play a leading role in this important new fuel.”
If you wanted to make up your own mind on whether green hydrogen is financially viable, you could do a lot worse than remembering the old adage, "Follow the money".
GETTING EXPOSURE TO HYDROGEN
Below are some U.K. listed of companies that have invested in hydrogen:
AFC Energy is the leading provider of Alkaline Fuel Cell systems for the generation of clean energy, offering best in class performance and lowest operating cost as part of global efforts to decarbonise industry.
Our purpose is reimagining energy for people and our planet. We want to help the world reach net zero and improve people’s lives
Ceres is a fuel cell technology and engineering company whose aim is to bring cleaner and cheaper energy to businesses, homes and vehicles. We are working with world-leading partners to embed our technology in mass-market energy products for the commercial, residential and transportation markets.
Getech Group plc is a leading consultancy providing geological and geophysical services to the oil, gas and mining industry. The client base comprises all the major and many smaller oil companies, as well as a number of major mining companies.
In July 2004, ITM Power became the first fuel cell company to be admitted to AIM. The group is developing fuel cells, which can convert hydrogen and oxygen into electricity, and electrolyser, which can convert water and electricity into hydrogen and oxygen.
Johnson Matthey is a speciality chemicals company that specialises in platinum. The business is organized into four units: catalysts & chemicals, precious metals, colours & coatings and pharmaceutical materials, all of which revolve around the white metal. The bread and butter business is the platinum refining and making catalytic convertors to filter car pollutants, but the long term attraction comes from its research into platinum-based cancer drugs and fuel cells.
Shell is a global group of energy and petrochemical companies with an average of 86,000 employees in more than 70 countries.
President Energy is an oil and gas company primarily focused in Argentina, with a diverse portfolio of operated onshore producing and exploration assets and 2P reserves of more than 27 MMboe.