ITM Power LON:ITM recently announced it was cutting its headcount by 25% as it sought to reduce its heavy pre-tax losses. Once the darling of green investors, the company has had difficulties scaling up its production of electrolysers. But the hydrogen story which has underscored the investor interest in ITM Power is still alive and well.
The demand for hydrogen overall is expected to grow, powered both by the incumbent markets like refining and ammonia production, and for new areas of use – methanol, transport and green steel. Sectors and countries want to decarbonise and improve their energy security. Green hydrogen can help with that.
Significant capital is now being spent on developing water electrolysis systems for the production of green hydrogen. While this part of the industry is still small in terms of value, it has the makings of a future giant.
Green hydrogen: what is it?
- Water is split into hydrogen and oxygen using an electrolyzer
- Powered by renewable energy sources like offshore wind and solar
- Has a much lower carbon footprint than hydrogen produced today
- Could provide decarbonisation solutions for sectors like shipping and aviation
- Currently estimated to account for less than 1% of global hydrogen production in 2022
One of the big obstacles many investors believe stands in the way of the roll out of green hydrogen is infrastructure. Sceptics argue that the nuts and bolts of getting this new form of energy out to market do not exist and won’t for decades. They could be wrong.
A report recently published in the International Journal of Hydrogen Energy argues that physical-based hydrogen storage systems have already reached commercial maturity. Challenges obviously still exist in terms of supply chains – e.g. carbon composite fibre tanks are still too pricey – but other solutions like metal hydrides look like they are also closer to feasibility.
This is the big early win which hydrogen could deliver to the green economy. According to the International Energy Agency, “hydrogen and hydrogen-based fuels can play an important role in sectors where emissions are hard to abate and where those other mitigation measures may not be available to implement. Hydrogen’s total contribution is also larger in the longer term as hydrogen-based technologies mature.”
The IEA reckons the switch over to use of hydrogen-derived fuels in the transport sector will happen sooner than many pundits believe. Apart from road and air transport, there are thought to be significant early wins available in areas like steel making.
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Global hydrogen demand is already pushing past its historic maximum level set in 2019. Getting the planet to net zero will require a step change in demand creation in the hydrogen space, especially in new applications. Hydrogen demand is expected to reach 180 Mt in 2030 with nearly half of it coming from the new applications space.
National targets for the deployment of electrolysis capacity total between 145-190 GW. This is more than double that of last year. More public funding is expected to be made available for hydrogen technology going forward.
“We are big believers in the strength of the green hydrogen story and certainly interested in looking at projects in that space,” says Clive de Larrabeiti, Corporate Finance Adviser to UK-listed cash shell Pineapple Power LON:PNPL His company was listed to seek potential acquisitions in the green energy market. “There is still a great deal of work that has to be done in terms of bringing green hydrogen to market, but it looks like a fantastic growth area to us,” he said.
We have recently seen London-listed Hydrogen Future Industries [LON:HFI] announce an investment into Tower Green Holdings, which is in the process of establishing multipurpose hydrogen hubs in the southwest of England. HFI is in developing wind-based hydrogen production systems which can combine with electrolyser technologies to generate green hydrogen for under $2 kg.
While green hydrogen production remains at an admittedly very early stage, it has a great many high level backers as a solution to the planet’s climate issues. We anticipate the level of government backing for hydrogen projects will step up considerably over the next five years. Demand for the right technologies and solutions will grow.
