The increased interest and investment in the hydrogen energy sector in the past year is almost certain to be sustained due to the growth needed to fill the gaps in energy demand that cannot be met by other forms of electricity, according to a report from broker finnCap.
Ahead of the publication of the UK government’s national hydrogen strategy, which has been promised for “early 2021”, the report says Westminster’s buy-in to hydrogen technology is one of several reasons why “this time it’s for real” for this store of renewable energy.
Also helping assert hydrogen’s role in the energy transition and triggering demand for hydrogen projects are the technological advancements that have lowered production costs and enabled wider variety of uses, plus the large-scale corporate partnerships that are being agreed – many of them driven by the global timetables to move towards net-zero carbon emissions.
“Hydrogen has the capability to decarbonise hard-to-abate sectors and ease pressures on national infrastructures,” finnCap’s report says.
A “significant scale-up” will be required, however, for ‘green’ hydrogen from renewable energy sources to become competitive with fossil-fuel based hydrogen, the broker says.
“This will require considerable funding to bridge the gap in production costs until cost parity is achieved.
“However, there is a strong precedent for this from renewable energy, where costs have been cut dramatically over the last decade.”
Looking at the potential to adapt the UK’s existing gas pipelines for hydrogen transportation and offshore connection, finnCap said this will require large upgrades to existing infrastructure, “but such repurposing can have substantial benefits for easing wider pressures particularly during times of peak demand”.
Elsewhere, the report notes numerous projects that are aiming to establish the feasibility of hydrogen industrial hubs and using hydrogen in residential and commercial buildings, both globally and in the UK.
“The growth of hydrogen stocks throughout 2020 has demonstrated widespread confidence in its potential to fulfil an urgent need for clean energy,” says Jonathan Wright, finnCap’s director of research.
“We believe that this momentum will be maintained throughout 2021 as technology and key partnerships continue to develop. Whilst significant private and public funds will need to be directed to scaling up the sector, hydrogen is critical to achieving global net zero climate ambitions.”
A large handful of hydrogen stocks are identified in the report as having risen by more than 1300% on average over the last two years, including AFC Energy PLC (LON:AFC), Ceres Power PLC (LON:CWR), ITM Power and Proton Motor Power in the UK, plus McPhy Energy, NEL, PowerCell Sweden, SFC Energy, Ballard Power Systems (TSE:BLDP), FuelCell Energy (NASDAQ:FCEL), Plug Power (NASDAQ:PL) and Doosan Fuel Cell overseas.