50 Shades Lighter (than Air): an introduction to hydrogen

In our sector report, 50 Shades of Hydrogen, we painted a helicopter view of moves towards the so-called hydrogen economy. Hydrogen is an energy vector or fuel that is capable of storing, transforming and transporting energy with zero emissions at the point of use. However, the majority of the hydrogen produced today is for industrial use and not in energy generation. What’s more much of that supply is “Grey” hydrogen. This is produced using fossil fuel hydrocarbon feedstocks, most typically, natural gas and has a high carbon footprint.

The emergence of “Blue” hydrogen takes advantage of this well-established production route and also provides an alternative usage for fossil fuel reserves than combustion. These processes are augmented with carbon capture utilisation and sequestration (CCUS) technologies to catch the emitted carbon and store it for other uses before it makes its way into the atmosphere. This is not without controversy.

However, in our view, for hydrogen infrastructure to really take off “Blue” hydrogen, will have to take up some of the short fall from ”Green” hydrogen production for at least the medium term to facilitate the implementation of the necessary infrastructure. Green hydrogen is made by using clean electricity from renewable energy technologies to electrolyse water (H2O), separating the hydrogen atom within it from its molecular twin oxygen. Whilst “Green” hydrogen is arguably carbon-free, it is energy-intensive. Estimates for the cost of one kilogram of “Green” hydrogen can range from $3 to $8 depending on the cost of the energy inputs.

Perhaps more controversially ”Purple” hydrogen is seen by some as an enabler of the nuclear industry. Just last month France’s Emmanuel Macron flagged a major role for nuclear-powered hydrogen production in France’s future energy mix as he vowed to make the nation an H2 powerhouse by 2030. Nuclear reactors generate a very consistent power load regardless of the current energy demand, and running electrolysers uninterrupted at maximum capacity could potentially help decarbonise H2 and rapidly achieve cost parity with existing supplies. In the UK, the Government is expected to match £21m of private funding for Rolls-Royce’s small modular reactor (SMR) project. Small modular reactors offer a lower initial capital investment, greater scalability, and siting flexibility for locations unable to accommodate more traditional larger reactors.

Looking ahead there is a concerted drive to bring down the cost of “Green” hydrogen. Indeed the “Hydrogen Shot “launched in June this year was the first of the U.S. Department of Energy’s (DOE’s) Energy Earthshots Initiative aims to accelerate breakthroughs of more abundant, affordable, and reliable clean energy solutions within the decade. The Hydrogen Shot seeks to reduce the cost of clean hydrogen by 80% to $1 per 1 kilogram in 1 decade (“1 1 1”).

In terms of where Hydrogen might make a difference, the technicalities of using it as a store of energy make it more suitable for some applications than most. Whilst batteries seem to be winning the Electric Vehicle battle in terms of domestic transport, hydrogen fuel cell power trains do have other advantages that can offset the low efficiency in more industrial usage making them more suitable for heavy duty transportation. These include range, rapid refuelling (sub 5 minutes). Hydrogen is best suited to heavy duty applications; fuel cells contain a higher amount of energy-per-unit mass than a lithium battery or diesel fuel. A truck can have a higher amount of energy available without significantly increasing the weight — an important consideration for long-haul trucks that have weight penalty policies. Shipping, and energy storage to help match supply of energy with demand from the grid (thereby increasing renewable penetration), are areas where we see hydrogen as having a strong future.

Heavy industry is often touted as a space where hydrogen can play a big role in decarbonisation. According to the American research group Brookings, heavy industry is responsible for nearly 40% of global carbon dioxide (CO₂) emissions. Steel, cement, and chemicals are the top three emitting industries and are among the most difficult to decarbonise, owing to technical factors like the need for very high heat and process emissions of carbon dioxide, and economic factors including low profit margins, capital intensity, long asset life, and trade exposure. There is often a high requirement for heat and in this case, it is suggested that hydrogen is combusted directly. One such proposed route is the replacement of coal with onsite produced hydrogen in blast. For this to be a reality though, a huge scale up in hydrogen production will be required.

UK listed companies are increasing their exposure to the space. We have tried to group them into categories and the report takes a look at a number of companies including the following.

Hydrogen production and storage

• Atome Energy / President Energy (PPC.L)
• Corre Energy (CORRE:EN)
• Oracle Power (ORCP.L)
• Igas (IGAS.L)
• Chariot (CHAR.L)

Hydrogen production technology

• ITM Power (ITM.L)
• EQTEC (EQT.L)

Fuel cells

• AFC Energy (AFC.L)
• Ceres (CWR.L)
• Proton Motor Power Systems (PPS.L)

Hydrogen Infrastructure

• Getech Group (GTC.L)

Miscellaneous (Investment companies, Hydrogen users, Consultants and other enablers)

• Pressure Technologies (PRES.L)
• Invinity Energy Systems (IES.L)
• HydrogenOne Capital Growth (HGEN.L)
• Tlou Energy (TLOU.L)
• UK Oil & Gas (UKOG.L)
• Harland & Wolff Group (HARL.L)
• Primorus Investments (PRIM.L)
• Vela Technologies (VELA.L)
• Sabien Technologies (SNT.L)
• Wood Group (WG..L)
• Ricardo (RCDO.L)
• RIO Tinto (RIO.L)
• Eurowag (WPS.L)
• Haydale Graphene (HAYD.L)
• Star Phoenix (STA.L)

The full report is available on the Hybridan website.