Following a surge in stock prices throughout 2020, the growth of the hydrogen energy sector looks set to maintain momentum throughout this year, financial services firm finnCap’s new energy report for the first quarter of 2021 states.
The report, titled ‘Hydrogen − this time it’s for real’, finds that recent gains differ from earlier hype cycles, with factors such as government buy-ins, lower production costs, large-scale private partnerships and technological advancements having coalesced to assert hydrogen’s role in the energy transition.
The report reveals that global commitments to a net-zero future have provided the opportunity for the acceleration of the hydrogen economy. finnCap points out that hydrogen has the ability to decarbonise hard-to-abate sectors and ease pressure on national infrastructure, although large scale-ups are needed that will require substantial initial investment to achieve cost competitiveness.
In contrast to earlier periods of activity in the hydrogen sector, the report finds that recent growth is set to be sustained, primarily resulting from countries that account for more than 60% of global energy-related carbon emissions having recently announced net-zero ambitions.
FinnCap research director Jonathan Wright says sustainability is taking up increasing space in global dialogues as governments continue to commit to a carbon-neutral future. “Such pledges require large investment into the development of viable energy solutions.”
Hydrogen can fill the gap in energy consumption that cannot be met by renewable electricity, with demand in the transport sector, in particular, expected to soar, states finnCap. As such, the report highlights that commitments from multiple global economies indicate massive investment in the future of hydrogen fuel, with the UK set to publish a national hydrogen strategy in the coming months.
FinnCap’s report notes that a significant scale-up will be required for so-called “green hydrogen”, which is derived using renewable-energy sources and will become competitive with fossil-fuel-based hydrogen.
However, this will require considerable funding to bridge the gap in production costs until cost parity is achieved, says finnCap, adding that there is a strong precedent for this from renewable energy, where costs have been cut dramatically over the past decade.
Adoption of Hydrogen
The report also examines the potential adaptation of existing UK gas pipelines for hydrogen transportation and offshore connection, and finds that this will require large upgrades to existing infrastructure.
However, such repurposing can have substantial benefits for easing wider pressures, particularly during times of peak demand.
The report finds that numerous projects have been identified 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 report also analyses the key components of hydrogen energy generation, focusing specifically on fuel cells and electrolysers. Fuel cells are noted for their versatility in terms of application, with a spotlight on polymer electrolyte membrane, alkaline fuel cell and solid oxide fuel cells. The report details the compatibility between fuel cells and hydrogen produced by electrolysers, alongside noting a decrease of 60% in the cost of electrolyser equipment over the past decade.
Wright adds that the growth of hydrogen stocks throughout 2020 has demonstrated widespread confidence in its potential to fulfil an urgent need for clean energy.
“We believe that this momentum will be maintained throughout 2021 as technology and key partnerships continue to develop. While 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.”