Green hydrogen is one of the fastest-growing clean energy technologies and looks set to grow exponentially in the coming decades. Many governments have placed it at the centre of their net-zero strategies thanks to its varied industrial applications.
As portfolio managers in the environmental sector, we seek out impactful, innovative technologies such as hydrogen, and look at the businesses behind the innovations. We talked with Andy Marsh, President and CEO of green hydrogen provider Plug Power, to learn if there is more to clean hydrogen than mere hype.
Hydrogen 2.0
Hydrogen has long been used for industrial purposes. What makes it a big opportunity today is the shift from grey to green hydrogen, which is made using renewable energy sources rather than fossil fuels. The transition has the knock-on effect of decarbonising typically brown industries such as steel and cement manufacturing, transportation, and energy storage.
For Andy Marsh, the potential of green hydrogen resides in the ability to move it at scale through pipelines. Referencing work in Demark to build a hydrogen pipeline through Central Europe, he believes that when such pipelines are as accessible as natural gas pipelines are today, it will enable many applications. He says, “Green hydrogen could take the place of anything which currently requires high-temperature burning and relies on natural gas and oil.”
He sees it becoming an integral part of power networks, with hydrogen-powered fuel cells providing backup for solar and wind energy. In transportation, liquid hydrogen is already used by long-range, commercial trucks, but it could shake up the consumer vehicle market by adding a hybrid component to electric cars. People could fill up at hydrogen fuelling stations just as they do with petrol now.
According to Andy, “The argument about what is better – batteries or fuel cells – will go away and it will be a combination of both that solves many problems. As the world becomes more electrified, and as hydrogen becomes a substitute, people are going to figure out creative ways to use hydrogen which nobody’s talking about today.”
Three drivers of momentum
Ambitions for a future hydrogen economy have been fuelled by three key events from the last decade.
After the 2016 Paris agreement, Andy recalls it took 2-3 years for people to recognise that green hydrogen was the only way highly emitting industrial applications such as cement making were going to decarbonise. “It did take a while for people to understand that electricity wasn’t going to work in these processes. Now, Bloomberg is forecasting that 20% of the world’s energy needs will come from hydrogen.”
Secondly, the Build Back Better ethos after the pandemic prompted efforts to make sure fiscal spending was aligned with government goals. “Hydrogen took a prominent position because people recognised that is where the jobs and opportunities of the future would be.”
The Ukraine war has increased the desire for national and regional energy independence and the need to ensure energy is readily available. Hydrogen can help solve this problem.
Countering the naysayers
Countering the argument that hydrogen is currently not cost-effective enough, Andy Marsh draws parallels from his experience in wireless communication. “Around 1993/94, the technology and costs were coming down, and there was a strong government push around the world for wireless communication. The same is happening with hydrogen today.”
He adds this time the push is also coming from consumers and from companies who are using green hydrogen to further their net zero goals. “The younger generation wants to buy sustainable products. They don’t want oil and gas… they want to buy from companies [that aim] to be net zero.”
The challenges that remain are mainly engineering and business-oriented rather than technology-related. “… new opportunities and areas…are becoming routine faster because we have been through such loops before.”
Looking at today and tomorrow
We believe companies making a genuine impact offer a real structural investment opportunity. For companies such as Plug Power, access at a project level to ‘patient capital’ from investors with a longer-term vision for the industry is critical. Andy Marsh: “We’re going to build plants by ourselves… with partners and… for partners… [So] they’re the kind of investors needed both in Wall Street and, hopefully, in Europe.”
He concludes: “As hydrogen drives the growth of the fuel cell industry, industrial applications will really [lower] hydrogen product costs, which will make them more competitive.”
Written July 2023
Disclaimer
This material is issued and has been prepared by BNP PARIBAS ASSET MANAGEMENT UK Limited (“BNPPAM UK”). Registered in England No: 02474627, registered office: 5 Aldermanbury Square, London, England, EC2V 7BP, United Kingdom. BNPPAM UK is regulated by the FCA under UK laws, which differ from Australian laws. In Australia, BNPPAM UK is exempt from the requirement to hold an Australian financial services license under the Corporations Act 2001 in respect of the financial services. This material is distributed in Australia by BNP PARIBAS ASSET MANAGEMENT Australia Limited ABN 78 008 576 449, AFSL 223418. This material is produced for information purposes only and does not constitute:
an offer to buy nor a solicitation to sell, nor shall it form the basis of or be relied upon in connection with any contract or commitment whatsoever or
investment advice.
Opinions included in this material constitute the judgement of BNPP AMAU at the time specified and may be subject to change without notice. BNPP AMAU is not obliged to update or alter the information or opinions contained within this material. Investors should consult their own legal and tax advisors in respect of legal, accounting, domicile and tax advice prior to investing in the financial instrument(s) in order to make an independent determination of the suitability and consequences of an investment therein, if permitted. Please note that different types of investments, if contained within this material, involve varying degrees of risk and there can be no assurance that any specific investment may either be suitable, appropriate or profitable for an investor’s investment portfolio.
Given the economic and market risks, there can be no assurance that the financial instrument(s) will achieve its/their investment objectives. Returns may be affected by, amongst other things, investment strategies or objectives of the financial instrument(s) and material market and economic conditions, including interest rates, market terms and general market conditions. The different strategies applied to the financial instruments may have a significant effect on the results portrayed in this material. Past performance is not a guide to future performance and the value of the investments in financial instrument(s) may go down as well as up. Investors may not get back the amount they originally invested. The performance date, as applicable, reflected in this material, does not take into account the commissions, costs incurred on the issue and redemption and taxes. All information referred to in the present material is available on www.bnpparibas-am.com.
