The supply chain
While the electrolyser and the fuel cell are critical components in the production and conversion of hydrogen, an entire supply chain needs to be in place for this process to work and be economically viable.
This ranges from the renewable energy producers, industrial gas pipelines and transportation, to the manufacturers of downstream products that will now use hydrogen to replace fossil-based fuel.
Investment in the infrastructure and supply chain has already begun. For instance, the world’s largest offshore wind producer, Orsted, has partnered with ITM Power to pilot attaching electrolysers to their wind farms.
Companies such as Italian pipeline utility SNAM and global industrial gases firm Linde, have taken direct stakes in ITM Power and signed contracts to work with them to incorporate electrolysers into their own infrastructure.
Oil major Shell is now ITM Power’s largest customer, with Shell deploying significant levels of capital to build out their hydrogen refuelling stations in anticipation of the phasing out of combustion vehicles.
Likewise with Ceres Power, Chinese industrial conglomerate Weichai and German engineering and technology company Robert Bosch have both taken direct stakes and signed contracts to license Ceres Power’s intellectual property (IP).
Furthermore, global vehicle and heavy-duty equipment manufacturers such as Honda, Toyota and Doosan have also signed agreements with Ceres Power to license their IP and incorporate their innovative fuel cells within their own vehicles.
The future for green hydrogen
The addressable market for green hydrogen is worth ca. 2 Gigawatts (GW) or $1.6 billion today. The EU alone is targeting ca. 6GW in 2024 and ca. 40GW by 2030.
The UK carbon strategy is expected to be announced in early 2022. With the US and China now engaged in Paris climate goals, the expectation is that global carbon strategies will continue to evolve from here. As we move towards the COP26 conference in Glasgow in November of this year, expect to see many more national targets incorporating hydrogen going forward.
The largest barriers to green hydrogen adoption remain the infrastructure development and the current cost levels.
Tellingly, we have seen offshore wind generation prices fall 89% over the last decade – as greater investments have been made as it became the leading contender to replace fossil-fuel based power generation.
There is every reason to assume that green hydrogen will follow a similar learning curve, especially now as it is being recognised as the best alternative to activities that cannot be electrified.
In terms of infrastructure, companies that are at risk from the decarbonisation trend have already taken the lead in ‘future proofing’ their business models.
This is usually the best vote of confidence a new technology can receive.
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About Randeep Somel
Randeep Somel has managed the M&G Climate Solutions Fund since its launch in November 2020. Randeep joined M&G Investments in 2005 and managed the M&G Global Themes and Managed Growth funds between 2013 and 2017. He was appointed Associate Portfolio Manager of the M&G Positive Impact Fund in 2019 and is part of the Equity Impact Committee.
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