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Hydrogen project pipeline tops $300bn, UK installs first hydrogen homes, solid-oxide electrolysis makes progress

A recent pull-back in hydrogen equipment companies’ share prices “was not directly related to hydrogen fundamentals”, analysts at Citigroup also said this week

The pipeline of investment in projects focused on developing hydrogen production, distribution or applications by 2030 current exceeds US$300bn, according to the latest report from the Hydrogen Council and McKinsey.

With the acceleration in hydrogen project developments last year and into 2021, leading to renewable hydrogen production costs falling rapidly, one of the main conclusions of the report was that a major hurdle for governments and industry now is to improve transmission and distribution costs.

New green renewable and grey hydrogen costs are expected to reach parity with fossil-fuel energy sources by 2028 in some countries, reaching $1.4 per kg in regions with optimal conditions to $2.3 per kg in average regions between 2032 and 2034, the report said, making hydrogen cost competitive in 20 different applications.

“Longer-term, a hydrogen pipeline network offers the most cost-efficient means of distribution,” the report said, noting that pipelines can transmit 10 times the energy at one-eighth the costs associated with electricity transmission lines and have capex costs similar to those for natural gas.

“The industry can partially reuse existing gas infrastructure, but even newly constructed pipelines would not be cost prohibitive (assuming leakage and other safety risks are properly addressed).”

It was estimated, as an example, that the cost to transport hydrogen from North Africa to central Germany via pipeline could amount to about USD 0.5 per kg of H2 – less than the cost difference of domestic renewable hydrogen production in these two regions.

With the momentum in the hydrogen market in the past year, more than 30 countries now have hydrogen roadmaps, with governments around the world have committed over US$70bn of funding and 228 large scale hydrogen projects having been announced across the value chain.

The US$300bn figure comes from all the planned hydrogen projects around the world through to 2030, based on government production targets, project announcements and spending projections.

“Given the industry’s early stage, the vast majority (75%) of these investments involve announcements but not committed funding,” the report said, of which to date there are an estimated US$80bn in the late stage of planning or being/already realised.

It is worth noting, said analyst Adam Collins at City broker Liberum, that the US$300bn of hydrogen projects still represent only 1.4% of global energy funding, so there is “more to go for” and that many of the projects are still in planning stage.

“That said it’s worth highlighting that in 2019 the Hydrogen Council estimated that between 2020 and 2030 $100bn of funding would reduce green hydrogen costs by 70%.”

Hydrogen Council members include , BMW, Microsoft Corp and Sinopec.

Hydrogen homes

Giving a glimpse of what the world could be like once the abovementioned hydrogen distribution network is in plan, the first hydrogen-powered boilers and cooking hobs are being installed in a UK pilot scheme.

Two semi-detached houses in Gateshead will from April use only hydrogen for their boilers, hobs, ovens and heaters under the government’s new Hy4Heat innovation programme.

The government said the aim is to create “hydrogen neighbourhoods” and even a “hydrogen town” by 2030 as part of the UK’s net-zero carbon plans.

Gas companies Northern Gas Networks and Cadent have both put in £250,000 of funding each to run the two-home pilot scheme, with £250,000 coming from the government.

The homes will not be occupied but will be available for the public to visit, to showcase the use of hydrogen in a real-world setting.

Hydrogen, which produces no carbon at the point of use, is one of several solutions being sought to reduce household carbon emissions, with natural gas being responsible for more than 30% of the UK’s carbon emissions.

While Downing Street has made its support for hydrogen clear but with a debate in the energy market about whether hydrogen is the right tool to combat climate change, the government has committed to undertaking more research before making any decisions about major projects.

A UK hydrogen strategy is expected this spring.

Hydrogen company news

At the company level this week, there were also some positive developments, including a trading update from fuel cell technology maker ().

The AIM-listed group, which has deals including with German giant Bosch, Chinese group Weichai and Korea’s Doosan, said revenues in its upcoming results would beat market expectations while its order book heading into 2021 was also very strong.

Ceres said it had orders of £54mln at the end of the year and a pipeline of £44mln, up from £22mln and £50mln a year ago.

READ: Ceres Power revenues ahead of target as fuel cell production scales up

Its expansion into green hydrogen electrolysis for industrial applications is also making good progress following a successful initial R&D stage, said chief executive Phil Caldwell, who said the past 18 months “have been one of the most important periods in our history”.

Solid-oxide electrolysis, as the company is developing, remains in its infancy but these are encouraging comments, said broker Berenberg added, suggesting that further investment could be required to capitalise on this potentially significant opportunity.

Winning more headlines was Jaguar Land Rover as the Indian owned carmaker unveiled its plans to step up its emissions-free vehicle production.

As well as turning Jaguar into an all-electric brand over the coming years, the group said it is preparing for when the hydrogen economy is more mature, with development “already underway” of a vehicle powered by hydrogen fuel cells.

This prototype will be arriving on UK roads “within the next 12 months as part of the long-term investment programme”, new boss Thierry Bolloré said.

In the mass transit market, where hydrogen is seen as potentially having a bigger role, () signed a contract with a train leasing company.

In a deal to supply hydrogen fuel cell systems for passenger trains, TP Group is acting as the prime contractor for the integrated hydrogen fuel system, building upon its preliminary consulting work.

CEO Phil Cartmell said: “This is an excellent opportunity for our hydrogen business and seeks to leverage our significant expertise created over many years operating atmosphere and gas management solutions, where we focus particularly on the safety aspects of working with gases such as hydrogen.

“It is very exciting to see the uptake of hydrogen fuel in new markets such as rail transport, where operator and passenger safety are such critical factors.”

READ: Hydrogen energy sector needs “significant scale-up” in investment, says broker

A recent pull-back in hydrogen equipment companies’ shares “was not directly related to hydrogen fundamentals”, said analysts at Citigroup this week.

They suggested it offered investors “a better entry level” to get access to the hydrogen story.

Broadly, the share prices of hydrogen equipment companies covered by the bank were 10% below their late January peak before being hit by “de-grossing” and a pause in clean energy fund inflows.

“In our view, the key drivers remain supportive,” the analysts said, noting that firm growth in orders had been reported.

“We see FY21 as another strong year for catalysts at the national policy and at the company order-book and activity levels.”

Ceres and Norway’s Nel were among the companies highlighted.

Offshore hydrogen

With wind generation sometimes higher than demand, such as was seen in the first lockdown last year, there are attempts being made to develop offshore hydrogen electrolysers to store this excess energy.

UK consultancy ERM told the BBC it is looking to fit floating wind turbines with desalination equipment to remove salt from seawater and electrolysers to produce hydrogen from the resulting freshwater.

A prototype system of the Dolphyn project plans to use a floating wind turbine of close to 10 MW capacity offshore Scotland, with first hydrogen pencilled in by 2024 or 2025.

Other offshore hydrogen projects are also in development, including the Oyster project set up by a consortium of companies including Denmark’s Ørsted and London-listed ITM Power; UK based Neptune Energy is also planning to convert an oil platform into a hydrogen production station; while Siemens has set aside €120mln of (£105m) to invest into the development of an offshore turbine with a built-in electrolyser. 

Read More: Hydrogen project pipeline tops $300bn, UK installs first hydrogen homes, solid-oxide electrolysis makes progress

2021-02-19 10:38:00

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