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Hydrogen remains a long-term investment opportunity, says JPMorgan

As of January 2022, 26 countries have national hydrogen strategies in place, of which half were launched in the past year and many include electrolyser capacity targets

Hydrogen is expected to remain a long-term investment opportunity, says JPMorgan, after a challenging year for alternative energy stocks.

The ‘hydrogen hype’ from 2020 is “clearly behind us”, the investment bank said in a note to clients on Monday, with the tough past year not completely erasing the benefits of the 2020 rally but seeing several stocks significantly underperform the market.

Yet, JPMorgan reiterated its support for hydrogen as a long-term investment opportunity due to the fact that the aspirational political momentum “has not slowed down”, with policy frameworks “slowly but surely establishing the conditions for the emergence of a low CO2 hydrogen market”.

As of January 2022, 26 countries have national hydrogen strategies in place, of which half were launched in the past year and many include electrolyser capacity targets.

READ: Green hydrogen versus blue hydrogen (and turquoise and grey hydrogen) – an explainer

For 2030, the announced target totals 69 gigawatts (GW).

In December, the European Union published a new ‘Gas & Hydrogen’ proposals to follow up to the ‘Fit for 55’ package from July.

In the new proposals, legislative proposals were outlined to decarbonise the EU gas market by facilitating the uptake of renewable and low carbon gases, including hydrogen, including an aim to significantly reduce natural gas use in homes and businesses.

A key element of this transition is establishing a competitive hydrogen market with dedicated infrastructure.

While the United States currently lags Europe and Asia in clean hydrogen development, JPMorgan said “the gap is closing”, helped by a positive policy landscape driving the H2 transition.

Major new legislation, including the Infrastructure Investment and Jobs Act, is set to bring billions in funding for clean hydrogen deployment, the analysts noted, with the US Department of Energy’s hydrogen shot initiative seeking to reduce the cost of clean hydrogen by 80% to $1 per 1 kilogram in a decade.

The US$550bn climate provisions in the Biden Administration’s Build Back Better act, if passed, could provide further support.

Looking to Asia, hydrogen proliferation is being driven by the de-carbonization rhetoric, such as those heard from the APAC Clean Energy Ecosystem.

While elevated costs for green hydrogen remain a key hurdle, the analysts believe “economies of scale and technological advancement will make hydrogen application economical in 10-15 years”.

In the meantime, they noted that China still lacks a national H2 strategy, tet, local initiatives and clusters, as well as businesses are “driving the momentum”.

The JPM analysts said they “remain cautious” on the European H2 electrolyser original equipment manufacturers, “given rapidly increasing manufacturing capacity globally could depress industry utilisations and thus margins”, with a ‘neutral’ rating for ITM Power and continental rival Nel ASA at ‘underweight’.

Hydrogen market developments since the fourth quarter of 2021

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2022-01-17 10:21:00

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