29th Jul 2021
In March 2021, President Biden unveiled his new infrastructure plan, promising “It is not a plan that tinkers around the edges. It is a once-in-a-generation investment in America unlike anything we have seen or done since we built the interstate highway system and the space race decades ago.1”
At the heart of his plan sits a commitment to clean energy provision and carbon neutrality, with hydrogen fuel playing a key role. Among other measures, the plan proposes to fund R&D in advanced hydrogen electrolyzers; build 15 decarbonized hydrogen demonstration projects in economically distressed areas; incentivize the adoption of electric and fuel-cell vehicles (FCEV); remove tax preferences for fossil fuels and redirect them to projects that advance industrial decarbonization; and invest $100 billion in upgrading and modernizing the electric grid. It sets a goal of a carbon-neutral, American-made power sector by 2035.2
Hydrogen is one of the leading hopes for Biden and the hundreds of governments, municipalities, and corporations around the world who have committed to reach carbon neutrality within the next few decades. Hydrogen is abundantly available across the planet in the form of water. It’s converted into fuel through electrolysis, which separates hydrogen molecules from the water compound. The hydrogen molecules are stored in pressurized containers, then compressed into a fuel cell which allows the energy they hold to be released as electricity.
Until recently, hydrogen fuel production was powered by fossil fuels, but today’s green hydrogen uses renewable energy sources, making it environmentally friendly and emissions-free. Hydrogen energy is more stable than other clean power, like solar or wind power; its energy-dense nature supports long-duration discharge cycles to release energy at times and places of peak demand; and because it’s a molecule-based fuel, it’s appropriate for use cases where electrification isn’t an option, like industrial feedstock.
Biden keeps green hydrogen in the spotlight
This week, Biden followed through on his commitment to bring down the cost of green hydrogen fuel production. Jennifer Granholm, the Energy Secretary, announced the “Hydrogen Shot” program that aims to lower the costs of clean hydrogen by approximately 80%, from around $5/kg today to $1/kg by 2030.3 Granholm referred to it as an “energy earthshot” that’s “an all-hands-on-deck call for innovation, collaboration and acceleration of our clean energy economy.4“
She continued that the project “sets an ambitious yet achievable cost target to accelerate innovations and spur demand of clean hydrogen. Clean hydrogen is a game changer. It will help decarbonize high-polluting heavy-duty and industrial sectors, while delivering good-paying clean energy jobs and realizing a net-zero economy by 2050.”5
Even before the unveiling of Hydrogen Shot, private companies and investors have been picking up on political enthusiasm for green hydrogen and taking bold steps to advance innovation and production. Plug Power, one of the leading producers of hydrogen fuel cells, recently announced plans to invest $84 million in building a fourth hydrogen refinery in the US, this one located in southern Georgia. The plant will use solar electricity to power green electrolysis, and have an initial capacity of 15 tons of hydrogen per day.6 The company also just revealed a new partnership with French carmakers Renault to produce hydrogen fuel-cell vans7. Together with Biden’s exciting news, these developments pushed Plug Power’s stock price up by 29.58% in 30 days, from $24.58 to $31.858.
UK-based ITM power announced a tender pipeline of £607 million, a rise of 131% on 2020, and work in progress totalling £35.4 million, a rise of 62% from the previous year. Neil Shah, director of research at the Edison Group, connects this positive performance with governmental decision-making, saying “The increasing global recognition of the potential for hydrogen to support green power should bring confidence to both ITM Power and their investors. The company has noted the explicit statement of electrolyzer targets from eight governments, and recent reports on global energy outlooks have recognized the necessity of rapid development in the sector.”9
Another leading hydrogen stock, Bloom Energy, just entered a partnership with the Idaho National Laboratory to test the outcomes of using nuclear energy to create clean hydrogen with Bloom Energy’s solid oxide, high-temperature electrolyzer, the results of which could impact the future of hydrogen fuel production.10
In the public sector, the Port of Los Angeles and its partners rolled out five new hydrogen-powered FCEVs and opened two hydrogen fueling stations. The achievement is part of the $82.5 million Shore-to-Store (S2S) program, a grand vision to improve air quality and address climate change statewide. The Port project involves over a dozen public and private sector partners to develop zero-emissions heavy-duty vehicles, to maintain shipment throughput at the port without adding to pollution levels.11
The global hydrogen market is keeping pace
Nor is hydrogen fuel activity limited to the US. Japan, South Korea, and the EU join the US with plans to invest more than $100 million of public funds in hydrogen fuel cell technology development12. While the US and Canada are the fastest growing market segments, encouraged by incentives through emissions regulations13, Asia-Pacific accounted for the largest revenue share in 2020, and the trend is expected to continue till 202814. It’s possible that a friendly rivalry could emerge between regions, which will help drive revenue for hydrogen stocks everywhere in the world.
Europe is rapidly emerging as a key player in the green hydrogen scene, with the EU’s Fuel Cells and Hydrogen Joint Undertaking (FCHJU) rolling out ambitious proposals to deploy 3.7 million fuel cell passenger vehicles, 45,000 fuel cell trucks and buses, 500,000 fuel cell light commercial vehicles (LCVs), and 3,700 refueling stations by 2030.15 Fuel cell solutions provider Ballard Power Systems just received an order for 13 fuel cell modules for fuel cell electric buses in the city of Frankfurt, Germany. Rob Campbell, Chief Commercial Operator at Ballard, says “The orders we are announcing today are indicative of the growing European and global adoption of zero-emission FCEBs.”16
The Asia-Pacific region is also surging ahead with green hydrogen development. Japan’s plans to be carbon-free by 2050 rely heavily on hydrogen power, and the government just announced that it will invest up to 370 billion yen ($3.4 billion) in two projects to accelerate green hydrogen R&D and adoption. One project aims to create a large-scale supply chain of hydrogen, while the other intends to build a large-scale hydrogen production plant using energy from renewable sources.17 Writing in the Wall Street Journal, analyst Phred Dvorak suggests that Japan’s projects could drive hydrogen adoption globally, saying “If it succeeds, it could also lay the groundwork for a global supply chain that would finally let hydrogen come into its own as an energy source and further sideline oil and coal—similar to the way the country pioneered liquefied natural gas in the 1970s.18“
Green hydrogen adoption is speeding up
For the moment, one of the biggest barriers to hydrogen adoption is the cost per kilogram of the fuel. However, tax breaks for clean power and penalties for fossil fuel use are helping lower the relative costs of hydrogen fuel, while the actual cost of production is also diminishing. A report from the California Energy Commission predicted that green hydrogen could fall to around $1-2/kg by 205019, and another source estimated that hydrogen fuel production costs will have dropped by 30% by 203020. The new Hydrogen Shot project aims to significantly speed up this trend, with the goal of lowering costs by 80% and reaching the target price of $1/kg by 2030.
The decline in fuel production costs is, as analysts had hoped, being accompanied by a rise in fuel production capacity. Hydrogen fuel production is predicted to jump one-thousand-fold globally, or by over 200GW, by 2040. It’s expected that as the technology and supply chain matures, the average size of a hydrogen electrolyzer project will expand from 1-10MW to 100-500MW by 2024. Richard Howard, research director at Aurora Energy Research, states “The growth of the hydrogen electrolyser pipeline is an early indication of the rapid rollout of hydrogen infrastructure that we are likely to see in the coming years.” It’s growing particularly swiftly in Europe, where capacity is on track to rise from around 200MW today to 40GW by 2030.21
These positive developments are encouraging optimistic predictions for the green hydrogen market. One study forecasts growth of 54.7% CAGR between 2021 and 2028, with the market rising from $0.17 billion in value in 2019 to $9.83 billion by 202822. As a result, and despite hydrogen stocks in general seeing a downturn at the beginning of 2021, many analysts are recommending green hydrogen stocks for investors who want to be part of a disruptive new vertical while meeting their desires for ESG (Environmental, Social and Governance–aware) investing.
1 “Biden Details $2 Trillion Plan to Rebuild Infrastructure and Reshape the Economy” March 31, 2021 https://www.nytimes.com/2021/03/31/business/economy/biden-infrastructure-plan.html
2 “Biden Details $2 Trillion Plan to Rebuild Infrastructure and Reshape the Economy” March 31, 2021 https://www.nytimes.com/2021/03/31/business/economy/biden-infrastructure-plan.html
3 “Biden administration launches program to cut cost of climate-friendly hydrogen production” June 7, 2021 https://news.yahoo.com/biden-administration-launches-program-cut-121558346.html
4 “Green hydrogen leads off US energy earthshots in ‘all hands on deck’ technology call” June 7, 2021 https://www.rechargenews.com/energy-transition/green-hydrogen-leads-off-us-energy-earthshots-in-all-hands-on-deck-technology-call/2-1-1021584
5 “Plug Power Is Still Undervalued as the Good News Keeps Coming” June 10, 2021 https://www.nasdaq.com/articles/plug-power-is-still-undervalued-as-the-good-news-keeps-coming-2021-06-10
6 “Hydrogen fuel company set to build $84M plant in Camden County” June 11, 2021 https://www.news4jax.com/news/georgia/2021/06/11/hydrogen-fuel-company-set-to-build-84m-plant-in-camden-county/
7 “Is PLUG Stock A Buy As It Teams With European Auto Giant?” June 11, 2021 https://finance.yahoo.com/m/3662e412-a9b6-3048-9f9d-571aee7fdb8f/is-plug-stock-a-buy-as-it.html
8 “Plug Power Stock Went Up By Over 29% In The Last 30 Days” June 12, 2021 https://via.news/markets/plug-power-stock-went-up-by-over-29-in-the-last-30-days/
9 “Electrolyser manufacturer ITM Power order backlog hits £154m” June 10, 2021 https://www.energyvoice.com/renewables-energy-transition/hydrogen/329209/itm-power-order-backlog/
10 “Bloom Energy, national laboratory to test hydrogen generation from nuclear power” May 18, 2021 https://www.spglobal.com/platts/en/market-insights/latest-news/electric-power/051821-bloom-energy-national-laboratory-to-test-hydrogen-generation-from-nuclear-power
11 “Port Of Los Angeles Demonstrates Hydrogen Fuel Cell Electric Trucks” June 10, 2021 https://www.fleetequipmentmag.com/port-los-angeles-hydrogen-fuel-cell-electric-trucks/
12 Hydrogen Vehicle Market Forecast, Trend Analysis & Competition Tracking – Global Review 2021 to 2031 https://www.factmr.com/report/685/hydrogen-vehicle-market
13 “Global Automotive Fuel Cell Markets, 2021-2028” May 28, 2021 https://finance.yahoo.com/news/global-automotive-fuel-cell-markets-082800012.html
14 “Hydrogen Generation Market Size, Share & Trends Analysis Report” March 2021 https://www.grandviewresearch.com/industry-analysis/hydrogen-generation-market
15 Hydrogen Vehicle Market Forecast, Trend Analysis & Competition Tracking – Global Review 2021 to 2031 https://www.factmr.com/report/685/hydrogen-vehicle-market
16 “Ballard Announces Follow-On Order for Fuel Cell Modules to Power 13 Solaris Buses in Frankfurt” May 27, 2021 https://www.prnewswire.com/news-releases/ballard-announces-follow-on-order-for-fuel-cell-modules-to-power-13-solaris-buses-in-frankfurt-301301337.html
17 “Japan Sets Aside $3.4B for Hydrogen R&D” May 18, 2021 https://www.oedigital.com/news/487734-japan-sets-aside-3-4b-for-hydrogen-r-d
18 “How Japan’s Big Bet on Hydrogen Could Revolutionize the Energy Market” June 13, 2021 https://www.wsj.com/articles/japans-big-bet-on-hydrogen-could-revolutionize-the-energy-market-11623607695
19 “Roadmap for the Deployment and Buildout of Renewable Hydrogen Production Plants in California. CEC. Publication Number: CEC-600-2020-002” Reed, Jeffrey, Emily Dailey, Brendan Shaffer, Blake Lane, Robert Flores, Amber Fong, G. Scott Samuelsen. 2020. https://cafcp.org/sites/default/files/Roadmap-for-Deployment-and-Buildout-of-RH2-UCI-CEC-June-2020.pdf
20 “Hydrogen in aviation: how close is it?” October 8, 2020 https://www.airbus.com/newsroom/stories/hydrogen-aviation-understanding-challenges-to-widespread-adoption.html
21 “Hydrogen electrolyser market booms with ‘1,000-fold’ growth in frame by 2040: Aurora” May 11, 2021 https://www.rechargenews.com/energy-transition/hydrogen-electrolyser-market-booms-with-1-000-fold-growth-in-frame-by-2040-aurora/2-1-1009199
22 “Green Hydrogen Market to Garner $9.83 Billion by 2028: Allied Market Research” May 27, 2021 https://www.globenewswire.com/en/news-release/2021/05/27/2237557/0/en/Green-Hydrogen-Market-to-Garner-9-83-Billion-by-2028-Allied-Market-Research.html