While switching to renewable energy sources for power generation and the electrification of private vehicles can significantly reduce global emissions, it will not be enough. “For some carbon-intensive activities, switching to electrification is of no practical or economic interest,” notes Randeep Somel of M&G Investments. For example: “In the transport sector, heavy commercial vehicles, air transport and maritime transport are responsible for 19% of global CO2 emissions and there is currently no way to electrify these activities. The cost and weight of batteries, even with continued technological advancements, means electrification is unlikely to be a solution for these sectors by 2050. And in industry, the production of steel and cement represents 16% of global emissions and these sectors do not have viable avenues towards electrification either”.
The fund manager says there is a need for a high density non-fossil fuel to take over from oil and coal. And this alternative exists: “hydrogen”.
50 shades of hydrogen
“There are many shades of hydrogen: blue, brown, green, just to name a few.” The different shades depend on different production methods, some emitting carbon and others not.
“We now have the technology to produce hydrogen from carbon-free renewable energy sources, such as wind and solar power. Electrolysers, which transform renewable energy into hydrogen, have reached a level of development where that they are capable of rapidly increasing and decreasing power, taking into account the intermittence of renewable energy sources, in order to capture the energy produced.”
Somel gives the example of the British company ITM Power, a leader in the development of proton exchange membrane electrolysers that convert renewable energy into carbonless green hydrogen. “The production capacity of its Sheffield plant is increasing.”
The other side of the technology is the fuel cell. “This is where the hydrogen is converted back into a usable form of energy, such as electricity. Substituting hydrogen vehicles for traditional combustion vehicles remains more expensive today. However, costs continue to fall, he notes. “The British company Ceres Power, which develops viable fuel cells, has significantly reduced the cost of the latter thanks to its innovative design: the fuel cell is 90% made of steel, the rest being mainly ceramic. With this innovation, it eliminated the use of expensive raw materials, such as platinum group metals, which drastically increased costs.” Riding on these innovations, Somel expects that within five years, “hydrogen-powered trucks will be cheaper to own and operate than current combustion trucks.”
Supply chain issues
Even as the technologies for the production and conversion of hydrogen mature, it remains to be seen if the supply chain behind the process works and is economically viable. “This ranges from renewable energy producers to downstream product manufacturers who will now use hydrogen to replace fossil fuels, to industrial gas pipelines and transportation.”
They have already started. Partnerships are multiplying. “Global vehicle and heavy equipment manufacturers such as Honda, Toyota and Doosan have also signed agreements with Ceres Power to license their intellectual property and integrate their innovative fuel cells into their own vehicles.”
On the infrastructure side, Somel expects to see a reoccurrence of the wind scenario--offshore wind power generation prices fell 89% over the past decade as wind power emerged as one of the main alternatives to the production of energy from fossil fuels. “Everything suggests that green hydrogen will follow a similar progression, especially since it is recognised as the best alternative to activities that cannot be electrified.”
The potential for growth is there. “The market potential for green hydrogen is now around 2 gigawatts or $1.6bn. The EU alone is targeting around 6GW by 2024 and around 40GW by 2030. UK carbon policy is expected to be announced in early 2022. With US and Chinese commitment to the Paris climate targets, worldwide carbon policies should continue to evolve. As we approach [the] COP26 [conference] in Glasgow in November this year, expect other countries to include hydrogen in their targets.”