Gordon T Long

Gordon T Long

Global Macro Research | Macro-Technical Analysis 

STRATEGIC INVESTMENT INSIGHTS

ENERGY – HYDROGEN

 

A $11T GREEN HYDROGEN REVOLUTION

Hydrogen as a renewable fuel has been touted as a viable clean energy source since the 1970s. Yet since then, despite all the meticulously crafted predictions, hydrogen hasn’t been used to do much of anything as far as powering our world goes. For the Hydrogen Economy, the past 50 years is a catalogue of hope and false starts. However, hydrogen now appears on the cusp of coming into its own, and living up to its decades-old promise of becoming the world’s most important, most reliable, and cheapest clean energy source. The time to get bullish on hydrogen stocks is now.
 
SOME BASIC CHEMISTRY
 
Recall that on the periodic table, hydrogen is the lightest element in the universe. As such, you can fit a lot more hydrogen atoms into a finite space than you can, say, lithium atoms. The result is that any power source made with hydrogen will be infinitely more energy dense than a power source made with something else. That has enormous implications.
 
  • In TRANSPORTATION markets, more energy density means hydrogen fuel cells have longer driver ranges and faster refuel times compared to batteries.
  • In STATIONARY markets, it means hydrogen fuel cells have more consistent and robust power output.
  • In ALL MARKETS, it means hydrogen fuel cells are much lighter and more transportable.

WHAT’S NEW?

  1. POLITICS: The politics have changed. In the 1970s – no one cared about decarbonization. Now, seemingly every country and company in the world has a net-zero emissions target they wish to hit by 2030, 2040, or 2050. While stateside, the U.S. government has passed bills that includes ~ 1.5 Trillion in green energy spending.
  2. COSTS: The costs have changed. Economies of scale and advanced technologies have led to the cost of hydrogen fuel cells dropping 60% over the past decade. Deloitte expects hydrogen fuel cell costs to drop below electric battery and combustion engine costs in just a few years.
  3. TECHNOLOGY: The tech has changed. Technological breakthroughs and falling renewable energy costs have led to a new era of scalable “Green Hydrogen” production, wherein hydrogen is cost-effectively produced from renewable energy sources, like solar and wind – and not from natural gas, which is how most hydrogen has historically been produced.
  4. DEMAND: While the periodic table hasn’t changed over the past 50 years, everything else has changed – and for first time ever, all the growth drivers for hydrogen have shown up at the same time as well as global Industry & Consumers demanding economical clean energy solutions.
 
In the words of Matthew Blieske, Shell’s global hydrogen product manager:
 
“[In the past] there was a policy missing, or the technology wasn’t quite ready, or people were not so serious about decarbonization. We don’t see those barriers anymore.”
 
With those barriers removed, the Hydrogen Economy will tip into its long overdue renaissance in the 2020s, creating what Morgan Stanley sees as an $11 TRILLION hydrogen market in the coming decades.
 
The time is right to tap into hydrogen’s potential to play a key role in tackling critical energy challenges. The recent successes of renewable energy technologies and electric vehicles have shown that policy and technology innovation have the power to build global clean energy industries.
 
Hydrogen is emerging as one of the leading options for storing energy from renewables with hydrogen-based fuels, potentially transporting energy from renewables over long distances – from regions with abundant energy resources, to energy-hungry areas thousands of kilometers away.
 
Green hydrogen featured in a number of emissions reduction pledges at the UN Climate Conference, COP26, as a means to decarbonize heavy industry, long haul freight, shipping, and aviation. Governments and industry have both acknowledged hydrogen as an important pillar of a net zero economy.
 
The Green Hydrogen Catapult, a United Nations initiative to bring down the cost of green hydrogen announced that it is almost doubling its goal for green electrolysers from 25 gigawatts set last year, to 45 gigawatts by 2027. The European Commission has adopted a set of legislative proposals to decarbonize the EU gas market by facilitating the uptake of renewable and low carbon gases, including hydrogen, and to ensure energy security for all citizens in Europe. The United Arab Emirates is also raising ambition, with the country’s new hydrogen strategy aiming to hold a fourth of the global low-carbon hydrogen market by 2030. Also Japan recently announced it will invest $3.4 billion from its green innovation fund to accelerate research and development and promotion of hydrogen use over the next 10 years.
 
GREY, BLUE OR GREEN HYDROGEN
 
You might encounter the terms ‘grey’, ‘blue’, and ‘green’ being associated when describing hydrogen technologies. It all comes down to the way it is produced. Hydrogen emits only water when burned, but creating it can be carbon intensive. Depending on production methods, hydrogen can be grey, blue or green – and sometimes even pink, yellow or turquoise.
 
Green hydrogen is defined as hydrogen produced by splitting water into hydrogen and oxygen using renewable electricity. This is a very different pathway compared to both grey and blue. However, green hydrogen is the only type produced in a climate-neutral manner making it critical to reach Net Zero by 2050.
 
Green hydrogen is an important piece of the energy transition. To realize this, it is well understood that we first need to:
  • Further accelerate the deployment of renewable electricity to decarbonize existing power systems,
  • Accelerate electrification of the energy sector to leverage low-cost renewable electricity,
  • Decarbonize sectors that are difficult to electrify – like heavy industry, shipping and aviation – through green hydrogen.
 
WHAT IS UNDERWAY
 
The number of countries with a hydrogen strategy doubled last year to 26, and expected plans from the U.S., Brazil, India and China could reshape the global market, according to Bloomberg.
 
India wants to be the world’s Green Hydrogen hub and is relying on the country’s billionaires to lead the way. India Billionaire Mukesh Ambani’s ambitious effort to pivot his conglomerate Reliance Industries Ltd. toward green energy could transform India into a clean-hydrogen juggernaut.
 
Ambani, Asia’s richest man who’s built his fortune on fossil fuels, announced plans earlier this month to invest $75 billion in renewables infrastructure including generation plants, solar panels and green Hydrogen electrolyzers. Ambani has vowed to produce green hydrogen at $1 per kilogram, a more than 60% reduction from today’s costs. A capacity utilization of more than 80% will be required, and that should be powered by constant energy supplies at less than 3 cents per kilowatt-hour. Other India companies such as Adani Enterprises Ltd. and state-run energy firms NTPC Ltd. and Indian Oil Corp. also have set plans for green hydrogen.
 
One of the largest hydrogen electrolyzers in the world is now up and running in China. A 20 megawatt hydrogen electrolyzer described as “one of the world’s largest” has begun operations in Zhangjiakou, Hebei Province, China. The electrolyzer will produce green hydrogen for fuel cell vehicles being used at Zhangjiakou’s competition zone during the Winter Olympics, which are due to open on Feb. 4. Once the Games finish, commercial and public transport will use the hydrogen.
 
Bloomberg is predicting a massive drop in Green Hydrogen prices.
 
Governments will require green hydrogen to reach their committed targets for Net Zero emissions, particularly for the heavy industry, shipping and aviation sectors. To do that they are urgently working on:
 
  1. Energy Efficiency;
  2. Less Expensive Electrification
  3. Accelerated growth of renewable power generation.
 
We will discuss how this will actually rapidly happen (and underway) in the next newsletter.
(Spoiler Alert: We outlined this in our 2022 Thesis paper regarding what Bill Gates and Warren Buffet are piloting in Wyoming and the US Government is funding as part of their massive New Green Deal).
 
Generally it is viewed that once this is achieved, we will be left with ca. 40% of demand to be decarbonised, and this is where we need green hydrogen, modern bio-energy and direct use of renewables. Once we further scale up renewable power to decarbonize electricity, we will be in a position to further expand renewable power capacity to produce competitive green hydrogen and decarbonize hard-to-abate sectors at minimal extra cost.
 
THE ROADMAP AHEAD
 
The main actions we will witness in accelerating decarbonization are:
 
  1. Energy efficiency
  2. Electrification with renewables
  3. Rapid acceleration of renewable power generation (which will further reduce the already low cost of renewable electricity)
  4. Scale up of sustainable, modern bio-energy, needed – among others – to produce green fuels that require CO2
  5. Decarbonization of grey hydrogen with green hydrogen, which would bring scale and reduce the cost of electrolysis. This would make green hydrogen competitive and ready for a further scale up in the 2030s, towards the objective of reaching net zero emissions by 2050.
 
HYDROGEN STOCKS ON THE MATASII SII WATCH LIST
 
IMPORTANT NOTE: NONE OF THESE STOCKS ARE YET CONSIDERED BUYS BY MATASII.COM.
  • SOME MAY BE POSSIBLE BUYS ON A MAJOR MARKET PULL BACK,
  • SOME MAY BE POSSIBLE BUYS ON MAJOR ELECTRICITY GENERATION ANNOUNCEMENTS (Coming)
 
 
 
CONCLUSION
 
There is only one impediment standing in the way of this $11 Trillion global industrial shift occurring in Energy.
 
What is required is a source of cheaper electricity generation. It is now available and will, like Hydrogen, begin rapid build-out over the next three years.
 
WE WILL DISCUSS THE ANSWER IN OUR NEXT NEWSLETTER
 
Canada’s First Hydrogen and German consulting firm FEV are developing a hydrogen fueling station for remote locations where there are no electrical power grids available.
 

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