Chemicals Chemicals Sector: Hydrogen - a new dawn or a 2000-like false dawn?

Hydrogen sentiment is rising as quickly as the element itself but similar trends occurred in the 2000s, so there may well be a sense for sector veterans of foreboding. We now see a higher chance of success but think challenges remain.

22 Jun 2020

Hydrogen stocks then…index 1995-2006

Source: UBS Research, stocks include Ballard Power, Plug Power

This line graph illustrates hydrogen stocks from November 1995 to December 2006.

Hydrogen rhetoric and share prices on the rise even in a low oil price context

Hydrogen sentiment is rising as quickly as the element itself. Given that fuel cell technology is not new (the concept of generating power using hydrogen is over 100 years old) there might be a sense for sector veterans of foreboding. So are recent developments different to the bubble of the 2000's?

Decarbonisation plan is a key goal of the EU… but infrastructure needs are big

We see a much greater chance of success but more in industrial than auto markets and even then with limited visibility on return on capital employed (ROCE) for participants. The level of governmental commitment, at least in Europe, along with greater availability of cheap, renewable power, differentiates this phase of the development of hydrogen from 2000. The EU Green Deal at the end of 2019 put hydrogen at the centre of its de-carbonisation plan and its net-zero greenhouse emissions by 2050. In Germany there is a 'national strategy for hydrogen', involving €9bn of potential funding and an ambition to build 5GW/10GW of electrolysis capacity by 2030/40. But while chances of meaningful growth of hydrogen energy applications appear higher the scale of infrastructure requirements in hydrogen production capacity, storage and distribution is huge.

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