Finance Pivots to Green Hydrogen

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Green hydrogen production is accelerating, and according to IEEFA is approaching light speed.

“Australia is clearly showing the world’s electricity market the future. On sunny days — 10am to 3.30pm daily — electricity prices are now negative. EVs, batteries and pumped hydro can absorb some of this negative cost electricity, but low–capacity factor GH2 facilities will profiteer on spilled electricity as electrification of everything drives decarbonisation.”

The elements that make up the manufacturing supply chain are scaling up. “Nel moved from 40 megawatts (MW) to 500MW in 2021; ITM Power from 100MW to 1000MW in 2021. In October 2021 Thyssenkrupp targeted a fivefold expansion to 5GW of manufacturing capacity online by 2025 and in the same month FFI and Plug proposed 2GW of manufacturing capacity at Gladstone, Australia.”

It is expected that electrolyser capital costs will be down by 50–80% by 2030, with a tenfold expansion every couple of years. In 2020, electrolyser production was double that of 2019. BloombergNEF estimates electrolyser capacity globally at 15 GW by 2024.

In February 2020, Japan had the largest operational GH2 facility (10 MW), but by January 2021, Air Liquide opened a 20 MW facility in Canada. Then Shell started construction on a 100 MW site in Germany. The records keep tumbling, just as they did for batteries. The title of the largest battery in the world was not held for long. Here’s more from IEEFA:

“Thyssenkrupp and Shell announced a 200MW unit in Rotterdam just last month to be commissioned by 2024/25. New Zealand is even more ambitious, with Meridian and Contact Energy proposing a 600MW facility for a 2025/26 start-up.”

China has pledged to have 50% of its generating capacity running on renewables within 3 years. Australia’s largest export markets are making CO2 energy pledges that will be impossible to fulfill without green hydrogen.

“In his 2022 letter, BlackRock’s CEO Larry Fink talks of a tectonic shift of capital. More than US$130 trillion of collective financial capital has been pledged globally to net zero emissions by 2050.”

This isn’t just a moral choice; it is a matter of factoring the risk posed to the global economy by fossil fuels and finding the place to make wealth for your clients. 

The demand for green energy is increasing exponentially. Green hydrogen is finding its place in the ecosystem and the means to achieve that place are being put into action rapidly. Concurrently, finance is flowing to the sector and profits are being made. Government policies, especially after the COP26 pledges, are aiding the transition.

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David Waterworth

David Waterworth is a retired teacher who divides his time between looking after his grandchildren and trying to make sure they have a planet to live on. He is long on Tesla [NASDAQ:TSLA].

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