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Forward thinking | Article - 5 Min

Hydrogen: tomorrow’s energy today

2 Authors - Forward thinking
18/07/2023 · 5 Min

Placed at the centre of governmental net-zero strategies thanks to its varied industrial applications, green hydrogen is one of the fastest-growing clean energy technologies and is set to grow exponentially in the coming decades.

As portfolio managers in the environmental sector, our role is to seek out innovative technologies, such as hydrogen, that are making an impact, and look at those businesses behind the innovations, regardless of their size. For our Uncapped Impact Series, we talk to the leaders of such businesses to get their perspectives on present and future opportunities.

In our latest interview, we discuss the wide-ranging potential of hydrogen with Andy Marsh, President and CEO of Plug Power, a global end-to-end green hydrogen provider, to see if there is more to the clean hydrogen ecosystem than mere hype.

Hydrogen 2.0

Hydrogen has long been used for industrial purposes. Yet, what makes hydrogen such a big opportunity is the burgeoning shift from grey to green hydrogen – which is made using renewable energy sources rather than fossil fuels – and the knock-on effect this will have on decarbonising typically brown industries, such as steel and cement manufacturing, as well as for transportation and energy storage.

For Andy, the future potential of green hydrogen resides in the ability to move it at scale. Referencing work currently being undertaken in Demark to build a hydrogen pipeline through Central Europe, he believes that when such pipelines are as accessible as natural gas pipelines are today, it will open up all sorts of applications. He says, “Green hydrogen could take the place of anything which currently requires high-temperature burning and relies on natural gas and oil.”

He sees it becoming an integral part of power networks, with hydrogen-powered fuel cells providing backup for solar and wind. Transportation also has the potential for a major hydrogen transformation. While liquid hydrogen is already associated with long-range, commercial trucks, Andy believes it could also shake up the consumer vehicle market by adding a hybrid component to electric cars so that people can fill up at hydrogen fuelling stations just as they do with gasoline.

According to Andy, “The argument about what is better – batteries or fuel cells – will go away and it will be a combination of both that solves many problems… As the world becomes more electrified, and as hydrogen becomes a substitute, people are going to figure out creative ways to use hydrogen, which nobody’s talking about today.”

Three drivers of momentum

Ambitions for a future hydrogen economy have been fuelled by three key moments from the last decade. Following the Paris Accord in 2016, Andy recalls it took two-to-three years for people to recognise that green hydrogen was the only way certain highly-emitting industrial applications – such as concrete manufacturing – were going to decarbonise. He says, “That was an important moment because it did take a while for people to understand that electricity wasn’t going to work in these processes. And now, Bloomberg is forecasting that 20% of the world’s energy needs will come from hydrogen.”

The pandemic was an equally important moment due to its Build Back Better ethos. Andy believes this prompted people to make sure ample fiscal spending was aligned with government goals, explaining “Hydrogen took a prominent position because people recognised that is where the jobs and opportunities of the future would be.”

Finally, he adds that the Ukraine war has highlighted concerns about energy independence and the need to secure a future where energy is readily available and not a national security issue – a problem that hydrogen has the potential to solve.

Building a hydrogen ecosystem at pace

Plug Power has harnessed this momentum to build out a whole hydrogen ecosystem. It utilises electrolysers to take water and green energy and create hydrogen and it stores hydrogen in cryogenic form. It now has over 200 fuelling stations worldwide and is the largest user of liquid hydrogen.

To further its ambitions, Plug Power is building its own manufacturing plants in order to become vertically integrated. Its first plant in Georgia is coming online shortly, followed by Texas, New York and Louisiana. What’s more, these plans are being developed at pace – the Georgia plant only took 48 weeks from breaking ground to generating liquid hydrogen.

Andy explains that Power Plug’s vast experience is being leveraged for future projects, saying “It’s been designed to duplicate, duplicate, duplicate.” He adds that the business’s learnings are also being applied in Europe, with development activities already being planned in Finland, “Between now and 2030, we’re planning to build out two gigawatts worth of electrolyser products for generating hydrogen for hard-to-decarbonise applications.”

Countering the naysayers

While momentum is undeniable, naysayers continue to suggest it’s too early to invest in hydrogen as it’s not cost-effective enough. To counter these arguments, Andy draws parallels from his prior experience in wireless communication, reflecting that many of the fundamentals are the same. “Around 1993/94 I realised that the timing was right: the technology and costs were coming down, and there was a strong government push around the world for wireless communication. The same is happening with hydrogen today.”

He adds that this time the drivers are not just coming from government policy, but from companies  – who are using green hydrogen to further their net zero goals – as well as consumers. He notes, “The younger generation wants to buy sustainable products. They don’t want oil and gas… and they want to buy from companies who have goals to be net zero.”

That said, challenges remain – especially when new technologies are being pioneered. Yet, Andy remarks that the challenges being faced are predominantly engineering and business-orientated rather than technology-related. He says, “Surprises happen, but you learn along the way… It’s the new opportunities and areas that we have to make work. These need to become routine, but they’re becoming routine faster because we have been through such loops before.”

Looking at today and tomorrow

For companies such as Plug Power, access to capital at a project level is critical. Andy values those investors who nurture a longer-term vision for the industry and are not trading in and out every day. Such patient capital will be essential to achieving that broader vision, “We’re going to build plants by ourselves, we’re going to build plants with partners and we’re going to build plants for partners… And they’re the kind of investors needed both in Wall Street and, hopefully, in Europe. I think it really matches well with the goals of European companies, European government policies and American companies and policies.”

While few investment journeys are direct, with no bumps in the road, companies contributing genuine impact offer a real structural investment opportunity. Since we introduced Plug Power into our environmental portfolios in 2019, its revenue has grown from USD 250 million per annum to well in excess of USD 1 billion. It now operates in five continents and aims to produce 2,000 tonnes of green hydrogen per day by 2030.

But while Andy has one eye firmly fixed on today’s goals, he also spends a lot of time thinking about tomorrow’s potential. He concludes by saying. “We talked about the business generating hydrogen for more traditional applications, but these all feed into each other. And as one gets stronger, the next one gets stronger… as hydrogen drives the growth of the fuel cell industry, these industrial applications will really make hydrogen product costs lower, which will make them more competitive.”

As at July 2023

Disclaimer

Companies mentioned herein, are for illustrative purposes only, are not intended as solicitation of the purchase of such securities, and do not constitute any investment advice or recommendation.

Please note that articles may contain technical language. For this reason, they may not be suitable for readers without professional investment experience. Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns. Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions). Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.
The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns.
Past performance or achievement is not indicative of current or future performance. Performances is calculated net of fees unless otherwise stated.
  • Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.
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