There may be investment opportunities in hydrogen in a zero-carbon economy, with the abundant element powering cars, trains, and potentially aircraft, writes John Mowll.
The concept of a “hydrogen economy” came into prominence in the early-2000s, when US economist Jeremy Rifkin envisioned the replacement of an oil-based economy with one centred on hydrogen.
The world’s most abundant gas is now seen by many experts as crucial to a zero-carbon future. For the transport sector, the hydrogen fuel cell may have a revolutionary impact and this could present emerging, long-term opportunities for investors.
A key benefit of hydrogen-powered cars as opposed to electric vehicles is once drivers find a hydrogen refuelling station, it takes only a few minutes to refill. However, this does not appear to be enough to persuade car makers, which are almost universally pursuing the battery electric vehicle (BEV) model, despite the practical and ethical challenges it presents in terms of lithium, nickel, and cobalt sourcing.
Nikola Motor Company now offers three hydrogen-powered truck models, with impressive range figures of up to 1,200km. The company is also working with partners to roll out hydrogen refuelling infrastructure – currently one of the most significant hurdles facing hydrogen-powered road vehicles.
Elsewhere, in the public transport arena, hydrogen-fuel-cell bus fleets have proved viable in the Scottish city of Aberdeen. The Aberdeen Hydrogen Bus Project, which comprises two European-funded initiatives, has grown to encompass a fleet of 10 vehicles, which just recently racked up their millionth mile, collectively.
Despite this, BEVs continue to be the preferred option for the transport sector currently. For example, Chinese megacity Shenzhen now has 16,000 electric buses; Santiago de Chile doubled its electric bus fleet in January 2019, adding a further 100 vehicles; and scores of cities globally are adopting the zero-emission technology.
A more promising application for hydrogen-fuelled vehicles may be in the mining sector, where trucks operate the vicinity of the mine site. This cuts out the problem of hydrogen transportation infrastructure, as the fuel can be produced on-site from renewable energy and electrolysing water.
Diversified mining company Anglo American, for instance, has recently announced its intention to trial a hydrogen-powered truck within the next 12 months.
In September 2018, the world’s first passenger train powered by hydrogen fuel cells ran between Cuxhaven and Buxtehude, in northern Germany. The trains – which emit only water, and store excess energy produced by the fuel cells in on-board lithium-ion batteries – are built by French TGV-maker Alstom.
The company intends to deliver 14 more zero-emission trains by 2021. Hydrogen trains are more expensive than their diesel counterparts in terms of capex, but running costs are significantly lower.
Hydrogen as an aviation fuel has a somewhat chequered past, but as experience has led to a more complete understanding of how to handle, store, and transport hydrogen safely, scientists and engineers are increasingly optimistic about hydrogen’s potential for “green” aviation.
This optimism is, in part, owing to pessimism about the practicality of battery-powered aircraft, since batteries are too heavy and not sufficiently energy-dense to be a practical solution to cutting the aviation industry’s carbon emissions.
Although hydrogen solutions such as HES Energy System’s Element One are in their infancy, they may yet prove both viable and scalable.
Oceans of potential
Hydrogen fuel cells have also been put forward as a zero-carbon solution to greenhouse gas emissions from marine vessels. Hydrogen fuel cells’ benefits in a marine context are much the same as in the aviation industry – principally that they are lighter and more energy-dense than batteries and allow for longer distances to be travelled between refuelling.
An additional benefit is that they reduce engine and propeller noise. Research has demonstrated that shipping noise can alter the behaviour of marine giants, such as wales and dolphins, disrupting communications, foraging and movement patterns. Yet hydrogen as a fuel source for marine vessels has a familiar drawback: a lack of refuelling infrastructure.
In a zero-carbon future, there is room for both battery-electric and hydrogen-electric modes of transport. Practicality and cost will likely determine which is used in specific contexts. However, for now, investment opportunities in a hydrogen economy remain thin on the ground for all but governments and private equity firms.
Only when there is a clearer picture on which clean-energy sources will power the zero-carbon economy will investors be able to harness hydrogen’s potential as a clean power.
John Mowll is responsible investment analyst at EdenTree Investment Management.