Bloomberg Intelligence releases new report on hydrogen revolution

Overall, the hydrogen revolution may provide a US$2.5 trillion investment opportunity through 2050 for utilities, equipment makers and others seeking to curb emission intensity. Annual demand-growth potential could reach 5% to 7%, according to Bloomberg NEF, to hit 7% of global energy use by the middle of the decade.

According to BI, companies across many industries are making early bets on hydrogen in order to gain a competitive edge before the market matures. Among energy, chemical and metallurgic companies, Shell, Orsted, Engie, Neste, Linde, and SSAB are making more progress in expanding hydrogen activities than Gazprom.

Within industrials, Alstom has a head start over CAF and Siemens, believes BI. Equipment suppliers, such as Plug Power, ITM Power and Faurecia should also benefit from the hydrogen boom.

Elchin Mammadov, BI Senior Industry Analyst, said: “A global climate push to decarbonise industries most in need of environmental remediation could turn hydrogen from a cottage sector into a behemoth with the help of government subsidies that attract investment to meet net-zero emissions targets.

“Hydrogen would be necessary for the world's largest emitters – the US, China, and Europe – to achieve net-zero climate targets by 2050 - 2060 by decarbonising hard to abate industries. Investment opportunity abounds, though subsidies are essential for the initial scale-up and to achieve cost reductions, since hydrogen production is very expensive.”

Globally, Europe is leading the way on the number of hydrogen projects thanks to pro-climate policies, including net-zero emissions targets adopted by governments and companies.

The EU as well as many of its member states, South Korea, and Japan have already developed hydrogen strategies, with the UK following later this year. The EU green hydrogen package envisages a cumulative €150 billion investment by 2030 to deploy at least 6 GW of electrolyser capacity to produce up to 1 million t of renewable hydrogen by 2024 and 40 GW by 2030 to make up to 10 million t.

Elchin Mammadov added: “Governments will need to develop new policies and regulation and initially offer subsidies such as contracts for difference, high carbon prices or low taxes, faster deployment of low-cost renewable energy to address the chicken-and-egg problem facing hydrogen producers, infrastructure operators, and potential consumers.

“To encourage regulated utilities to invest in hydrogen networks, authorities will have to allow grid operators to include hydrogen-related works in their rate base.”

Uncertainty on future carbon prices, government subsidies, economies of scale, and the learning curve means there is a huge variation in forecasts for hydrogen investment and consumption growth.

WoodMac estimates that a cumulative US$1 trillion of capital investments will be needed by 2050, while the IEA's projections imply about US$2.5 trillion during that period. Similarly, there is also a wide variation in projections for hydrogen demand in 2050, with Bloomberg more bullish than WoodMac and the IEA.

However, BI believes that hydrogen offers growth opportunities to utilities (Orsted, RWE, Snam), manufacturers (NEL, Plug Power, Alstom), refiners (Neste), transport (Nikola), metals and mining (Anglo American, ThyssenKrupp) and other companies seeking to curb emission intensity (Linde, Equinor).

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