One dilemma for green energy enthusiasts is what to do with any excess power supply when demand is low. One option is to produce clean hydrogen, an approach which the EU is taking very seriously. Germany unveiled a €7bn investment plan in June. The EU is soon expected to provide a hydrogen strategy as part of its green economic recovery deal.
Various companies aim to get involved. Gas group Air Liquide said it will build truck hydrogen refuelling facilities in France on Wednesday. Energy group Equinor, on the same day, said it would begin producing “blue” hydrogen — which recaptures any released CO2 from its natural gas feedstock — in the UK. Transportation offers a promising end use. Fuel cells using hydrogen are better for large electric vehicles, such as trucks and buses, due to their limits on battery size.
So far the star attraction is electric truckmaker Nikola of the US with a valuation of $25bn, even before it has earned a penny. Share prices of fuel cell manufacturers PowerCell of Sweden and Canada’s Ballard have doubled since the start of the year. The bet is that as scale grows, costs will fall as has happened for more typical electric batteries and solar cells.
Similar to earlier subsidy programmes for renewable energy power projects, assistance will be needed to smooth the transition to costlier “green” hydrogen (using electrolysis). Currently around $4.7 per kg, costs are expected to halve by 2030, think Bernstein. Already blue hydrogen is at $2.5 per kg, but regular petrol is 30 per cent below that figure. Encouraging supply (and demand) will require carbon contracts for difference to close the gap with fossil fuels.
Apart from cleaner air, consumers may get little exposure to the technology unless they hop on a hydrogen-fuelled bus. That looks like bad news for carmakers such as Toyota which have bet on fuel cells. For now, electric batteries look to prevail in the passenger car market.
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