New Gold Rush?: Hydrogen Seen Replacing Fossil Fuels as World’s Dominant Energy Carrier: Morgan Stanley

–Hydrogen supply chain companies eg Siemens and Alstom: “like selling picks and shovels in the California gold rush”
–Clever contracts for difference, emissions market seen bringing investment forward, needed to meet Paris-climate-deal goals
–China and U.S. could jump on board, as Europe leads way


By Mathew Carr

March 4, 2021 –LONDON: Hydrogen, including its green variety, will increasingly replace carbon as the dominant energy carrier on the planet, according to Morgan Stanley analysts.

Cumulative investments in renewable hydrogen in Europe, which has the most developed policy to encourage H2, could be up to €180-470 billion by 2050, and in the range of €3-18 billion for low-carbon fossil-based hydrogen, analysts including Ben Uglow and Katie Self wrote in a March 3 research note.

“Within this, by 2030, investments in electrolysers could range between €24 billion and €42 billion, while €220-340 billion would be required to scale up and connect 80-120 GW of solar and wind energy production capacity to the electrolysers.,” they said.

Based on estimates by the Hydrogen Council and IEA, the volume of hydrogen produced globally is set to jump from about 70mt today to about 545mt by 2030, an eight times increase.

“Hydrogen will transition from a dirty feedstock used in industrial processes to a clean fuel source adopted by power, industry and mobility in particular.

Like selling picks and shovels in the California gold rush, we look to capital equipment companies to supply tools that facilitate this transition.

Polymer electrolyte membrane (PEM) electrolysis and hydrogen-fueled trains are key examples of opportunities.

“For PEM Electrolysers, our base assumption is 8.7% CAGR through 2050 to $19.5bn; bull case 11.7% to $44.1bn. For hydrogen trains, base case assumes 12.9% to $24.2bn; bull case 15.6% to $48.4bn,” the analysts wrote.

In these scenarios, these emerging industries are set to be bigger than gas-fired power generation and on a par with onshore wind within two decades.

The analysts raised their Siemens Energy price target to €40. — “Uniquely placed to capitalise.” (€29.30 now)

They boosted Alstom to €59 — “Best-placed in hydrogen rail globally.” (€43.65 now)

Source: Morgan Stanley note

Investments in carbon capture and storage are estimated by the EU Commission at around €11 billion, while €65 billion will be needed for hydrogen transport, distribution, storage and refuelling, Morgan Stanley said.

In Europe, Funding support will come from the region’s recovery fund. Individual countries have also pledged sums to kickstart the hydrogen economy.

“Other support schemes to be considered include tendering systems for carbon contracts for difference to accelerate the replacement of existing hydrogen production in a range of industries from low-carbon steel to basic chemicals and incentivisation through the EU emissions trading system.”

See this for more context on H2 and some basics:

Green hydrogen becoming cost competitive with fossil-fuel hydrogen by 2030.

A long way from alignment with the Paris Agreement

While Europe’s ambitions for hydrogen are clear, achieving the targeted 40GW rollout by 2030 would “still be only a small step towards what is required to achieve the Paris Agreement,” Morgan Stanley said.

“We forecast that about 1,600GW of electrolyser capacity is needed globally by 2030 and about 4,600GW by 2050 in order to be on track to stay within a 2ºCelsius scenario for climate change.”

Elsewhere, global policy on hydrogen is ramping up, but still early stage, tha analysts said.

China’s net zero commitment could accelerate the adoption of hydrogen use and particularly in transport. We note that China has defined hydrogen fuel cells as an important part of its national strategy for GHG abatement. Japan plans to have 10% of its energy mix from hydrogen and ammonia by 2050 and has set aside a ¥2trillion (US$19.2 billion) fund to assist ambitious green projects, including hydrogen, low-cost storage batteries and carbon-recycling technology.

In the US, President Biden is set to drive a change of tone
on climate policy. At the same time, renewable economics could continue to improve to the point that green hydrogen might be competitive against new conventional hydrogen. However, the timeline is unclear at this stage.”

See this hydrogen catalyst story:

Leave a Reply