Hydrogen values are celebrating like it’s 1999. Hydrogen’s potential to play a major role in decarbonisation has led producers’ actions to behave like tech stocks before the dot-com crash. Investors trying to find the future Amazon of the sector have at least some clues to follow.
The value of the shares of the US fuel cell specialist Plug Power, of 30,000 million dollars (24,600 million euros), has multiplied by 20 since the beginning of 2020 and multiplied by almost 70 the sales forecast for this year. Its American rival Bloom Energy and Canada’s Ballard Power Systems, British group Ceres Power and Norway’s Nel have multiplied it by four or more. Britain’s ITM Power, which is now worth 3.6 billion pounds (4 billion euros), is trading at more than 100 times next year’s revenue.
The hysteria is understandable. The Energy Transition Commission think tank believes that hydrogen could account for 15% of the world’s energy by 2050, compared to next to nothing now. But investors risk betting on the wrong horse. Current production, which is worth more than $ 150 billion (€ 120 billion) a year, is mostly gray hydrogen, made by steam treatment. It’s cheap, less than $ 2 a kilo, but it does produce carbon dioxide. What really matters is green hydrogen, which is obtained by harnessing renewable electricity to fuel electrolysis, which divides water molecules into hydrogen and oxygen. It is more expensive, although the costs are falling rapidly. The crucial question is when will green be cheaper than gray?
It is possible to make an estimate. McKinsey estimates that green hydrogen for the chemical and refining sectors, and hydrogen-powered trucks, will cost the same as gray in 2030. The consultancy says it will take longer to apply to other activities such as iron and steel production and household heating. However, he also believes that a possible carbon price of $ 100 per tonne imposed by governments, three times the current European level, would make these uses competitive in 2030 as well.
This means that the nascent hydrogen Amazon may be lurking in the niche (albeit very important) sector of electrolyzer manufacturing. Nel, ITM’s rival in this area, said Thursday that it could make green hydrogen for $ 1.50 per kilogram by 2025. True, its targets are based on renewable energy at $ 20 per megawatt-hour, less than half of what offshore wind costs in the UK. But the interest of investors and governments is such that, as in the case of wind and solar, it is possible to achieve spectacular savings. The prospect of backing the industry’s Amazon means that even with today’s inflated valuations, gambling can be rational.