News

Marc Lavaud
ESG Analyst at ODDO BHF

Every twenty years or so, another wave of enthusiasm for hydrogen is stifled. That said, the conditions currently appear to be in place for an industrial rivalry which might lead to the emergence of a real alternative energy source within the next ten years. In our coverage, Plastic Omnium, Faurecia and Michelin are the best positioned, alongside RWE and Engie for utilities.

Hydrogen, the perpetual energy source of tomorrow

At regular intervals over the past fifty years, ideas for hydrogen for applications such as mobility, heating and electricity storage have withered on the vine. Unfavourable macroeconomic conditions and technical realities have prevented hydrogen from becoming competitive. Currently, hydrogen is essentially used in industry (94% of usage).

The alternatives to the production of carbon-intensive hydrogen are in their infancy, but positive prospects exist

Hydrogen is often lauded for its benefits to the climate. However, currently 98% of hydrogen production is based on gas and coal. This generates global annual emissions of 830 MtCO₂, i.e. representing the combined emissions of the UK, France and Belgium. In order to lower the carbon intensity of this production, the electrolysis of water based on renewable energies (RE) is a more credible and greener alternative. However, this remains an expensive option in the current conditions. The prospect of cost reductions is nonetheless positive, going hand-in-hand with the decline in the cost of RE. The use of fuel cells (FC) is the holy grail of low-carbon transport. In the automotive sector, fuel cell electric vehicles (FCEV) are already used in tandem with battery electric vehicles (BEV), but are more adapted to the heavy goods segment.

European climate policies and stimulus plans post COVID-19 as catalysts

The fate of hydrogen is closely linked to the climate ambitions of governments. The public authorities should enable the development of hydrogen via a high CO₂ price and subsidies for the rollout of infrastructure. Businesses have not been idle. Like the 95 gCO₂/km regulation that transformed the automotive sector, a high CO₂ price cannot be ruled out, particularly in Europe. The green tone of European stimulus plans seems to confirm this. Business still has time before massive investment becomes necessary (until 2030, on our reckoning). However, companies must take a strategic option to anticipate a possible major shift in direction towards hydrogen out to this horizon.

Auto suppliers are committed (Plastic Omnium, Faurecia and Michelin), initiatives at OEMs and utilities (Engie and RWE)

Outside our coverage, Air Liquide is clearly a safe bet in hydrogen, but the group must lower the carbon content of its production. In the automotive segment, Asian OEMs (Hyundai, Toyota, Honda) are leading the pack. In our coverage, the majority of businesses are lagging behind, but we note major efforts from auto suppliers. Plastic Omnium (€ 200m invested in 2018-2020) has the most ambitious plans given its size. Faurecia and Michelin also have major ambitions via the JV Symbio (€ 140m invested since creation), which already equips 200 Renault “hybrid” FCEV/BEV. Daimler is the European OEM that we see as the furthest advanced, with lofty ambitions now focused on trucks (with Volvo) more than on passenger cars. With regards to utilities, Engie is developing around ten pilot projects at different points on the value chain, whilst EDF is counting on its partnership with McPhy for the production and commercialisation of H₂ in heavy transport activities. In Germany, the € 9bn hydrogen strategy is an argument in favour of the industrialisation of green hydrogen production. RWE and Thyssenkrupp have announced a partnership to develop a 100 MW green hydrogen production site which is due to come into service in 2025. For the first time in hydrogen’s long history, we might see the launch of the industrialisation of its production.

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