Season 6, Post 44: Hydrogen’s high hopes
Happy to hear about hydrogen? Perhaps much less so now than a few years ago. With the share prices of many listed hydrogen plays down more than 90% from peak, hubris over hydrogen’s potential has morphed into humility. Or, as the Chief Executive of a leading player in the industry put it to us, “initial excitement was clearly over-stated.” However, hydrogen is still happening. A recent trip by your author to meet with Ceres Power, a clean energy technology company, provided a useful update.
Located on the outskirts of London sits Ceres’ Manufacturing Innovation Centre. Here, the business designs and builds fuel cell prototypes that can then be licensed to larger companies who will scale the technology. Have no doubt, building solid oxide fuel cells that can produce green hydrogen via electrolysis is a complex process that requires significant amounts of proprietary know-how. When scaled, however, the technology can enable high efficiency energy conversion at a compelling cost.
Where might hydrogen play a role? At peak hype, the consensus view was that hydrogen would revolutionise the transportation and (home) heating industries. Now, a much more pragmatic assessment prevails. Consider instead the case for industrial decarbonisation. Ceres believes that it will be difficult for countries to get to net zero without using hydrogen as a feedstock. Data centres are energy-hungry, as are manufacturing processes, whether for semiconductors or heavy industry. No surprise, perhaps that Ceres has struck deals with businesses in Taiwan, South Korea, Japan and Germany to-date.
Back in 2020 we cautioned that significant investments and government support would be required for the hydrogen industry to successfully scale. This remains our broad view today. While the incoming Trump administration is unlikely to look favourably upon the case for alternative energy, outside the US prospects for hydrogen are more compelling, particularly should they help boost energy independence, while conveniently driving decarbonisation too. After the peak of inflated expectations and the trough of disillusionment comes a slope of enlightenment, if Gartner is to be believed. The hydrogen industry may just be getting there.
14 November 2024
The above does not constitute investment advice and is the sole opinion of the author at the time of publication.. Past performance is no guide to future performance and the value of investments and income from them can fall as well as rise.
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Alex Gunz, Fund Manager
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