Quarterly Outlook
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Head of Fixed Income Strategy
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China unveils ambitious plans for hydrogen
Peter Garnry
Chief Investment Strategist
Summary: China has unveiled plans to triple global output of hydrogen by 2025 in order to rapidly decarbonize its economy and achieve its climate goals. Hydrogen is seen as a key driver in the future of heavy transportation and decarbonizing steel and cement production. We go through the impact and highlight which companies are exposed to the hydrogen theme.
Hydrogen: one path to decarbonize the economy
China is well aware of the environmental impact of coal and other fossil fuels used in its industry and in order to create a greener future the country must decarbonize using many different technologies including hydrogen. China has announced today that it will massively expand hydrogen production to the extent that it will triple global output by 2025. Hydrogen has been declared as a key driver in the future of heavy transportation (aviation, trucking and shipping) but also the way to decarbonize steel and cement production.
Hydrogen is also seen as a key industry in Europe in order to achieve climate goals through the Power-to-X (PtX) concept which is essentially using excess renewable energy production to produce hydrogen which can then be seen as an energy storage until it is used in either transportation or power plants for electricity production; Siemens Energy has ambitious plans to build hydrogen power plants in the future to facilitate the PtX concept.
China’s decision but also the EU’s rapid move to become independent of Russian oil and gas will likely have a positive impact on growth rates within the hydrogen industry. The list below shows some of the companies that are exposed to the hydrogen industry either in the production (electrolyze equipment) or consumption (fuel cells):
- Bloom Energy
- Plug Power
- Ballard Power Systems
- FuelCell Energy
- NEL
- McPhy Energy
- PowerCell Sweden
- Doosan Fuel Cell
- ITM Power
- AFC Energy
For those that wants a broad exposure to the hydrogen theme the L&G Hydrogen Economy UCITS ETF is an option (see chart below with ETF’s price development over the past five years).
Our Green Transformation theme basket has recently staged a comeback up 1.9% this month due to the EU’s ambitious plans on green energy in order to become independent of Russia’s oil and gas. The green transformation is so transformational for our society going forward and consists are large sub-categories that we are currently evaluating on splitting the theme basket into production and consumption of green energy which would give more room to for example hydrogen in terms of both production (electrolyze equipment) and consumption (fuel cells).
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