From grey to green stocks: the rise of decarbonised hydrogen
Green hydrogen is more than just a niche investment buzzword. It is a promising alternative for achieving the United Nations’ sustainability goals and is attracting the attention of the global community. Green hydrogen is produced exclusively through the electrolysis of water using renewable energy sources such as wind, solar, geothermal or hydroelectric power, differentiating it from its grey counterpart, which is mostly produced by methane cracking with steam, or its blue counterpart, which is powered by natural gas and a carbon capture solution.
As a 100% fossil fuel-free process that enables the decarbonisation of sectors where direct electrification is difficult, such as transport, industry and energy storage, green hydrogen may prove to be a breakthrough alternative on the road to a carbon-neutral landscape.
State of play: the green hydrogen market and European initiatives
As renewable energy sources become more accessible and competitive, green hydrogen has experienced a growth spurt in recent years, demonstrating flexibility for grid balancing and the ability to decarbonise hard-to-abate industries. The global green hydrogen market, estimated at USD 2.5bn in 2022, is expected to reach USD 143.8bn by 2032, with a compound annual growth rate (CAGR) of 50.3% between 2023 and 2032.
Determined to honour the 2015 Paris Climate Agreement, governments around the world are launching initiatives to foster a green hydrogen ecosystem, reduce dependence on imported fossil fuels and accelerate the energy transition within the short remaining time frame.
The European Union has set itself ambitious targets as part of the European Green Deal and the REPowerEU plan to promote the green hydrogen economy. By 2030, at least 40 GW of electrolysers for renewable hydrogen are to be installed and up to 10 million tonnes of renewable hydrogen are to be produced in the EU. In addition, a further 10 million tonnes are to be imported to ensure energy independence and promote climate neutrality. The European Commission's IPCEI Hy2use project is providing 5 billion euros for 35 green hydrogen projects in 13 countries.
Addressing the demand dilemma
Despite this favourable environment, investing in green hydrogen stocks is still rife with risk. The high initial cost of electrolyser technology, the need for a large supply of renewable energy and the development of a comprehensive transport and distribution infrastructure are responsible for the lack of demand, which could dampen the potential growth path of the hydrogen market.
This problem stems from the early stage of market development for green hydrogen applications, where end-use sectors such as heavy industry, transport and heating have not yet fully integrated green hydrogen solutions. In addition to this immature infrastructure, the technology required for widespread adoption also contributes to this demand gap. To overcome these challenges, concerted efforts are needed to stimulate market demand through policy support, incentivise the use of green hydrogen and invest in technologies and infrastructure that enable wider uptake across different sectors.
Professional investors have a unique opportunity to influence this development by using their capital and strategic insight to accelerate the development of the sector.
The advantages of investing in green hydrogen
Green hydrogen stocks are becoming increasingly attractive as they offer both profit and planetary potential. As an emerging market, green hydrogen offers a confluence of environmental and economic interests: Not only does it offer the opportunity to participate in the global energy transition, but it also opens up a market with long-term growth potential. Starting from a modest capacity of 0.3 GW in 2020, a huge capacity of 137 GW is forecast by 2030. European and international initiatives such as the National Clean Hydrogen Strategy in the US, the National Green Hydrogen Mission in India and the WEF’s roadmap for the deployment of low-carbon hydrogen in the Middle East and North Africa are supported by substantial financial commitments to develop the necessary infrastructure and ensure the successful integration of green hydrogen into national energy systems. As these continue to evolve, investments in green hydrogen can bring significant long-term returns.
As electrolysers are also becoming increasingly efficient, production costs are likely to fall by around 50% by 2030. By 2050, they are expected to be between €1 and €1.5/kg in some regions, making green hydrogen increasingly competitive with conventional energy sources.
By investing in innovative technologies, fostering partnerships and advocating for supportive policies, investors can drive the demand needed to unlock green hydrogen's full potential.
Investment strategies: production, storage and distribution
Strategic investments in green hydrogen should focus on production technologies, including advanced combustion and electrolyser technologies that can dynamically run on renewable energy to maximise both operational efficiency and sustainability, as well as innovative storage and distribution solutions such as liquid organic hydrogen carriers (LOHC), metal hydrides, compression or liquefaction technologies, as well as hydrogen pipelines. These solutions aim to improve the safety, efficiency and cost-effectiveness of hydrogen storage and transportation to end-users and remove one of the critical bottlenecks in the hydrogen value chain.
Equans' expertise in green hydrogen
Having already delivered over 20 hydrogen projects across Western Europe, at varying stages of maturity from innovation projects through to operational commercial projects, Equans is a leading green hydrogen specialist with end-to-end experience in electrical engineering, mechanical engineering and renewable energy. Our expertise extends from project conception to the design, installation and maintenance of electrolysis projects, the integration of renewable energy and the development of hydrogen infrastructure at scale.
At the recent Hyvolution trade show in Paris, we presented our comprehensive suite of solutions designed to decarbonise industrial sectors, enhance clean mobility, and promote e-fuels.
Key areas of expertise
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Electrolysis Projects, such as our Net Zero North West Cluster Plan project in North West England and North East Wales, include tailored recommendations aiming to contribute to the development of efficient and sustainable hydrogen production facilities that answer to regional and industry-specific needs.
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Renewable Energy Integration: Given our strong background in renewable energy projects, Equans plays a critical role in integrating green hydrogen production with renewable energy sources such as wind, hydro, geothermal and solar power. This integration is essential to ensure that the hydrogen production process is truly net-zero.
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Energy Storage and Solutions: Equans offers solutions in energy storage, an important aspect of managing the intermittency of renewable energy sources. Our capabilities in this area are beneficial for green hydrogen projects, where stored energy can be used to produce hydrogen during peak periods of renewable energy generation.
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Infrastructure Development through partnerships: The development of infrastructure for hydrogen transport, storage, and refuelling requires a diversified approach. Equans’ multi-services experience, which combines mechanical and HVAC engineering, along with our capabilities in digital solutions, enables us to provide a comprehensive offering for the development of hydrogen infrastructure. Our Decarbonised H2 hub aims to unite multiple industrial players in the same territory developing a local partnership network to structure the H2 sector in specific regions.
Hyvision: A game-changer in decarbonised energy
Our mobile, turnkey solution Hyvision delivers decarbonised energy through electro-hydrogen generators. Designed for isolated sites, construction areas, and events, Hyvision stands out by reducing CO2 emissions by 70% to 80% compared to traditional diesel generators, offering a silent, odourless, and smoke-free alternative that significantly cuts down noise pollution.
Future prospects for green hydrogen
The road ahead is fraught with challenges such as high production costs, demand gaps and the need for comprehensive infrastructure development. Strategic partnerships, technological innovation and supportive policies are essential to stimulate market demand and ensure the growth of the sector. The combined efforts of investors, governments and industry leaders such as Equans are crucial to turn these obstacles into opportunities and make green hydrogen a cornerstone of a sustainable energy future.
Conclusion: a call to action
Green hydrogen is well on the way to becoming the clean energy carrier of the future. It is an answer to the urgent need for net-zero alternatives in sectors traditionally reliant on carbon-intensive processes and offers a way to reduce emissions in industrial manufacturing, transport and beyond.
For investors, the path forward entails a proactive approach to creating and capitalising on market demand, underpinned by a commitment to sustainability and innovation. As the sector keeps evolving, those who invest in bridging the demand gap today will be well-positioned tomorrow to reap the benefits of a cleaner, more sustainable energy future.