3 reasons why hydrogen technology is the next disruptive technology to look out for By Lion Global Investors 2 March 2021 The team at Lion Global Investors is constantly looking into the horizon to identify new disruptive themes or technologies.
In this article, we bring into the spotlight a new disruptive technology that the Lion Global Disruptive Innovation Fund will invest in – the hydrogen technology. This theme aligns smoothly with the ongoing trend of environmental sustainability in the investment community.
The cost of production, transportation and storage of hydrogen has plunged. This is accompanied by increasing regulations supporting clean technology. As such, we believe the hydrogen technology will see a rise in adoption - specifically in the transportation and the alternative power generation space.
Hydrogen as a clean source of energy Notable drawbacks for the adoption of hydrogen technologies include high cost of production (especially for green hydrogen) coupled with a lack of distribution network. Having no quick solutions for this problem also mean that technological applications will likely be limited to industries that do not need vast deployment of the refueling stations.
At the moment, hydrogen is mostly made from fossil fuels. Environmental activists will likely be aware that the extraction of hydrogen from natural gas is not a carbon-free process.
However, there is actually a greener method that splits water through the process of electrolysis using renewable energy. Hydrogen produced through this method is fully carbon-free and known as green hydrogen.
The primary expenditure for producing green hydrogen is the cost of renewables. Fortunately, this has been on the decline due to technological advancement and the falling cost of the electrolyser used in electrolysis.
Figure: The production process of green hydrogen
The price of electrolysers has dropped by 50% in the past 5 years (source: BloombergNEF (BNEF), September 2020) and is projected to fall by another 40% to 60% till 2030 (sources: BNEF, Hydrogen Council, ITM Power, September 2020). This consequently makes production of clean hydrogen more commercially viable.
Green hydrogen produced can then be used in multiple ways – i) for transportation in the form of a fuel cell, ii) as a large store of energy (as compared to batteries) in power generation, and iii) as a clean fuel source for polluting industries using high temperature processes like steel making which burns coal.
In fact, transportation, electricity generation and industry are some of the largest carbon emission sources globally. We highlight a notable example of hydrogen being used to reduce carbon emission in the transportation sector in the next section.
Use of hydrogen cell in trucks Hydrogen is used in fuel cells to power the transportation that you and I commute on daily – trains, trucks and even passenger cars.
Most of us are more familiar with Hydrogen powered Fuel Cell Electric Vehicle (FCEV) passenger cars like Hyundai Nexo and Toyota MIRAI. Despite this, it is the trucks used in the logistic industry that we believe will see an early success for the mass adoption of FCEV technology.
This is due to the predetermined delivery routes which allows for fewer refuelling stations as it is costly to quickly build up an extensive infrastructure.
The International Council on Clean Transportation estimated that, with proper planning, the total cost of owning a renewable FCEV truck deployed for long haul delivery can be a similar cost to that of a battery electric or diesel truck. All this can happen within the next 10 years.
That said, we may not need to wait a decade as cost may not be the only motivating factor.
In hopes to achieve environmental targets, many companies are already doing trials using FCEV trucks while aiming for mass deployment within the next five years.
Anheuser-Busch, producer of the Budweiser beer, has already placed an order for 800 FCEV trucks from Nikola, an Original Equipment Manufacturer for FCEV trucks and hydrogen infrastructure. This is part of their solution to reducing 25% of their carbon emissions by 2025.
Figure: Total cost of ownership for diesel, electric, and hydrogen fuel cell long-haul tractor-trailers Source: The International Council on Clean Transportation, August 2019
Potential market size of hydrogen technology We believe that the direct beneficiaries from this disruptive trend will be producers of renewable energy, electrolysers and fuel cells. Conversely, traditional oil & gas and coal producers will suffer from declining demand.
We anticipate a potentially huge market for companies able to capture this trend.
According to the Hydrogen Council, the estimated market size can be as large as $2.5 trillion in annual revenue. BNEF approximated a cumulative capital investment of $11 trillion in direct (electrolysers, fuel cells) and indirect (renewable energy) infrastructure.
YOU MAY ALSO LIKE THIS
Lion Global Investors' Disclaimer
This advertisement or publication has not been reviewed by the Monetary Authority of Singapore. It is for information only, and is not a recommendation, offer or solicitation for the purchase or sale of any capital markets products or investments and does not have regard to your specific investment objectives, financial situation, tax position or needs. Applications for units in our funds must be made on forms accompanying the prospectus. You should read the prospectus and Product Highlights Sheet which is available and may be obtained from Lion Global Investors Limited (“LGI”) or any of its distributors, consider if a fund is suitable for you and seek such advice from a financial adviser if necessary, before deciding whether to invest in the fund. Investments in our funds are not obligations of, deposits in, guaranteed or insured by LGI or any of its affiliates and are subject to investment risks including the possible loss of the principal amount invested. The performance of a fund is not guaranteed and the value of units in a fund and the income accruing to the units, if any, may rise or fall. Past performance, as well as any predictions, projections, or forecasts are not necessarily indicative of the future or likely performance of a fund. Dividend distributions, which may be either out of income and/or capital, are not guaranteed and subject to LGI’s discretion. Any such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value of the fund. Any information (which includes opinions, estimates, graphs, charts, formulae or devices) is subject to change or correction at any time without notice and is not to be relied on as advice. You are advised to conduct your own independent assessment and investigation of the relevance, accuracy, adequacy and reliability of any information contained herein and no warranty is given and no liability is accepted for any loss arising directly or indirectly as a result of you acting on such information. The fund may, where permitted by the prospectus, invest in financial derivative instruments for hedging purposes or for the purpose of efficient portfolio management. LGI, its related companies, their directors and/or employees may hold units of a fund and be engaged in purchasing or selling units of a fund for themselves or their clients.
The references to any particular company is intended for illustration purposes only and is not indicative of Lion Global Investors Limited’s intention to invest in such company or a recommendation to viewers to invest in the securities of such company or its products or services.
This publication is issued in Singapore by Lion Global Investors Limited (Singapore UEN/ Registration No. 198601745D) and in Brunei, by its branch (Brunei company registration No. RFC/00000772). Lion Global Investors Limited is a Singapore incorporated company and is not related to any asset or fund management entity that is domiciled in Europe or the United States. Lion Global Investors® is a registered trademark of Lion Global Investors Limited. |