Hydrogen generation could become a
$1 trillion per year market, Goldman Sachs says
Published Wed, Feb 24 2022
By
Anmar Frangoul
- “We need something that
takes today’s role of natural gas, especially to manage
seasonality and intermittency, and that is hydrogen,”
Goldman Sachs’ Michele DellaVigna told CNBC.
- Described by the
International Energy Agency as a “a versatile energy
carrier,” hydrogen can be produced in a number of ways.
- One method includes using
electrolysis, with an electric current splitting water
into oxygen and hydrogen.
The pump of a hydrogen refueling
point at a gas station in Berlin, Germany, on Wednesday, Aug. 25,
2021. Krisztian Bocsi | Bloomberg | Getty Images
Hydrogen has an important role to play in
any transition to net-zero and its generation could develop into a
market worth over $1 trillion a year, according to
Goldman
Sachs.“If we want to go to
net-zero we can’t do it just through renewable power,” Michele
DellaVigna, the bank’s commodity equity business unit leader for the
EMEA region,
told CNBC’s “Squawk Box Europe” earlier this week.
“We need something that takes today’s
role of natural gas, especially to manage seasonality and
intermittency, and that is hydrogen.”
Hydrogen has a diverse range of
applications and can be deployed in a wide range of industries.
“It’s a very powerful molecule,”
DellaVigna said. “We can use it for heavy transport, we can use it
for heating, and we can use it for heavy industry.”
The key, he argued, was to “produce it
without CO2 emissions. And that’s why we talk about green, we talk
about blue hydrogen.”
Described by the International Energy
Agency as a “a versatile energy carrier,” hydrogen can be produced
in a number of ways. One method includes using electrolysis, with an
electric current splitting water into oxygen and hydrogen.
If the electricity used in this process
comes from a renewable source such as wind or solar then some call
it green or renewable hydrogen.
Blue hydrogen refers to hydrogen
produced using natural gas — a fossil fuel — with the CO2 emissions
generated during the process captured and stored. There has been a
charged debate
around the role blue hydrogen can play in the decarbonization of
society.
“Whether we do it with electrolysis or
we do it with carbon capture, we need to generate hydrogen in a
clean way,” DellaVigna said.
“And once we have it, I think we have a
solution that could become, one day, at least 15% of the global
energy markets which means it will be ... over a trillion dollar
market per annum.”
“That’s why I think we need to focus on
hydrogen as the successor of natural gas in a net-zero world.”
DellaVigna’s comments echo the analysis
in a recent report from Goldman Sachs Research which he co-authored.
Published earlier this month, the
report’s bull scenario sees hydrogen generation’s total addressable
market having the potential to hit more than $1 trillion by 2050
compared to around $125 billion today.
While there is excitement in some
quarters about hydrogen’s potential, the vast majority of its
generation is currently based on fossil fuels. Efforts are being made
to address this, however.
The European Commission, for instance,
has laid out plans to install 40 GW of renewable hydrogen electrolyzer
capacity in the EU by the year 2030.
During his interview, DellaVigna was
asked about the stocks investors should look at to take advantage of
the hydrogen sector’s projected growth.
“There’s two ways to invest in hydrogen,”
he said. “One is to buy the pure play electrolyzer companies which …
have the pure exposure to hydrogen.”
The alternative would be to invest
“through conglomerates which already have hydrogen as part of their
ongoing businesses.” This included energy service companies,
industrial gas companies and oil and gas firms, he said.
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