The hydrogen economy: from grey to green

Hydrogen offers opportunities as an energy carrier. Now that the countries that emit the most CO₂ are striving to become CO₂-neutral in about 30 years’ time, the hydrogen economy is finally becoming feasible. This can create opportunities for investors.


03/06/2021 – Piet Schimmel

In the fight against climate change, besides, for example, solar and wind energy, there is nowadays a lot of investment in electricity storage via batteries. Batteries are used, among other things, to power electric cars. However, for many industrial segments and forms of transport, batteries do not offer an adequate solution. Here hydrogen seems to be an alternative. Like fossil fuels, hydrogen contains a lot of energy. But unlike fossil fuels, hydrogen that is produced with renewable energy – also known as 'green' hydrogen – produces no CO₂ emissions.

Until recently, support was lacking to make the production of sustainable hydrogen economically feasible. Without the support of governments to lower the current high production costs, help build the necessary infrastructure and tax CO₂ emissions, hydrogen seemed unrealistic as an alternative energy form. This is now changing.

The world's three largest CO₂ emitters – China, the US and the EU – committed themselves last year, along with many other countries, to the goal of becoming CO₂-neutral in about 30 years. This will not be possible without making industry and the transport sector more sustainable. The necessary support for hydrogen is now finally in sight.

Hydrogen in industry and transport

Many industrial processes for making plastics, steel and cement, for example, require high temperatures – temperatures that are difficult to achieve with electricity. Such high temperatures are more easily achieved by burning hydrogen. Hydrogen can therefore become an alternative to electricity in many industrial applications.

In the transport sector, hydrogen can be an alternative to batteries. In long-distance transport, such as freight transport, shipping and aviation, the batteries required are too heavy to be functional. Hydrogen can take over the role of batteries. Electricity can be generated from gaseous hydrogen using so-called fuel cells. That electricity can be used to power a vehicle. However, there are still a number of hurdles to overcome when using hydrogen in the transport sector. Hydrogen has to be pressurised or cooled strongly in order to be transported. The casing needed for this requires extra weight. It also requires other engines that are still in an early stage of development. For transport purposes, therefore, people are looking in the short term at hydrogen-produced CO₂-neutral fuels, which suffer less from these drawbacks.

Blue hydrogen as an intermediate form

Hydrogen is already used to make fertiliser, for example, but with the help of fossil fuels. This hydrogen is called 'grey' hydrogen, and is very harmful to the environment. In the future, sustainably produced, 'green' hydrogen will ideally be used. But the amount of sustainable energy (such as solar and wind energy) that is generated is (still) limited. In the coming years, renewable energy will mainly be used to provide households and businesses with green electricity and not so much for the production of green hydrogen. Therefore, 'blue' hydrogen is a more realistic alternative for the time being.

Blue hydrogen is produced with fossil fuels. But the CO₂ released in the process is captured. The CO₂ is then stored, for example in empty gas fields, or used in the production of concrete or plastic, among other things. Blue hydrogen can therefore be an interesting intermediate step in the development process from grey to green hydrogen.

Opportunities for investors

Investors can approach this equity theme in different ways. Companies that are already delivering hydrogen and other gases have technical knowledge and experience. Furthermore, one can think of industrial companies that provide the systems and infrastructure for hydrogen. And do not forget companies in wind and solar energy, which could see the demand for renewable energy for green hydrogen production increasing even further.

Piet Schimmel – Senior Equity Thematic Expert

Graph Price of hydrogen

The risks associated with investments

The risks associated with investments

Find out which type of investment suits you

Find out which type of investment suits you