Transition Towards Hydrogen Economy Already Started
The authors are analysts of NH Investment & Securities. They can be reached at ys.jung@nhqv.com. -- Ed.
Reducing carbon emissions becoming ever more important
With implementation of the Paris Agreement starting on Jan 1 2021, a number of countries have started to reinforce renewable policies and announce their commitment to achieve net zero GHG emissions. With the accomplishment of an environmentally-friendly economy becoming an integral part in pursuing mid/long-term economic growth, countries are seeking to reduce carbon emissions more than ever before.
Hydrogen offers promising alternative to traditional renewables
Solar and wind, which are traditional renewable energies, have limitations in that: 1) output is not stable; and 2) they require a large-sized land area for generation. Against this backdrop, hydrogen has come into the spotlight for its advantages in overcoming the above-mentioned weaknesses of traditional renewables. We note that green energy generated from water electrolysis does not emit pollutants throughout all processes of its use, and hydrogen can be stored in large quantity. We believe the energy source promises to be a promising alternative to old renewables by resolving the issues of output instability and excess generation. In addition, with hydrogen contained in various materials (including water), supply is easy.
In order to achieve hydrogen economy, it is important to ensure economic feasibility and build sufficient infrastructure
A hydrogen economy is an envisioned future in which hydrogen is employed the main fuel instead of crude oil. To achieve a hydrogen economy, it is important to supply green hydrogen produced at costs as competitive as that for fossil fuel, and to build sufficient infrastructure for application of hydrogen such as FCEVs and fuel cells. As the significance of investment in hydrogen is widely recognized, the pace of hydrogen penetration into the fuel market is expected to accelerate once economic feasibility for hydrogen projects is secured.
Governments introducing policy measures to promote use of hydrogen in earnest
Governments have started to strengthen their support for the shift towards a hydrogen economy. Korea has been rolling out policies to promote the use of hydrogen following the release of the Hydrogen Economy Roadmap in 2019. Meanwhile, Japan, China, EU, and the US are also beefing up efforts to secure early leadership in the global hydrogen industry. Moving ahead, we believe that global efforts to bolster eco-friendly industries will center upon the hydrogen sector.
Transition towards hydrogen economy already started
We view several Korean companies (including Doosan Fuel Cell and Hyundai Mobis) as possessing the potential to develop into leading global hydrogen plays. In addition, SK, KOGAS, Hanwha Solutions, POSCO, and Hyosung Group have announced mid/long-term hydrogen investment plans. Given: 1) various governments’ commitments towards creating a hydrogen economy; and 2) global firms’ aggressive hydrogen investment plans, a transition towards a new hydrogen paradigm appears to already be underway. Warranting attention in our opinion is the fact that companies are joining hands to take the initiative in the global hydrogen ecosystem.
Draw attention to leading players in individual segmentsof hydrogen market
In Europe, there are a number of companies that boast outstanding hydrogen production and storage technologies, including Linde and Cummins (which took over Hydrogenics). In the US, leading fuel cell companies such as Plug Power and Bloom Energy are contributing towards an expansion of the hydrogen market. As the first country in Asia to start implementing hydrogen energy, Japan has been expanding its hydrogen infrastructure, a factor which should benefit Japanese companies such as Iwatani and Aisin. Although government policy support in China for hydrogen energy development began later than other countries, we draw attention to the massive growth potential of the Chinese market.