A hydrogen refueling pump at a gas station in Berlin, Germany, on Wednesday, August 25, 2021.
christian boxy | Bloomberg | Getty Images
According to Goldman Sachs, hydrogen plays a key role in any transition to net-zero and its generation could grow into a market worth more than $1 trillion a year.
“If we want to go net-zero, we can’t do it through renewable energy alone,” Michelle Delavigna, the bank’s commodity equities business unit leader for the EMEA region, told CNBC’s “Squawk Box Europe” earlier this week. Can.”
“We need something that takes on the role of natural gas today, specifically to manage seasonality and lag, 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,” Delavigna said. “We can use it for heavy transportation, 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 so we talk about green, we talk about blue hydrogen.”
Described by the International Energy Agency as “a versatile energy carrier”, hydrogen can be produced in a number of ways. One method involves using electrolysis, in which an electric current splits water into oxygen and hydrogen.
If the electricity used in this process comes from a renewable source such as wind or solar, some call it green or renewable hydrogen.
Blue hydrogen refers to hydrogen produced using natural gas – a fossil fuel – with CO2 emissions generated during the capture and stored process. There has been a charged debate about the role of blue hydrogen 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,” Delavigna said.
“And once we have that, I think we have a solution that could, one day, become at least 15% of the global energy markets, which means it will… more than the market.”
“That’s why I think we need to focus on hydrogen as the successor to natural gas in a net-zero world.”
Delavigna’s comments echo analysis in a recent report by Goldman Sachs Research, which he co-authored.
Published earlier this month, the report’s bull scenario sees the total addressable market for hydrogen production with the potential to hit more than $1 trillion by 2050, up from about $125 billion today.
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While there is excitement in some circles about the potential of hydrogen, much of its generation is currently based on fossil fuels. However, efforts are being made to deal with it.
For example, the European Commission plans to install 40 GW of renewable hydrogen electrolyzer capacity in the EU by 2030.
During his interview, Delavigna was asked about the stocks that investors should be looking at to take advantage of the hydrogen sector’s projected growth.
“There are two ways to invest in hydrogen,” he said. “A pure play is to buy electrolyser companies that have a net exposure to hydrogen.”
The alternative would be to “invest through groups that already have hydrogen as part of their ongoing businesses.” This includes energy service companies, industrial gas companies and oil and gas companies.
