Europe has been one of the biggest advocates of hydrogen as a key player in the energy transition. Germany in particular has been spearheading the changeover, announcing a 7 billion euro package to bolster hydrogen production in June. Many commentators have seen this as a leapfrog of China’s dominance in the electric battery market, where US and European automakers have been slow if not actively resisting moves away from petrol and diesel cars. The hydrogen strategy also forms part of the wider renewable integration within Europe. As coal and gas fired plants are being shut down, coupled with an ageing nuclear fleet, Europe is making strides towards an interconnected self-sustaining future.
At the same time, carbon emissions have been under increased scrutiny. With global emissions down significantly as a result of national lockdowns, there is pressure from the public to embrace this change and maintain low emissions across all sectors going forwards. The meat industry, for example, has come under increased pressure recently to combat animal-based emissions. Carbon taxes have yet to be formalised for the sector, with the exception of New Zealand who recently passed legally binding emission targets. A report by FAIRR published earlier this year concluded that meat producers could face an $11bn carbon tax bill based upon a study of 40 meat companies. The airline industry is also being targeted, with Switzerland enforcing a new airline tax estimated to generate CHF 500m a year. However, there has been strong pushback from the industry to not use 2020 as a baseline for emissions, considering the majority of international travel was grounded.
One unicorn out of COVID-19 has been hydrogen truck company Nikola Motors. Hydrogen, CNG and LNG have been seen as the more commercially viable options for the haulage industry to move away from fossil fuels, as electric batteries deplete too quickly for long haul heavy loads. The lengthy charge-up time is also commercially unviable when compared to the refill time any of the three alternatives. Despite not yet having a product to sell and currently only taking pre-orders, Nikola valued at $23bn in June 2020 – higher than established manufacturers Fiat and Ford. This highlights how much value and trust the market is prepared to place on a company with such a vision and technology. Looking to traditional automakers, most are still firmly entrenched in fossil fuels and their lack of innovation is beginning to hurt share prices. In 2020, the car industry is ripe for disruption.
Established companies have not all been slow to move. Shell, for example, is currently building the world’s largest hydrogen electrolysis plant. Shell’s partner in this venture UK-based hydrogen pioneer ITM Power, who have seen their share price treble over the last six months. Embracing hydrogen and other alternate fuels for transport is a logical new fit for oil majors – they already have the infrastructure set up, now they just need to change the product. The energy transition has begun.