Hydrogen boom on track to reach $ 11 trillion

The Hydrogen Boom Is On Track To Hit $11 Trillion
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It’s official: the great hydrogen techlash is now history.

For decades, there has been an undeniable and growing animosity towards all things hydrogen on the part of the investor universe, with the technology relegated to niche market niches, such as material handling and emergency power supply. Hydrogen technology has been found to be too expensive and impractical, with Tesla Inc. (NASDAQ: TSLA) CEO Elon Musk called hydrogen fuel cells “dumb cells‘and’incredibly stupid“.

But the circle has come full circle, and suddenly Wall Street can’t stop talking about the enormous potential of abundant and versatile gas to cut emissions from many hard-to-decarbonize sectors.

Bank of America is the latest analyst to speak on a bullish note.

According to the giant investment bank, hydrogen could meet our vast energy needs, power our cars, heat our homes and also help fight climate change. BAC says we have reached the tipping point of efficient and economical operation of this element and predicts that the hydrogen market will reach $ 11 trillion by 2050.

BAC compared hydrogen to pre-2007 smartphones and advised investors to double down before it goes mainstream.

Hydrogen fuel cell propulsion system

BAC is not alone in this adulation.

Morgan stanley updated Plug Power Inc. Equal to overweight (NASDAQ: PLUG) with a price target of $ 14 after the leading fuel cell maker impressed during its investor presentation. Stephen Byrd of Morgan Stanley believes green hydrogen will become economically viable faster than investors appreciate, saying the Plug Power deal with Apex Clean Energy to develop a green hydrogen grid using wind power offers a chance to tap into “very low cost” renewable energy and helps accelerate the shift to clean energy. Plug aims for more than 50% of its hydrogen supplies to be generated from renewable resources by 2024.

PlugPower is no longer content to be seen as just a manufacturer of fuel cells for forklifts. The company announced a partnership with Universal Hydrogen to build a commercially viable hydrogen fuel cell propulsion system designed to power regional commercial aircraft. This initiative will help bring Plug’s proven ProGen hydrogen fuel cell technology to new markets.

Through this partnership, we are taking our first steps towards establishing a complete ecosystem for the aviation market, from powertrain to hydrogen solutions, ultimately enabling a global transportation system powered by green hydrogen,Says CEO Andy Marsh.

Plug shares have jumped 13.3% after the latest bullish notes and are now sitting on a 317.4% gain year-to-date.

The cost conundrum

Over the years, the hydrogen economy has seen many false dawn, mainly due to technical issues and, most importantly, costs. This has led to a situation where wind and solar power is now competitive with traditional fossil fuels in power generation, while hydrogen remains considerably more expensive.

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For example, to refuel a hydrogen fuel cell vehicle (FCEV) in California costs about $ 16.50 per kilogram, compared to $ 3.232 per gallon of regular gasoline in the same state. Lightweight FCEV vehicles are typically 2.5 times more fuel efficient than comparable gasoline vehicles, which means that to achieve price parity with gasoline, 1 kilogram of hydrogen will not sell for more than $ 8.08. In other words, the costs of hydrogen have to fall by 50% to become competitive with fossil fuels.

Fortunately, there is hope on the horizon.

According to a recent report from the Hydrogen Council, “…increasing fuel cell production from 10,000 to 200,000 units can reduce unit costs by up to 45%, regardless of any major technological advancement, and can impact multiple end-use cases. Boosting up to 70 GW of electrolysis will result in electrolyzer costs of less than $ 400 per kW. “

It appears to be happening in California already: FirstElement Fuel reported selling hydrogen for $ 12 per kilogram plus tax for a total of $ 13.11 per kilogram and expects prices to continue to fall as it goes. that the cost of producing hydrogen drops.

Currently, California has a network of 43 open retail hydrogen refueling stations capable of delivering more than 11,800 kilograms of hydrogen each day. This is enough to support nearly 17,000 light FCEVs, more than double the California fleet of 7,000 FCEVs (5,000 FCEV in 2018).

Green steel

The hydrogen ecosystem has grown and recently added a new application to its portfolio: the use of hydrogen to make green steel.

In April, Swedish steelmaker Ovako successfully used hydrogen instead of LNG in tests at its Hofors steel plant, succeeding in showing that H2 had no effect on the quality of the steel. It was the first time that hydrogen was used on a commercial scale in the manufacture of steel.

Since steel production accounts for around 7% of global carbon emissions, steel made from renewable energy is expected to become a multi-billion industry as countries move toward decarbonization.

The Anti-Tesla

However, not everyone is convinced of the hydrogen hype.

Bill Apton of Barron says Wall Street discovered hydrogen this year and hydrogen stocks are a bubble. Apton says the huge surge of Plug Power, Ballard Energy and Bloom Energy has left them trading at over 50 times future cash flow, making them difficult to hit their high valuations. He notes that small hydrogen companies face big players and manufacturers with deep pockets, including government-backed rivals in China and companies like Cummins.

According to Apton, it could be a decade or more before environmentally friendly hydrogen can become competitive with natural gas on a cost basis, making hydrogen stocks better long-term choices than cult stocks. that they have become.

Notorious Wall Street short seller Andrew Left of Citron Research was even more blunt, calling PlugPower an anti-Tesla:

$ PLUG back to $ 7 because it’s the Anti-Tesla. Why even look for short $ TSLA when $ PLUG is twice as expensive with a never profitable business?The firm tweeted.

Citron has been negative on PLUG since 2014.

Wall Street remains extremely bullish, with 8 out of 10 Wall Street companies covering the title nodding its head.

By Alex Kimani for OilUSD

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