Tim Buckley: Green hydrogen moving from hype to reality
Energy finance expert Tim Buckley says global interest in green hydrogen has surged, and now is the time for its potential to be realised.
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Tim Buckley is the director of energy finance studies at the Institute of Energy, Economics and Financial Analysis (IEEFA), working at the intersection of energy, finance and climate. IEEFA is an international non-profit that examines issues related to energy markets and policies, with the aim of accelerating the transition to a sustainable energy economy.
Buckley, who lives in Sydney, has been looking at the impact of green hydrogen for the last six years, and believes it will help reshape the global energy landscape.
“Green hydrogen has the potential to be revolutionary for world energy markets. Certainly in the last one to two years, the amount of hype in the sector has gone through the roof, backed by rapidly growing corporate, government and financial sector interest,” Buckley says.
But this hype comes with risk, as green hydrogen is a decade away from commercial reality absent subsidies, higher carbon prices and/or the emergence of a green hydrogen premium.
“Interest in green hydrogen has built dramatically since the European governments announced a green-led stimulus recovery from COVID. And when they came out with this stimulus, green hydrogen featured very prominently, which galvanised global attention and the stock market’s attention.
“Now we're trying to actually work out, how do you move from hype to reality?”
Decarbonisation “the defining issue”
Buckley says “the defining issue of the energy landscape in the last decade has been the need to decarbonise, while at the same time the costs of renewable energy have been steadily declining. In the last 12 months, we've moved from hollow rhetoric to a massive global policy alignment on the urgent need for decarbonisation.”
"The defining issue of the energy landscape in the last decade has been the need to decarbonise."
Buckley explains that the global energy, transport and industrial systems are key sectors of focus for delivery of this objective.
While Japan and Korea have been the world leaders on thinking about a hydrogen-centric energy pivot for decades, Europe has become a world focal point for hydrogen in the last year or so. Buckley says there is now a global push by governments and corporates that has led to a “technology race”, attracting strong attention from financial markets.
“The imperative to decarbonise was hugely elevated by China’s pledge to be carbon neutral by 2060 back in September 2020, which was rapidly followed by new pledges by Japan and Korea to reach net zero emissions by 2050. And then at the start of 2021, we've had President Biden elected and now implementing a very aggressive agenda for decarbonisation in the United States too.”
“I think the financial markets have cottoned on that there is a massive financial strategy to permanently reduce the reliance most nations have on high emissions fossil fuel imports, improving energy security in the process.
“This will drive a rapid decarbonisation and energy system deflation, and green hydrogen is increasingly likely to play a key role in driving decarbonisation of the hardest to electrify sectors,” Buckley says.
“The stock markets can tell you when something’s fundamentally changed. If you look at green hydrogen stocks, while many are very much still in the startup phase, some of their shares have rallied 1,000 per cent in the last couple of years. This shows the financial markets are now willing to take a punt because of where the technology is now being considered, and the rapid build up in terms of economies of scale.”
Hydrogen awareness building
Buckley says while public awareness of hydrogen as a power source is currently low, it has been a potential energy solution for decades.
“Jules Verne actually wrote about hydrogen as an energy source well over a hundred years ago, but the potential just hasn't translated yet.
“But the ongoing and rampant reduction in the cost of renewable energy generation has really changed the world’s thinking on hydrogen,” Buckley says.
“Once you’ve built a green hydrogen electrolyser, 70 to 80 percent of the operating costs of running it are electricity. For the last decade we’ve seen the price of solar power continuing to drop around the world by around 10 per cent per annum. As that trend continues for the next decade or two, and the internalisation of carbon costs rise then that changes everything.”
Why this time is different
Buckley says a confluence of political, technological, economic and climate factors mean hydrogen is now gaining momentum, following decades of interest surging at times, but the potential failing to be realised.
“We’ve had hydrogen bubbles before, and we’ve gone back to relying on the traditional energy sources when those bubbles burst.”
“In finance it’s dangerous to say ‘this time is different’, but this time really is different. What we're seeing now is technology innovation, a massive increase in the scale of projects, and the cost efficiencies that are going on in hydrogen, combined with the unstoppable rise in renewable energy.
“In finance it’s dangerous to say ‘this time is different’, but this time really is different."
“The theory works and increasingly, the numbers are starting to work. Now we’ve got to work out what the end market is that will really drive the uptake of green hydrogen.
“There’s also the urgent policy imperative to have a liveable planet. This is a rather important thing to most people, other than those who are paid to ignore science and ignore the global existential threat of climate change.
“Humanity has to deliver on decarbonisation, and I think green hydrogen will play a key role.”