HYD0055

Written evidence submitted by Macquarie Group Limited

19 June 2020

Macquarie Group Limited (Macquarie) welcomes the opportunity to contribute written evidence to the Committee’s call for evidence into hydrogen production and distribution. Macquarie Group includes Macquarie Infrastructure and Real Assets (MIRA), the world’s largest infrastructure manager, and the Green Investment Group (GIG), acquired from the UK Government in 2017 and now a global developer of renewable energy projects.

Macquarie is happy to be contacted by the Committee in relation to this submission. Please contact Laura Thompson, Government Affairs: laura.thompson@macquarie.com

 

Contents of this submission

 


Executive summary

 

 

 

 

 

 


About Macquarie

Macquarie is a diversified financial group, providing clients with asset management and finance, banking, advisory and risk and capital solutions across debt, equity and commodities. Headquartered in Sydney, we are the world’s largest infrastructure manager employing around 16,000 people across 30 countries.

Macquarie has had a presence in the UK for thirty years, employing over 2,000 staff in our offices in London, Edinburgh and Reading. We have invested over £40 billion in UK infrastructure over the last decade.

Macquarie has a strong interest in the development of hydrogen in the UK and globally.


Summary of Macquarie’s outlook on the potential of hydrogen

  1. Macquarie’s view is that hydrogen will be essential to reach the UK’s 2050 Net Zero target and to achieve it in the most efficient way.

 

  1. The UK would benefit from hydrogen as a carbon free substitute for fossil fuels to enable the reliable and cost-effective decarbonisation of the wider energy system for the following reasons:
    1. There is a significant domestic heat demand in the United Kingdom, caused by large winter and summer temperature differences. This is amplified by the prevalence of poorly insulated, aged, and detached housing stock.
    2. Existing electricity infrastructure will not be sufficient to support the demand for heat in a fully electric system, whereas additional upgrades to existing gas transportation infrastructure to make it hydrogen ready are minimal.
    3. Hydrogen allows for seasonal storage of energy at scale, which would not be possible with batteries. Long-term storage will allow the UK to optimise generation capacity from intermittent sources such as wind, and will strengthen security of supply.
    4. For households, converting the UK’s housing stock to fully electric systems would require potentially disruptive and expensive upgrades, whereas existing gas infrastructure is strongly embedded into the housing stock and dismantling it would come at significant cost.
  2. The UK has a number of inherent advantages which uniquely place it to potentially become a global leader in hydrogen:
  1. Wind capacity: There are extensive wind resources in the UK, and the UK is already one of the global leaders in offshore wind power generation, with a strong future pipeline and a target set by the UK Government of 40GW by 2030. The seabed allows the UK a considerable expansion of the existing offshore wind capacity, which is one of the most efficient sources to produce hydrogen. As the scale and technology of offshore wind continues to evolve, Macquarie sees industrial customers who are exploring the feasibility of creating hydrogen from offshore wind assets.
  2. North Sea infrastructure and skills: The UK boasts world class engineering skills and extensive experience of operating infrastructure in the North Sea, including the natural gas reservoirs and pipelines from offshore oil and gas reserves, particularly in the north east of Scotland and the Scottish Islands.
  3. Technological skills: The UK benefits from leading research capabilities to develop an emerging technology and scale the production, storage, and transportation of hydrogen. Scotland and the North of England in particular have existing offshore wind expertise and are well-placed to be at the forefront of development, attracting further investment and creating new jobs.
  4. Established energy market: The UK benefits from a well-functioning and established energy market, with highly regulated market participants. This will help enable an efficient transition to the new hydrogen-based energy system once necessary changes to the framework enabling hydrogen have been introduced.
  5. Existing onshore infrastructure is largely hydrogen-ready: The UK’s transmission gas network is made of steel which supports hydrogen and the distribution gas network has been going through an extensive 30-year HSE-mandated replacement programme since 2002, which will make the network largely hydrogen ready by 2031. It is worth noting that historically, before natural gas was utilised in the network, the old town gas included up to 50% of hydrogen, transported through the UK gas pipelines prior to the currently ongoing upgrades to the network. Cadent Gas has been future-proofing its network since 2002 to be largely hydrogen-ready by 2031.
  1. These factors could make the UK a global centre for production of green hydrogen in the years ahead, creating skills hubs in a growing export industry and supporting the North Sea’s oil and gas industry in its transition.
  2. However, it is widely expected that the hydrogen market will be internationally competitive and the UK’s prospects for success are likely to be enhanced through a well-calibrated partnership between government and private sector. The UK Government should consider how it can work with the private sector to create a centre of international excellence and leadership in the UK, utilising the UK’s existing advantages.
  3. In this document, Macquarie uses the following descriptions which are widely used within the industry to define certain ‘types’ of hydrogen:
  1. ‘Green’ hydrogen: The cleanest form of hydrogen, generated by renewable energy sources, with no associated carbon emissions.
  2. ‘Blue’ hydrogen: Hydrogen generated in a way such that all the carbon emissions from its generation are captured and stored, or reused.
  3. ‘Grey’ hydrogen: Hydrogen produced industrially from natural gas, a process which generates carbon emissions.

 


Responses to call for evidence questions

Q1. How effective has the Government’s investment in hydrogen projects such as the Low Carbon Hydrogen Supply competition, the UK Hydrogen Mobility Programme and Hy4Heat been in moving the sector towards becoming an integral part of a low-cost, low-carbon economy and boosting the productivity and competitiveness of the UK energy sector?

 

  1. Existing Government pilot projects such as Hy4Heat are valuable and necessary to prove the feasibility of and build public trust in hydrogen solutions. These pilots and follow-up measures should be considerably expanded, and further policies considered including:
  1. Issuing an indicative roadmap: The creation of a timeframe of how the Government intends to scale up hydrogen opportunities to meet the 2050 Net Zero target would be welcomed by the industry, in order to plan effectively and take confidence from the UK Government’s supportive messaging on the sector.
  2. The creation of hydrogen markets: Government regulation is instrumental in creating such markets, particularly prior to green hydrogen being market competitive. Such regulation may be in the form of mandates (for H2 blending, CO2 intensities, and/or H2 use in certain sectors), subsidy schemes, or carbon pricing.
  3. Price mechanisms to ensure demand: The creation of offtake agreements or a dependable future market demand are essential for investors to realise hydrogen projects.
  1. The market expects the cost of hydrogen to decrease over time as the market matures. This creates a price deflationary scenario, which discourages early commercial entrants in a purely competitive market (later entrants will be able to achieve better economics). This can be addressed by putting in place long-term offtake agreements like those used in renewable energy; doing so is likely to drive investment into hydrogen deployment and get the UK on the hydrogen learning curve. The offtake agreements can be government led, through auctions, or industry led, where mandates for hydrogen use are likely needed.

 

Q2. What are your views about the proposed role of a statement of policy intent? What level of output can the sector deliver in the UK, and what Government support would be needed to achieve this? How does the potential for hydrogen differ by end-use? 

 

  1. Macquarie would welcome a statement of policy intent from the UK Government on hydrogen, alongside a detailed roadmap to 2050, and believes this would be widely welcomed by industry and the market. Other actors, such as the European Union, are understood to be preparing policy papers on the potential role for hydrogen in the decarbonisation of heat, heavy transport and industry. A clear statement of intent on the potential for transition to hydrogen would be positive for investment and would provide welcome additional detail to the Government’s existing commitment to achieving net zero by 2050.
  2. The UK should also consider specific focus on the opportunities for hydrogen (and other solutions such as electrification) in high potential areas such as: port and airport ground services; long haul HGVs on fixed routes; regional buses and coaches; shipping and trains; and heating and industrial processes.
  3. In terms of what level of output the sector could deliver in the UK, resource availability in the UK is likely to allow a level of output consistent with large scale use of hydrogen in the UK economy.
  4. It could be possible to generate this level of output entirely through renewable energy, i.e. green hydrogen. For example, approximately 100GW of offshore wind would produce enough green hydrogen to replace natural gas used for domestic heating, which represents around 75% of the current use of natural gas for heating. To give a sense of scale, each 100GW of offshore wind deployment requires around 13,000km2 of seabed.
  5. Increasing offshore wind capacity to 300GW would provide sufficient green hydrogen to replace all the natural gas used for heat (domestic and industrial) and electricity, and may also allow the UK to produce hydrogen for export. Other renewable energy sources including onshore wind could also form part of this mix.
  6. It would also be possible for this green hydrogen production to operate in parallel with blue hydrogen (derived from fossil fuels), if sufficient CO2 storage reservoirs can be identified. The use of blue hydrogen could provide a medium-term solution in the transition.
  7. In addition to hydrogen production, the UK could also support the development of regulatory frameworks that would encourage repurposing of existing gas infrastructure. The UK already benefits from the 30-year Health & Safety driven pipeline replacement programme which started in 2002 and therefore the incremental spend to make gas networks 100% compatible with transportation of hydrogen would be expected to be quite reasonable, reflecting good value for customers.
  8. The UK could take the opportunity presented by the final proposals for RIIO-2 due later in 2020 to include flexibility allowing a reopening of the investment allowances within the next five years. A timely repurposing of gas infrastructure to accommodate hydrogen is crucial to enable the UK taking a leadership role in hydrogen relative to international competitors such as the Netherlands and Germany.

 

Q3. How realistic is industry’s claim of widespread applicability of hydrogen technology in transport, heating and other sectors? Is hydrogen a cost-effective, feasible solution towards a low-carbon economy?

 

  1. Macquarie’s analysis indicates that hydrogen will be a critical component of the most cost-efficient path to decarbonising the UK within the timeframe set in legislation. Hydrogen’s application can be very wide ranging, from the industrial and chemical processes it is used for today, to heating and transportation.
  2. Hydrogen is not currently a cost-effective solution, but as set out in paragraph 8, it should become so over time as Wright’s Law (i.e. the learning curve) drives costs down and as existing technologies become more expensive as a result of carbon pricing. To create the right incentives, additional support mechanisms similar to those implemented for UK offshore wind could be explored in the short to medium term, with carbon pricing also playing an important role.
  3. Based on Macquarie’s assessment, decarbonising the economy with zero hydrogen use would come at a very significant cost and would not represent the optimal path. Alternatives should of course be assessed, but the view is widely held today that a whole system solution involving power and gas/hydrogen sectors working together will deliver the best solution from environmental, socio-economic, and security of supply perspectives. Hydrogen is expected to be at the base of applications where electrification is not feasible, cost effective or practical:
  1. Seasonal storage and energy security: Long-term energy storage or energy imports are necessary in an energy system that relies heavily on intermittent energy sources such as wind power to compensate for seasonal mismatches between demand and supply. Hydrogen provides a means of storage for these potentially large quantities of energy. 
  2. Opportunity vs opportunity cost: Carbon neutral hydrogen and its derivatives such as ammonia import/export flows may replace the current carbon intensive oil and gas imports without jeopardising security of energy supply. Per unit of energy, transport of hydrogen by pipeline is much cheaper than transport of energy through an electric system. The use of gas networks for hydrogen distribution presents an opportunity to repurpose existing infrastructure to supply carbon free energy. Full electrification of heat would be costly, as set out in paragraph 1.
  3. Electrification: Carbon neutral electrification will likely require hydrogen as a dispatchable, carbon neutral fuel for gas turbines or fuel cells to keep the lights on during longer periods of lower electricity generation that exceed storage durations viable for batteries. Electrification may also prove difficult due to the large connection capacities required, while a hydrogen supply via an existing gas network may prove a more viable solution.
  4. Chemical industry: There is no alternative to hydrogen for the chemical industry, which requires it as a feedstock. This is currently formed from steam methane reformation of natural gas, emitting CO2. Green or blue hydrogen is required to decarbonise that demand.
  5. Transport, logistics and agriculture: In heavy-duty vehicles, logistics, shipping and aviation, the higher energy density of hydrogen or its derivatives compared to batteries, together with the need for high performance and high peak power output, makes it a very likely candidate to decarbonise these sectors. A policy direction like the 2035 cessation of petrol and diesel passenger vehicle sales could further accelerate this transition.
  1. In summary, while hydrogen can in numerous applications become a cost-effective solution towards a low-carbon economy, hydrogen is not cost competitive today. Government support schemes to get hydrogen scaled and cost effective will be key to unlocking the widespread application of hydrogen.

 

Q4. What are the different implications of hydrogen produced from fossil fuels versus from renewables in terms of cost, scale, and emissions, and in terms of meeting the UK’s net zero targets? 

 

  1. Both blue and green hydrogen could have a role in meeting net zero targets. The costs are different for each form of production: blue hydrogen is arguably more cost competitive today but does not fully decarbonise the process; there is an additional environmental premium for blue over green hydrogen. Blue hydrogen will require CO2 transportation and storage infrastructure and comes with a stranded asset risk which could be undercut by green hydrogen. Macquarie’s view is that both forms of hydrogen production have merit, and a combination of both blue and green hydrogen could be a likely outcome.
  2. Hydrogen is a global market opportunity and the UK will need to consider the long-term competitiveness of its renewable resource, the size of the addressable market and the distance to that market. Whilst the economics of blue and green hydrogen continue to evolve, as the costs of electrolysers fall the cost of hydrogen production will rely more on the cost of energy used to create that hydrogen. If it follows a similar cost reduction path to other renewable technologies, then green hydrogen production should cluster around areas where globally cost-competitive large-scale electricity can be produced. There is potential for offshore wind to play a central role in the development of green hydrogen, especially in Scotland and the north of England. This, combined with the potential to repurpose existing oil and gas infrastructure for transport and storage of hydrogen, make a compelling proposition that the UK could become a global centre of production for green hydrogen in the years ahead, as long as government partners with the private sector to enable adoption, repurpose networks and unlock investment across the value chain.

Production of blue hydrogen from fossil fuels

  1. For blue hydrogen, the underlying cost of the hydrocarbon, be that coal or gas, is key to the blue hydrogen cost. Low natural gas prices significantly reduce the cost of blue hydrogen. The incremental cost of carbon capture and storage (CCS) is important, but not necessarily prohibitive. Current published estimates of the amount of CO2 captured during blue hydrogen production would be 60-90%, so they are not ‘zero’-carbon. That said, the amount captured can increase, but with an incremental cost to the CCS costs shown above. The UK is particularly well-placed for blue hydrogen, given its suitable geology for offshore underground storage of CO2 and has a world-leading offshore oil and gas industry with the associated physical infrastructure that can enable this. Please see Chart 1 for further information.

 


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Chart 1: Cost of hydrogen production from fossil fuels

A close up of a map Description automatically generated

 

Source: Macquarie (MIRA) analysis based on IEA information


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Production of green hydrogen from renewables (or nuclear)

  1. There are three key variables needed to understand the cost of green hydrogen:
  1. Electrolyser cost: The chart below provides a range of potential electrolyser costs, with the high-end is close to many reported numbers in Europe and North America for small projects. BloombergNEF reported in late 2019 that Chinese manufacturers were already selling at around $200/kW, and discussions with western manufacturers and public quotes show that around $300/kW is already achievable for large orders. There is therefore significant potential for electrolyser prices to go even lower, based on basic ‘learning curve’ rates, as was the case for solar PV modules, wind turbines and electric vehicle batteries. A low range of $100/kW is included in the chart, though it is certainly possible for prices to go below that in the future.
  2. Utilisation rates: Some assume that ‘baseload’ clean energy would be needed to make electrolysis economically viable, as this would increase the utilisation rate of the electrolyser and thereby reduce the amortised unit cost. Macquarie’s analysis suggests that there is a diminishing return from utilisation rates above 20% or 30%, particularly at the low-end of currently available prices ($200/kW). UK onshore wind has capacity factors of >30%, and UK offshore wind’s capacity factors are 40-60%. In the sunbelt, solar PV has capacity factors of 20-30%, though in the UK this is closer to 10% so would need to be accretive to wind for electrolysis.
  3. Electricity prices: High input costs of electricity would make green hydrogen uncompetitive, even with free electrolysers. Therefore, the lowest cost clean energy with a minimum capacity factor of 20-30% will be key to making green hydrogen viable. In the UK, onshore and offshore wind are the lowest cost supplies with said minimum capacity factors and show potential for further cost reductions. That leads to the question of just how low can on/offshore wind prices go, along with those of solar prices.
  1. See Chart 2 for a ‘goal seek’ for these three key variables.

 

 


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Chart 2: Cost of hydrogen production from electrolysis

 

Source: Macquarie (MIRA) analysis

Notes: 


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Cost reductions of renewable electricity since 2010:

  1. As the following chart (Chart 3) based on data from the International Renewable Energy Agency shows, the cost of on/offshore wind, as well as solar PV and CSP have shown dramatic price reductions over the last ten years. In the sunbelt, solar PV has already reached prices <$20/MWh, and in the future $10/MWh should be possible, this would equate to roughly $30-40/MWh in the UK. Onshore wind in some markets has already reached around $20/MWh and offshore wind has also come down to as low as $50/MWh. Crucially, there is significant potential for offshore wind costs to reduce further over the next decade due to larger turbines, floating vs. fixed foundations, increasing capacity factors, better construction and O&M.

 

Forecast price of ‘green’ versus fossil-fuel-derived hydrogen:

  1. Chart 4 takes data from Bloomberg New Energy Finance’s outlook for green hydrogen, which shows a price cross-over with blue/grey hydrogen starting around 2030, with green cheaper than grey by 2050. Macquarie analysis adds to this outlook by using the ‘best in class’ prices today for offshore wind, solar PV and electrolyser prices; this shows that in some instances, green hydrogen could be competitive much sooner than current forecasts.
  2. For the UK, this suggests that the already world-leading offshore wind industry could have an additional role to play in delivering the decarbonisation agenda.

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Chart 3: Cost of renewable electricity

 

Source: IRENA data supplemented by Macquarie: https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2018/Dec/IRENA_COP24_costs_update_2018.pdf

 

 


Chart 4: Forecast levelised cost of hydrogen

 

Source: BloombergNEF Production of Hydrogen from Renewables (2019) and Macquarie (MIRA) analysis using example of recently awarded solar PV (MENA, southern Europe, USA) and offshore wind prices (North Sea), and low-end of electrolyser prices reported by BloombergNEF.


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Q5. How feasibly can hydrogen technology be applied in various sectors, from transportation, to energy generation and industrial processes, whilst maintaining the highest safety standards?

 

  1. From a technical perspective, safety issues relating to hydrogen tend to be less focused on combustion risks, which are analogous to other fuels, and more on specific challenges such as embrittlement and high-pressure storage. The current global roll-out of hydrogen technologies, including gas turbines in Japan and Korea, hydrogen forklifts in the USA, steel production, and bus and HGV trials in a number of countries, has not indicated any technical barriers that are unable to be overcome.

 

Q6. How might the UK take advantage of further advances in hydrogen technology, such as hydrogen boilers and innovative storage and distribution solutions?

 

  1. The UK could signal intent for hydrogen conversion by setting a date for new domestic boilers to be dual fuel ready, hence spreading the cost of conversion over a longer period and providing a stimulus for further investment in the technology. Companies like Clean Burner Systems and others are developing technologies which could support this transition.

 

Q7. What support does the sector require to keep pace with the most cutting-edge innovations, such as in hydrogen fuel cells? using Small Modular Reactors for hydrogen production? and in end use applications?

 

  1. Support helpful to industry will include creating a roadmap for the hydrogen transition, and a policy framework for the necessary market and demand incentives. The latter could include minimum hydrogen or clean gas targets for key sectors, targeted grant funding, and consideration of the carbon price.
  2. The argument that nuclear (be that conventional or ‘advanced’, next-generation technologies like Small Modular Reactors) is required to make green hydrogen cheap is based on the idea of maximising electrolyser utilisation. However, as the price of electrolysers drop, there is a diminishing return of cost reductions from electrolyser utilisation from around 30%, as set out in paragraph 24(b). It should be noted that in sunny countries, solar PV capacity factors are around 30% (though more like 10% in the UK), and UK offshore wind has capacity factors of around 40-60%, which would be more than adequate for electrolyser amortisation.
  3. As stated in paragraph 24(a), the lowest reported electrolyser costs in the world are $200/kW, with $300/kW viable today based on a 1GW project, and that costs can come down with further scale. At these prices, as the industry scales, the primary driver of the price of green hydrogen will be the input electron price.
  4. Even allowing for high utilisation factors, the electron prices from nuclear (even the aspirational prices for developers of small modular reactors) are not likely to be low enough to be as competitive as renewables. For green hydrogen in the UK therefore, offshore wind (and possibly some onshore wind, solar PV and other opportunistic utilisation) offers the most promise in terms of high capacity factors with low levelised cost of electricity as an input to green hydrogen.

Q8. What is the UK industry doing to scale up green and blue hydrogen production by using its offshore wind capability and developing feasible, cost-effective Carbon Capture and Storage technologies? 

 

  1. Macquarie is involved in the development of renewable energy projects that could involve a green hydrogen offtake solution. For this to contribute to 2030 targets and beyond, a final investment decision would realistically need to be taken by 2027. This will require both a long-term offtake contract and subsidy support to exist beforehand and in enough detail to support raising of finance. If support and the right investment framework is in place, investors such as Macquarie would be interested in deploying capital at scale. There is already demand for hydrogen in the UK, so scaling up production would likely be welcomed by the market.

 

 

Q9. Given hydrogen’s potential cross-sector application, how co-ordinated is the Government’s approach to policy and regulatory development of hydrogen?

 

  1. The UK Government has clearly recognised hydrogen as an opportunity for clean growth and reaching net zero. While there has historically been a perception that the Government would look to the private sector alone to promote and fund pilot projects, this seems to be shifting and would be further supported by a clear statement of intent, which should encourage further development and investment.
  2. Hydrogen presents opportunities that touch on the work of a number of government departments as well as arm’s length bodies and regulators, and it will be key for the UK Government to coordinate these efforts, and if possible provide a single point of contact for the industry. There are also opportunities to be more coordinated in relation to links between the North Sea, the UK renewables sector, and energy networks.
  3. The UK Government could consider a role for the Green Finance Institute on hydrogen similar in scope to the ‘Energy Efficiency in Buildings Coalition’. The Government could also consider how it can further engage regional hydrogen groups, such as Hydrogen London, Scottish Hydrogen and Fuel Cells Association, and North West Hydrogen Alliance, alongside national trade associations like Energy UK, CBI, ICE, and Energy Networks Association, to facilitate regular input into a national position on hydrogen and the regulatory regime and public financing options that could support its adoption. The All Party Parliamentary Group (APPG) on Hydrogen has recently played a helpful role in bringing parties together on this subject.

 

Q10. How well has the Government raised awareness amongst industry, public officials and the general public of the potential for hydrogen to support a low-carbon economy?

 

  1. The UK Government’s Clean Growth Strategy sets a clear ambition, and within this document the Hydrogen Pathway set out the aim to use hydrogen to heat homes, fuel vehicles and power the UK’s industry by 2050 through the adaption of existing gas infrastructure, a national network of hydrogen fuelling stations and a large new industry supporting hydrogen production using natural gas and capturing emissions using Carbon Capture Storage. This publication was welcomed by industry, and should be built on with a more detailed timeframe and roadmap for how the Hydrogen Pathway will be achieved.
  2. The upcoming RIIO-2 review of the energy sector provides the UK Government and Ofgem with a key opportunity to recognise the need for investment stimulation and hence improve the investment climate. A clear path to encourage the initiatives and efforts of private investors in hydrogen should also drive more interest from overseas investors in the UK as a hydrogen investment destination.

 

Q11. To what extent has the UK established, or can establish, any early adopter advantage in the use of hydrogen in research, applied science or industrial processes? Which countries are at a similar or more advanced stage than the UK in exploring applications for hydrogen in helping deliver net-zero targets?

 

  1. The UK has established certain leads in relation to early adoption of hydrogen. For instance, the retrofitting work that all gas distribution networks (including Cadent) have been undertaking since 2002. Having this necessary infrastructure in place by 2031 could give the UK first mover advantage in relation to adaption.
  2. There are several international examples of best practise in facilitating the early adoption and use of hydrogen.
    1. In Canada, British Columbia has a renewable gas target, which is stimulating hydrogen demand and provides a subsidy support. It is mandating “hydrogen ready” technologies now that have the ability to facilitate a transition e.g. burners and boilers that can operate on both gas, hydrogen, or a blend.
    2. In Europe, Norway has been facilitating advances in CCS projects and there has been deployment of HRS (hydrogen refuelling stations) in Germany.
    3. In Australia, the federal government has set up a A$300 million fund for hydrogen projects.
    4. In Asia, South Korea and Japan have supported HFCEV[1]s and China’s State-Owned Enterprises have invested billions into production and use of green hydrogen and they have a lead on electrolyser prices.

 

Q12. What can the UK hydrogen sector learn from other countries’ hydrogen strategies?

 

  1. Australia, Germany, and China amongst others have all pioneered impressive hydrogen strategies with supportive government policy. The EU Green Recovery Plan published on 27 May 2020 included a proposal to strengthen the Just Transition Fund, a vehicle to support the transition from fossil fuels across the bloc, by up to €40 billion and the creation of the €150 billion Strategic Investment Facility to boost the resiliency of sectors linked to the green and digital transition. The EU will also soon be publishing its own papers on hydrogen but are anticipating a 30-year timeframe for adoption, with many believing this timeframe can be shorter.
  2. The German government announced on 5 June 2020 that they plan to invest between €7bn-€9bn in hydrogen as the “fuel of the future”, as part of Germany’s €130bn COVID-19 economic recovery package. This proposal includes the creation of green hydrogen production plants and supportive offshore and onshore energy generation with a total capacity of around 5 gigawatts. The UK should consider exploring and implementing similar policy initiatives in order to create a supportive ecosystem for hydrogen, building on the HyNet and HyDeploy pilot initiatives in the North West, and leverage hydrogen and green technology as a tool of economic recovery post-COVID-19.

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Disclaimer

This information is a general description of Macquarie Group Limited’s view on potential hydrogen opportunities only. Before acting on any information, you should consider the appropriateness of it having regard to your particular objectives, financial situation and needs and seek advice. No information set out above constitutes advice, an advertisement, an invitation, a confirmation, an offer or a solicitation, to buy or sell any security or other financial, credit or lending product or to engage in any investment activity, or an offer of any banking or financial service. Some products and/or services mentioned in this document may not be suitable for you and may not be available in all jurisdictions. All securities and financial products or instrument transactions involve risks. Past performance of any product described in this document is not a reliable indication of future performance.

[1] Hydrogen Fuel Cell Electric Vehicles