November 15, 2021, marks the day that President Biden finally signed his much-heralded, $1.2-trillion infrastructure plan into law as the Bipartisan Infrastructure Framework (BIF). Alongside financial support for mending and building new bridges, roads, and rail connections, and rolling out broadband internet connection, you’ll also find $9.5 billion in funding for green hydrogen technologies.
The approval of the plan is clearly good news for green hydrogen stocks themselves, but it remains to be seen how other industries and sectors may react to the passing into law of the BIF.
Will oil and gas companies get on board?
It might seem unlikely for oil and gas companies to welcome a bill that aims to reduce use of fossil fuels, but stranger things have happened. The oil and gas industry is reading the writing on the wall, facing increasing demands from investors, customers, and other stakeholders to meet sustainability standards.
Companies are looking for ways to clean up their act while still maintaining revenue streams, and hydrogen fuel presents an option. BP, Shell, and Total are among companies experimenting with hydrogen production.
Although green energy enthusiasts insist on green hydrogen, which uses electrolysis to produce hydrogen fuel from water, and results in almost zero pollution, other types of hydrogen are also touted as clean energy alternatives. These include “blue hydrogen,” which uses steam methane reforming (SMR) to extract hydrogen from natural gas, together with carbon capture and storage (CCS) technology to catch the emissions and store them underground. Some companies are exploring pure hydrogen “wells” too.
The infrastructure plan does set a strict standard for green hydrogen, limiting production to creating no more than 2kg of carbon-dioxide equivalent per kilogram of hydrogen fuel, but oil and gas companies hope to achieve that through CCS. They’ll be encouraged by the fact that the BIF sets aside $8.5 billion to build four regional “hydrogen hubs,” at least one of which is to use fossil fuels for hydrogen production, and two of which will be located near the US’ natural gas fields.
Industries could find the path to decarbonization
Manufacturing verticals as diverse as petrochemicals, pharmaceuticals, and food and beverage companies are anxious to improve their sustainability. They all consume massive amounts of energy, and so are exploring clean energy alternatives at the same time as introducing measures to lower their energy needs. Businesses realize that those who get ahead of green energy requirements now could benefit in the long term.
Manufacturing companies are considering their options, but the prominence of green hydrogen in the BIF could give it a boost. Green hydrogen already offers a number of advantages for industrial sectors. It’s energy-dense, supporting a long-duration discharge cycle that makes it more reliable than renewables like solar, wind, or biomass. Additionally, green hydrogen is a molecule-based fuel, making it suitable for industrial feedstock that can’t be adapted to electrification.
One of the main barriers to industrial adoption is the relative cost of green hydrogen, averaging around $3-10/kg. The new infrastructure plan includes $1 billion towards R&D, deployment, and commercialization of new green hydrogen electrolyzers that would lower the cost of both the equipment needed to produce hydrogen fuel, and the fuel itself. If the cost of hydrogen tumbles over the next few years, we could see vastly increased takeup among manufacturing and heavy industry.
Carmakers could drive hydrogen vehicle production
When it comes to green vehicles, there’s a long-term friendly battle between electric vehicle (EV) fans, and proponents of hydrogen-powered vehicles (FCEVs). The BIF could swing the pendulum in favor of the latter.
One of the BIF’s stated goals is to advance the adoption of hydrogen for transportation, including heavy vehicles like buses, trucks, and trains as well as light vans and cars. With the backing of the government, it’s likely that carmakers which have already begun experimenting with hydrogen vehicles, like General Motors, will redouble their efforts, and other automotive manufacturers might join them.
As well as addressing the relatively high costs of hydrogen fuel, the infrastructure plan also channels around $500 million of investment into establishing a domestic hydrogen supply chain. The funds should help improve hydrogen production, processing, storage, and distribution across the country, which will in turn strengthen the overall hydrogen infrastructure and help make it easier to open up hydrogen refueling stations for FCEV drivers.
Finally, there’s the prospect of incentives for people who drive hydrogen-powered cars. Although tax incentives were dropped from the current law, it’s possible they may be included in a reconciliation bill next year. These, together with the lower price of hydrogen fuel, could encourage more consumers to buy an FCEV, reigniting the market for hydrogen cars.
The broader hydrogen ecosystem could take a step forward
It’s worth remembering that green hydrogen stocks include far more than just those companies involved in directly producing green hydrogen fuel, hydrogen power stations, and hydrogen grids. It includes companies like Bloom Energy that manufacture electrolyzers, which as already mentioned stand to gain from increased government investment.
There are also companies like Ballard Power, which make the fuel cells that serve as the motive force for FCEVs, and new businesses like ZeroAvia and Universal Hydrogen which are working on the first hydrogen-powered commercial planes, all of whom are hoping to benefit from the BIF’s push to advance hydrogen adoption in the transportation sector.
Will hydrogen stocks feel the love from the BIF?
Now that people know that the government is committed to encouraging the development of a broad hydrogen market, more of them could feel confident enough to invest in hydrogen.
Confidence is always a major factor in stock market prices, so it’s little surprise that hydrogen companies’ stock prices, like Plug Power, Bloom Energy, and FuelCell Energy, are enjoying a boost in the wake of the BIF. It’s impossible to predict which hydro stocks will end up being winners, but nonetheless, investors could feel more inspired to take part in this new and disruptive technology.
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