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COVID-19 a catalyst for Hydrogen.

Massimiliano Cervo's picture
Energy Leader WEC

Member of the Hydrogen Experts Panel for the World Energy Council, Lecturer on Hydrogen Diploma at the National University of Technology in Buenos Aires, Argentina. FMVA (Financial Modeling and...

  • Member since 2020
  • 13 items added with 10,895 views
  • Aug 28, 2020
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There is no doubt that the world is going through what could be the biggest crisis up to date. In this context the energy sector is facing unprecedented conditions, both political and economic. However, the COVID-19 has brought new business opportunities for the sector. In this brief article I will further explain my vision of the current situation.

To begin with, this article presents a chart with an overlap of two stocks line charts. One of them is from NEE (Next Era Energy), marked in red, and in blue XOM (Exxon Mobil). The period chosen for this example dates from May 2018 up to date; The spread of the virus is marked with a green vertical line and the respective trend lines since their COVID-19 drop with white color. 

Cervo Stock

Hydrocarbons stocks have been falling since May 2018, accumulating a 56% drop, recently accelerated due to the Covid and political issues. Other, more diversified in their offer (who shifted from oil companies into energy companies), have exhibited drops around 32%. Nevertheless, one important fact to consider is that this transition is all about diversification, and companies will need to change their business plans in order to reactivate their financials.

Turning to other divisions of the energy market, NEE has been investing in alternative technologies, such as hydrogen, and was also affected by the COVID-19 situation. In contrast, their recovery was not only faster, but also managed to accumulate a 113% growth in the past year. When looking at their respective trend lines, the first one (XOM), exhibits a down trend behavior whereas the latter a bullish trend. 

Declination of the short term investments is leading to a new way of thinking the future of energy. Countries will need to build key alliances in order to recover post covid, without loosing the perspective and commitment to protecting the environment. This moment is where hydrogen begins to gain attractiveness, offering clean energy cluster opportunities.

Policy makers can take advantage of this crisis for brand-new decision making. Using as a main driver the supply of clean, affordable and secure energy. As a result, these measures can aid to preserve and restore ecosystems that will, inherently accelerate the pace into sustainability. This is an important time for hydrogen, which is going through an accumulation phase (according to the dows theory), where markets will possibly increase their quotes rapidly. As a following step for this crisis, hydrogen will need to cross the slope of enlightenment in order to reach the productivity needed for businesses to scale up.

It is important to highlight that hydrogen is not a silver bullet. It is an enabler of new ways of trading clean energy, fuels and an agent for decarbonizing industrial heat. Green hydrogen will definitively bring more investment for the renewables sector, one thing cannot happen without the other. This would be followed by a fall in the CAPEX of hydrogen related technologies, leading for long term contracts. 

Politics collaboration will be of great help, developing a transparent framework and financial instruments that would ensure clear rules for private investors, assisting with the integration of this new energy vector. Considering the diversified application range, many sector can be favored from this measures.

In conclusion, the hydrogen sector has a unique opportunity in their hands. Needing short term actions that will stabilize the sector, promote the implementation of hydrogen clusters and hubs, restoring the long term confidence of investors. Essential partnerships will need to be implemented for hydrogen to work and overcome the slope that is presented versus the conventional technologies, who are down trending at the moment. This moment could be used as a turning point for a better, clean and sustainable future.

 

 

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Matt Chester's picture
Matt Chester on Aug 28, 2020

Really interesting, thanks for sharing! So in the end, do you think hydrogen will get to a new place it wouldn't have in the absence of hydrogen, or will it just get on its destined path more quickly?

Massimiliano Cervo's picture
Massimiliano Cervo on Aug 28, 2020

I think COVID-19 is just accelerating the shift towards new, diverse and descentralized businesses in the energy sector.

Jim Stack's picture
Jim Stack on Sep 4, 2020

EVeryone knows Hydrogen is a dead horse. If someone is invested in it then they will see anything as a call for more H2. With Renewable Energy growing fast with lower prices than fossil fuels it will be hard to beat. 

Peter Poptchev's picture
Peter Poptchev on Sep 4, 2020

A most topical and accurate analysis. It applies in particular to the hydrogen markets developments in the EU (starting to) and China. The key question is, will hydrogen grow to be an internationally traded commodity?

 

Massimiliano Cervo's picture
Massimiliano Cervo on Sep 10, 2020

Peter, there are some companies already working on the vision and establishment of hydrogen as a commodity. This will be definetively a gamechanger.

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