Aug 24, 2019 – Onvista reports: Now the big corporations take over

(Convenience translation; citation: https://www.onvista.de/news/wasserstoff-jetzt-uebernehmen-die-grosskonzerne-268105025)

Here is a lot on the subject of hydrogen. Where previously small specialists set the tone, now more and more large corporations take over. For investors, this results in several episodes. On the one hand, there is now spectacular growth and, on the other hand, the takeover imagination of the remaining fuel cell and electrolysis shares, such as NEL and Plug Power, is on the rise.

How big business now takes over

Hardly any other company in the field of energy and transport is more likely to ignore the hydrogen issue today. Since the founding of the Hydrogen Council in 2017, in which global groups from industries such as industrial gases, automotive, gas stations and plant construction participated, a lot has started to move. Here are some examples:

Linde, for example, now has its own business unit, Hydrogen FuelTech, which wants to expand rapidly in the field of refueling. Cummins, the leading independent supplier of truck engines, has taken a promising position with the acquisition of Hydrogenics and is now reportedly also interested in the Volkswagen subsidiary MAN Energy Solutions. For its part, this company has taken some interesting steps towards hydrogen, including a stake in H-TEC Systems, a supplier of stacks and electrolysis equipment, and a project with Hydrogenious LOHC Technologies to develop novel liquid hydrogen carrier materials.

Bosch also noticed the first half of the year. The development of the so-called solid oxide fuel cell technology (SOFC) is driven forward with Ceres Power and the deal with PowerCell Sweden is about fuel cell stacks for the automotive industry. In both cases Bosch wants to go into mass production for the foreseeable future. The fact that Siemens not only developed some of the most efficient PEM electrolysers, but also announced the construction of a hydrogen technology center in Görlitz in July, is a further indication that a race has almost begun.

If you look at the other side of the Rhine, you get a similar picture. Numerous consolidation steps have also taken place in France, and from the oil company Total to automotive suppliers to utilities such as ENGIE, all push into the hydrogen market in one way or another. More examples can be found in the Far East.

Episode # 1: Takeover Fantasy

Of course, the intensifying competition has its reasons: the technology, which has so far been too expensive for most applications, now faces dramatic cost reductions thanks to the increasing volume production of the components. At the same time, it is becoming increasingly clear that a genuine energy transition can only be achieved through sectoral linkage, and that requires green hydrogen.

Of course, only those suppliers who can offer the best package of durability, performance and price will be successful. The necessary expertise can not be stamped out of the ground. Rather, it requires experienced teams that have been dealing with technology for decades and know the pitfalls of sensitive processes.

The acquisition of a specialist or the formation of joint ventures is therefore probably the best way for many companies to participate in the hydrogen issue. Now that Hydrogenics has been snatched away, there are not that many listed candidates anymore.

Episode # 2: Critical Size in Sight

The hydrogen economy is an incredibly extensive field that requires the interaction of innumerable actors if it is to become reality. For mobility, nationwide tank infrastructure is needed and in the production is to think of the coordination of renewable energy, storage facilities and customers. If only one element of it does not play along properly, the entire business model is in the balance.

That’s why size is an absolutely crucial factor. Large electrolysis plants can produce hydrogen at a lower cost, which can then be conveniently stored in large storage facilities, making more applications economically viable. The more numerous and varied the customers are, the better predictable the sales will be. In addition to refineries and steel manufacturers, more and more chemical companies, mobility service providers and others will soon be added. This results in network effects that are comparable to those on social networks and other platforms.

We are not quite there yet, but if in a few years the critical point is exceeded, I expect a demand explosion in the style of solar modules, as their costs dipped below a certain threshold. In this way, even with many suppliers, the dilemma will finally come to an end that the sales volume is insufficient to finance ongoing operations with own funds.

So what to buy?

The argument of takeover fantasy speaks for relying on specialists. But when it comes to the expectation of a rapidly growing market, I would rather be defensive and not focus on one company. After all, only the best will fully benefit and the massive entry of large-scale industry could now cause a lot of confusion.

Forget electric cars – this market could get much bigger

Billions of research programs are now driving the development of hydrogen. Before our eyes, a huge industry is developing. And there are two players who, according to our analysis, could already benefit from it!