While oil and gas have dominated discussions over energy security in recent months, on a longer-term basis hydrogen has been touted as a clean replacement for emissions-heavy technologies across all kinds of industries.
But that far-off horizon hasn’t stopped the German government and Amazon (AMZN) from inking deals for green hydrogen in the last week of August.
The retail and cloud services giant signed a deal to buy 10,950 tonnes a year (or 50t a day) of green hydrogen from US producer Plug Power (US:PLUG). Like the UK’s own Ceres Power (CWR), Plug Power makes fuel cells and is still ramping up in terms of capacity and sales. This Amazon deal is not an expansion in production but does guarantee more sales – overall output is expected to be 500t per day by the end of 2025. Investors liked the news, and the company’s shares are trading up a third over the past month.
Plug Power also aims to hit $3bn (£2.6bn) in sales in just three years, from $500mn last year.
As part of the deal, Amazon will also get 16mn Plug Power warrants, exercisable if the company spends over $2.1bn on hydrogen over seven years. BMO Capital Markets analyst Ameet Thakkar said it was a positive sign for the developing market. “It is good to see existing customers stepping up to commit to production as far out as starting in 2025, and reflects confidence in Plug’s ability to deliver fuel,” he said.
Germany’s deal with Canada deal is far more hopeful – alongside a mining agreement between the North American country and automakers Volkswagen and Mercedes, the two countries will launch a hydrogen alliance, with a view to establishing a “transatlantic supply corridor” by 2025. This would mean shipping liquid hydrogen from Canada to Germany, even with shipping options still very much in development.
Energy expert Michael Liebreich said seaborne trade was never likely to be significant. “No more than homeopathic quantities of H2 will ever move by ship,” he said, pointing to the carrying capacity of H2 ships compared with liquefied natural gas transports.
LNG has almost three times the volumetric energy density of H2, meaning that to carry the same energy content, a hydrogen ship would need far more carrying capacity. To get technical, this is the other way around on a non-volumetric basis, with hydrogen holding more energy.
Hydrogen-powered cells outperform lithium-ion batteries despite losing more energy between a wind turbine, processing and eventual use. This, and its quicker refuelling speed, makes it more suitable for heavy industry use.
“One kilogram of hydrogen (39 kilowatt hours) contains 195 times more energy than a 1kg lithium-ion battery pack (0.2kWH),” said Bernstein analyst Neil Beveridge in a new report. He put the current green hydrogen price – set to tumble with new capacity on the way – at the equivalent of $15 per million British thermal units (mmBtu), ahead of US gas prices but well below current European and Asian prices.
He added that 2022 could be a “breakthrough” year for hydrogen after “many false dawns”: “The falling cost of renewables coupled with the rising price of oil and gas makes green hydrogen viable on an unsubsidised basis in a way that it never has,” he said.
