Investment in green hydrogen has seen a significant surge in recent years, driven by its potential as a clean energy carrier that can help decarbonize various sectors of the economy. Green hydrogen has the potential to replace oil in several applications. Green hydrogen, produced via electrolysis powered by renewable energy, can significantly reduce reliance on fossil fuels, thus decreasing overall carbon emissions. Hydrogen can be used in various sectors where oil is currently predominant, including transportation, industry (like steel and chemical production), power generation, and heating.
MUFG as part of the Mitsubishi UFJ Financial Group, has shown significant interest in sustainable and green energy investments. It has been actively involved in promoting hydrogen technologies. For instance, MUFG has invested in the Japan Hydrogen Fund, which aims to accelerate the use of hydrogen and scale its supply chain. This fund was created in collaboration with the Japan Hydrogen Association (JH2A) and Advantage Partners, focusing on investments in hydrogen to promote its societal use and supply chain development. MUFG’s involvement in this fund is part of their strategy to contribute to the development of the hydrogen sector, including its promotion and financing capabilities. MUFG has committed to providing tens of trillion of yen in sustainable finance by 2030, which includes investments in areas like renewable energy, where hydrogen plays a pivotal role. They have also established a Green, Social, and Sustainability Bond Framework, indicating their interest in sustainable financing instruments that could encompass hydrogen projects.
Given the global push towards hydrogen, especially green hydrogen, as a clean energy source, MUFG’s investment in hydrogen funds or related projects would align with both national and international trends. The bank’s strategic focus on sustainable finance, coupled with Japan’s ambitious hydrogen strategy, positions MUFG to be at the forefront of this transition.
Governments worldwide are recognizing the role of green hydrogen in achieving net-zero emissions targets. For instance, the European Union has set ambitious targets to produce 10 million tonnes of renewable hydrogen by 2030, backed by policies like the European Hydrogen Strategy and funding mechanisms like the European Hydrogen Bank.
In the U.S., the Inflation Reduction Act has introduced tax credits for green hydrogen production. Similarly, India has launched the National Green Hydrogen Mission with significant financial commitments.
The global green hydrogen market is projected to grow at a compound annual growth rate (CAGR) of over 30% in near future, with market size expected to exceed USD over Six billion by 2024. This growth is fueled by increasing demand for clean energy alternatives and technological advancements in electrolyzer technologies.
Innovations in electrolysis technologies, like Proton Exchange Membrane (PEM) and Solid Oxide Electrolyzers, are making green hydrogen production more efficient and less costly. Companies like Bloom Energy are developing technologies like the Bloom Electrolyzer to integrate green hydrogen production with renewable energy sources.
Major corporations across various industries are investing in green hydrogen. For example, Air Products is investing in what will be the world’s largest blue hydrogen facility, while companies like BP aim to capture a significant share of the hydrogen market with projects like H2Tesside in the UK. Toyota and Airbus are also investing in hydrogen technologies for fuel cells in vehicles and aircraft respectively. Investment in infrastructure for green hydrogen includes not just production facilities but also storage and transportation. Projects like the green hydrogen hub in Visakhapatnam by NTPC involves an investment of ₹1.85 lakh crore, are examples of large-scale infrastructure development aimed at producing significant quantities of green hydrogen daily.
The economic case for green hydrogen is bolstered by its potential to reduce dependency on imported fossil fuels, create new job opportunities, and foster economic development through new industries. Environmentally, it offers a pathway to reduce greenhouse gas emissions significantly, especially in hard-to-decarbonize sectors like steel production, heavy transport, and industrial processes.
Despite falling renewable energy prices, the cost of producing green hydrogen remains higher than that of grey hydrogen, though technology advancements and scale are expected to reduce these costs over time. The development of a hydrogen economy requires substantial investment in infrastructure for production, storage, and distribution, which is currently a bottleneck.
The investment in green hydrogen not only represents a shift towards sustainable energy solutions but also opens up a multi-trillion dollar market opportunity as it becomes integral to the global energy transition strategy. As with any emerging technology, there are risks, but the potential for significant long-term benefits in environmental impact and economic growth makes it an area of keen interest for investors and policymakers alike. Investors can look into companies directly involved in hydrogen production or into diversified ETFs focusing on hydrogen and fuel cell technologies. Another avenue is through green bonds which finance environmentally friendly projects, including those in green hydrogen.
Recently TotalEnergies has also announced its entry as an investor in the “Japan Hydrogen Fund. The fund was initially endowed with over $400 million at its launch. TotalEnergies joined forces with several major Japanese companies in this venture, including Toyota Motor Corporation, Iwatani Corporation, Sumitomo Mitsui Banking Corporation, MUFG Bank, Tokyo Century Corporation, Japan Green Investment Corp. for Carbon Neutrality, and the Bank of Fukuoka.
The fund’s objective is to develop the low-carbon hydrogen value chain, focusing on promoting sustainable development through hydrogen. The fund is managed by Advantage Partners, a leading Japanese private equity firm. It was launched by the Japan Hydrogen Association (JH2A), which represents over 440 members committed to advancing the hydrogen economy. By investing in hydrogen, particularly in a market like Japan, which has aggressive plans for hydrogen utilization, TotalEnergies positions itself not only as a participant but as a potential leader in the emerging hydrogen market. This move by TotalEnergies follows their broader strategy of investing in clean energy solutions, as evidenced by their earlier launch of the Hy24 clean hydrogen infrastructure fund in 2021 in collaboration with Air Liquide and VINCI.
Green hydrogen production is currently more expensive than traditional fossil fuel-based hydrogen production (grey or blue hydrogen. There’s a need for a new infrastructure for production, distribution, and storage of hydrogen, which involves high initial investment. Existing oil and gas infrastructure isn’t fully compatible with hydrogen due to its different physical properties. Investment in Green Hydrogen will create new innovations and applications that may eventually reduce hydrocarbon footprints. However transition would likely be gradual, with hydrogen initially playing a complementary role in the energy mix, eventually potentially expanding as technology matures and economies of scale bring down costs.
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