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A rise in hydrogen-related M&A activity globally

As international pressure mounts for urgent responses to climate change, there are signs that, after several false dawns, hydrogen is finally emerging as a key component in the transition from fossil fuels.

close up image of glazed green building

The pressure for de-carbonisation is driven by the Paris Climate Agreement and UN Sustainable Development goals, implemented through regulatory reform and increasingly (as evidenced in recent weeks) even the courts.

Public opinion and activist shareholders represent a parallel development that also reflects a clear generational shift in priorities and values.

The many potential applications for hydrogen – from acting as a substitute for natural gas/ LNG, to use in transportation and mobility, through to blending for domestic and industrial uses – have long been known.

Indeed, thanks to its flexibility, one leading renewables company calls it the “Swiss army knife” of energy. But it is only now that we are seeing the momentum gathering behind hydrogen.

Technology drives change in acceptance of hydrogen as an energy source

Technological advances are also driving growing acceptance of hydrogen as an energy source, and interest in hydrogen technologies is prompting hydrogen-related M&A activity globally.

These include advances in:

  • electrolyser technology, particularly with efficiencies conducive to the production of “green” hydrogen, which is emerging as the “holy grail” of hydrogen alternatives (in preference to more carbon-intensive “brown” and “blue” hydrogen varieties)
  • fuel cells for use in transport and mobility, with particular interest in heavy and long haul applications that have traditionally relied on diesel fuel (such as long-haulage trains, trucks and mining machinery)

While we expect to continue to see “brown” and blue hydrogen projects develop (especially where carbon capture and storage is included), it is outpaced by the interest in green hydrogen over the past 18 months.

That in part reflects government action to incentivise green hydrogen projects through a variety of grants and funding schemes.

In Australia, for example, the Murray Valley blended hydrogen joint venture between Engie and the Australian Gas Infrastructure Group is one of several projects to win a multi-million package of government funding for qualifying green hydrogen developments.

In line with this, the market is now seeing the start of significant investment in integrated green hydrogen projects, such as the ambitious green hydrogen-for-export ‘Asian Renewable Hub’ in Western Australia’s Pilbara. Investment in such developments will be a focal point in Australia and the Middle East especially, where governments look to transition from being major exporters of LNG to leading exporters of hydrogen.

Podcast length: 09:24.

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