Oil price rebound unlikely to derail hydrogen investments, say experts during Energy Voice event

A rebound in the oil price is unlikely to derail future hydrogen investments, industry experts have predicted.

After historic lows last year, partly brought on by global lockdowns, brent crude has bounced back and has recently been sitting at more than $70 a barrel.

But, Doug Vaccari, director of global energy and power infrastructure at financial giant BlackRock, says that doesn’t mean investors will automatically chase the money and abandon green energy.

Speaking during the second session of Energy Voice’s ‘Hydrogen – A Tracking Transition Series’, in association with Deloitte and Fasken, he said: “There has been a systemic change in the mindset of investors. Despite oil markets looking more attractive, people are really hungry for a better future, for making a change and ultimately getting the world where it needs to be.

“Higher prices will be good for the balance sheet of oil and natural gas producers, but that’s not going to change the investor appetite for clean energy plays.”

Rather than incentivising hydrocarbon investments, Vaccari said the rising price could actually benefit the energy transition.

As bottom lines improve, companies “looking to find a new home” could increase their spending on low carbon technologies like carbon capture and storage.

Shahrooz Nabavi, a partner at legal firm Fasken, said: “Investors in clean technologies have a long-term view. Institutional money thinks long, about 10 or 15 years into the future.

“They consider where the momentum is heading and, at the moment, it’s towards hydrogen and clean technology.”

Pierre Girard, director of new energy at Neptune Energy, said that, at this stage of the energy transition, it’s not case of picking between hydrocarbons and renewables.

He added: “We’re going to need both in the medium term – we can’t think of the world without gas and oil for the next few decades.

“There is obviously a need in the future to turn our attention more towards low carbon technology. In the short term, blue hydrogen is a good way to develop the market because there’s still a bit of uncertainty around how things are going to grow and at what pace.

“We need investments in all areas to ensure that we reach the future we want in terms of clean energy.”

There is much debate currently going on the industry around green hydrogen – which is made using renewable energy and water – and blue hydrogen – which uses natural gas combined with emissions abatement technologies – and which should be prioritised.

Daniel Grosvenor, renewables lead at Deloitte UK, said it is likely to be a mixture of both, with blue currently leading the line but with “gigawatt scale” green projects in the pipeline.

He added: “Countries with an existing oil and gas industry are probably going to be more focussed on blue, while those without existing resources might be chase green.

“It may be blue that leads but I don’t think that will be too material and green is going to play a big role in the future.

“There’s also a question about the other forms of hydrogen – is there a role for nuclear power in generating electricity that goes into the system?

“It may be helpful to have baseload generation driving an electrolyser rather than variable generation.”

But Grosvenor said he’d be “surprised” to see investment in blue hydrogen without some sort of safeguard about stranded assets, should the focus switch to green.

One area that needs to be addressed in order to accelerate the deployment and uptake of hydrogen is cost.

Although progress is being made, Henrik Andersen, VP of low carbon technologies at Equinor, said the industry is now at a point where deployment is more important than research and development (R&D).

He said: “We need to build electrolyser plants and we need to scale up to get the market going – that will drive cost reduction.

“Many electrolyser companies are now mobilising and building factories that can produce 500 megawatts to 1 gigawatt per year. But, there needs to be a market that’s asking for them.

“We’re out of the R&D phase and we’re at a stage when we need to deploy the technology to get that cost down further.”

The webinar is available for viewing by following this link. 

Catch up on the first webinar and register for session three in the series, policy focus & COP26 reflection, here.