We introduce our integrated hydrogen model across the coming three decades based on cost-parity assumptions around green/blue/grey hydrogen, sensitising these assumptions to different carbon price environments. We apply these to demand-side forecasts with a deep-dive into transport, industrial, and heat and power end-markets, forming a view on hydrogen adoption vs. competing technologies.

In hydrogen production, we forecast 340mt by 2050E (5x 2020 levels), of which ~60% is green hydrogen. This is a significant incremental end-market for renewable energy assets (CSe ~3TW req. capacity 2050E) and 30 years of underwritten growth for electrolysis equipment producers ($80bn sales p.a. by 2050E). Electrolysis producers already reflect ~50% of 2050E sales in market cap today. We believe the greatest scope for upside is in supply chain companies (materials, distribution, asset owners) – with limited growth potential currently reflected in valuations. Opportunities in blue hydrogen are also significant, with large new build potential (~$500bn total capex to 2050E) as a means to monetise gas assets while significantly limiting carbon footprint. This is broadly constructive for capex enablers.

In hydrogen demand, we are most constructive on applications across trucking, ammonia and steel, but users are not necessarily winners. The automotive powertrain of the future is likely to remain primarily battery electric. We analyse the total cost of ownership across cars, trucks and buses and expect fuel-cell adoption to be greatest where batteries struggle most (e.g. hydrogen having ~30% market share in trucks 2050E), but even so, battery innovation poses a threat to these assumptions. In industrial end markets, growth in steel (~16mt H2 demand pa by 2050) and ammonia (~80mt) supports overall demand. Hydrogen is an opportunity for producers with feedstock disadvantages to decarbonise and potentially shift down the cost curve (very long term); however, these are commodity, low-return end-markets, requiring capex to upgrade existing facilities. Heat and power represent significant opportunities, but hydrogen is a clear “plan B” (~75mt of demand) vs. electrification.

We highlight global stock implications: In European Chemicals, we now factor probabilityweighted hydrogen opportunities into our long-term assumptions for Air Liquide and Johnson Matthey (both Outperform-rated), raising their target prices 4% and 6%, respectively.