The UK Government’s hydrogen strategy could represent one of the final pieces of the puzzle to help the UK reach net zero, according to Louie French, Manager of the Tilney Sustainable MPS.
Hydrogen is the latest alternative energy source to be backed by the government – with its plans outlined in a strategy document published on 17 August – and French believes over time it will become an important part of the energy mix.
“If we look at the journey of UK renewables over the past decade, we’ve gone from projects and technologies requiring significant upfront government and taxpayer support, through to the current Contracts for Difference scheme and a number of new projects requiring very little to no support for low-carbon electricity generation.
“This journey has seen a dramatic increase in renewable capacity and helped reduce our dependency on the likes of coal, but intermittency issues remain a real challenge.
“Green Hydrogen is a clear and obvious alternative to battery technology, which is arguably better for the planet when you consider the life cycle of the various materials needed to produce batteries.
“We are now seeing established companies in this space growing in prominence again and our Sustainable MPS has a small exposure to some of these, including Ceres Power Holdings.”
French believes parallels can be drawn from the listed renewable infrastructure trust sector, which has grown significantly since 2013.
“Back in 2013, the likes of Greencoat UK Wind, just like hydrogen, required government support and it is now part of a multi-billion-pound listed sector. You can easily see the same happening with hydrogen in 10 years’ time.”
However, French points out that the growth of hydrogen as an alternative energy source is just part of the development of net zero investment solutions.
“Clean energy has been on a bit of a rollercoaster ride with huge returns for some funds last year followed by more difficult periods this year. We have preferred the energy efficiency theme as a less volatile strategy, but as always, we keep a close eye on valuations and opportunities across the market.”