The main shareholders Bosch and Weichai are already counting on the English Ceres Power and their high-temperature fuel cell systems or their patents and know-how. With the South Korean Doosan Fuel Cell there is a license agreement and the planning of a joint FC production. Now, US company Delta Electronics is joining as a partner, which boasts a turnover of around 23 billion USD (over 80,000 employees) and recently closed a license agreement on the production of FC stacks for hydrogen production in the volume of 43 million GBP with Ceres Power, half of which will be counted towards the turnover for the current fiscal year. Delta will produce FC stacks on a license basis for various applications and markets at its 200 production sites worldwide. The company works with, among others, Microsoft and Tesla.
For us, it is interesting to see that Bloom Energy as well has bet very successfully on high-temperature fuel cells developed in-house (microgrids) and thus makes various energy sources such as natural gas, biogas and hydrogen usable. Bosch too addresses this market segment – among other things via a cooperation and license from Ceres.
The share price of Ceres, like all other listed FC companies, has suffered greatly in recent years, but seems to me to have reached a price level at which one should build up positions. The partnerships with large companies allow the expectation of sustainably high revenue from licenses and sales, without Ceres having to strongly invest in the build-up of production capacities. Conclusion: A good portfolio addition in the area of FC and H2 technology.
Disclaimer
Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.
#Shares from the crypto universe and from many technology companies are currently reaching new highs. Armaments are also booming on the stock market in view of the many global, some war-like, political conflicts. Only the topic of hydrogen and fuel cells is still leading a shadowy existence, with prices at crash level, which however – still – fully obscures the prospects of sustainably produced energy, and above all of hydrogen.
The stock exchange also always works according to the principle of group rotation, according to which always exactly these topics slide back into the focus and center of investor interest that have been completely neglected up to now but have excellent prospects. Precisely why I expect that, after almost three years of falling share prices, the trend will now gradually reverse and a sustainable, long-term upward trend on the stock market is beginning that is based on very high company growth.
To many market participants, it is unclear at this time how hydrogen will be available in large quantities, although it is already clear today that production volumes will increase enormously and prices will fall. All this, however, doesn’t happen overnight: Gigantic capacities in electrolyzer technology – PEM, AFC, AEM, SOFC – must arise to be able to produce sufficient hydrogen.
Hydrogen economy is on its way and will come!
“The H2 economy is on its way and will come,” was the conclusion of the H2-Forum in Berlin (Feb. 19 and 20, 2024, see p. 20). One speaker explained that we’ve now come, after overinflated expectations, “out of the valley of the dead” and on solid ground. Now, it’s all about assessing risks and partaking in concrete projects, which would mean investments in the whole area of hydrogen. From talk to action.
If we take a visionary look into the years 2030, 2035 and 2040, it’s clear what technologically needs to be on course today. Green and, temporarily, blue hydrogen (produced by natural gas reforming – 70 percent less CO2) will dominate and replace gray hydrogen from natural gas, eventually CO2-freely. Regeneratively produced hydrogen will be a raw material that receives a market price as a commodity on the stock exchange. Those producers who have large quantities of low-cost renewable energy (solar, wind and hydropower) at their disposal and have the necessary access to water (above all seawater) will get a tradable commodity that they can sell on the world market, with high profit margins, or use themselves.
In the last case, it can be observed that countries with ideal framework conditions are increasingly thinking about using the hydrogen produced locally themselves, by setting up corresponding industries, instead of selling it to countries like Germany, as energy is a very important location factor.
Hydrogen and the stock market
In countries such as China and individual regions like the US state of California are developing hydrogen strategies that have model character and can serve as a blueprint for the world. In China, over 1,200 H2 refueling stations are to be in operation by 2025. Currently, it’s about 400. South Korea wants long-term to establish more than 1,600 H2 refueling stations in the country. Here in Germany are, as before, around 100 in operation.
Companies with capacities for fuel cell stacks and modules for commercial vehicles are in the starting blocks (Bosch, Cummins, Ballard, Hyzon, Toyota, Hyundai, etc.), because these markets will be huge. Several million trucks and buses can be assumed to be converted to battery or fuel cell (also in combination) in the next ten to twenty years. Hydrogen engines are also attracting a lot of attention, as various prototypes have already been developed (Bosch, Cummins, Toyota).
The question of the right H2 shares can be answered well with this context, as primarily companies will win that have a mature technology, operate with robust business models, are able to deliver and possibly profit from the consumable hydrogen itself, if they can produce it themselves at low cost or distribute and use it as a commodity.
Here beckons the prospect of a good profit margin with high growth potential. On the stock exchange, however, there is right now in the area of hydrogen a phase of disappointment, as firstly everything is not going so quickly and secondly setbacks must also be overcome. In addition to questions of implementation speed, there are often also regulatory issues on the timeline. That the stock market has not yet recognized the potential of the companies through their share prices and valuations is easy to see from the current prices. There is no question that there will be a complete reassessment, however, even if it will take longer. Be patient. We are only at the beginning of this new mega-trend – also on the stock exchange. Let’s wait for the group rotation; then, everything will happen very quickly.
Disclaimer
Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.
Things had quietened down on the Bonhoff front. But then new information surfaced in February 2024 which prompted German transportation minister Volker Wissing to take action. On Feb. 15, he released Klaus Bonhoff, head of the policy issues department, from his duties with immediate effect and also moved a divisional head. The reason behind the decision lies in a discrepancy uncovered during an internal review undertaken by the transportation ministry, also known as the BMDV. The affair gained added force when German news magazine Der Spiegel reported on Feb. 20 that Wissing had stopped “completely the approval of hydrogen funding.” Yet in reality funding is not being axed. The ministry is merely carrying out reassessments that could lead to a delay.
But one thing at a time. In this article we’ll attempt to shed light on who did what to whom as well as how and when it all happened.
It started back in summer 2023 when German business paper Handelsblatt published an article about a questionable friends and lobbying network. The suspicion of nepotism that was raised on various sides was based on the alleged existence of an overly cozy network of contacts linking a number of different political and industry figures. Bonhoff was reproached for his reported friendship with Werner Diwald, chairman of the German hydrogen association, and its president, Oliver Weinmann, both of whom he allegedly joined on a ski trip. What’s more, it was claimed that Bonhoff helped the German hydrogen association, abbreviated to DWV, to gain funding in 2021.
Stefan Schnorr, state secretary at the German transportation ministry, was tasked with clarifying the facts and, according to Der Spiegel, gave the all-clear a few weeks later, stating there was “No trace of favoritism.” At the same time, Bonhoff received broad support, particularly from the hydrogen sector.
Everything bubbled up again in early 2024 when Der Spiegel quoted parts of an email exchange between Bonhoff and Diwald (see freedom of information website www.fragdenstaat.de). This apparently substantiated a high degree of closeness and familiarity between the two men.
Inconsistencies and contradictions
In fact, what the disclosed emails show is that certain wishes and views regarding funding measures had been articulated on the part of the DWV. For example, Werner Diwald wrote in September 2021: “In view of the upcoming elections it would certainly be good for grant approval to be given before the end of this legislative period.” (Der Spiegel, Feb. 6, 2024)
This prompted Bonhoff to forward the email to the appropriate specialist department at the transportation ministry where he inquired after the state of affairs, according to the statement he gave to H2-international. As Der Spiegel and Tagesspiegel Background, another German publication, both reported, he also “orally supported” the project. However, given this expression of support was previously denied, this admission could now cause no end of trouble for the ministry.
LobbyControl then took it as proof that favoritism was indeed at play. On Feb. 16, 2024, the online platform stated that days before the ministry had conceded there were “inconsistencies and contradictions” in the allocation of funding and that is why minister Wissing relieved department head Klaus Bonhoff from his duties.
“The necessary relationship of trust between the minister and the head of department no longer exists.”
Stefan Schnorr, state secretary at the German transportation ministry, in the Frankfurter Allgemeine Zeitung (FAZ)
Furthermore, LobbyControl criticizes what it sees as the inadequacy of compliance rules at the transportation ministry and Bonhoff’s lack of a clear-cut separation between his personal and official contacts when it comes to grant allocation.
Overly cozy network?
Klaus Bonhoff, who is also known as “Mister Hydrogen” due to his extensive experience in leadership roles in the H2 and fuel cell sector, had previously worked for many years on fuel cell cars at Daimler before becoming managing director of Germany’s National Organisation Hydrogen and Fuel Cell Technology, or NOW, in 2008 (see HZwei, April 2011 & H2-international, October 2019). From there he transferred to his post at the German transportation ministry. His successor at NOW since May 2020 has been Kurt-Christoph von Knobelsdorff (see H2-international, February 2021).
Thanks to his considerable expertise, he was a popular and long-standing contributor at numerous industry events since he was well known as an adept public speaker with a skill for highly diplomatic and precise wording. It’s understandable that the DWV in particular wanted to get close to him given that the association comprises many major German industrial corporations from the H2 community and Bonhoff, in his role as NOW spokesman, was the main point of contact for funding applications in the hydrogen sector. However, the responsibility for awarding funds, both then and now, lies with the project management agency Jülich (PtJ).
The DWV’s role
Over the years, the DWV has developed – especially under the leadership of Werner Diwald – from a highly committed body of motivated idealists to an industrial lobbying group. Because of this change, some of the original members who prefer an idealistic approach have turned their back on the association in the past few years. Some of them have urged repeatedly for less dependency on industry and greater levels of transparency. Most recently, Johannes Töpler, who was a long-serving chairman of the DWV, resigned from his post as the DWV’s education officer at the turn of the year. Among the reasons for his resignation was that he no longer thought education and training, a crucial area in his view, was receiving the appropriate attention and appreciation it deserved within the work of the association.
In terms of legal form, the DWV is officially a registered association. Over the years, Diwald has worked to set up various expert commissions to which participating companies pay high-level contributions. This enables the DWV to represent their interests, including on the political stage in Berlin and Brussels. As such, political evenings and business talks are organized on a regular basis where political and industry representatives can meet, as commonly occurs in associations nowadays. One of these expert commissions, HyMobility, was awarded millions of euros in funding in 2021 via the PtJ, i.e., from the transportation ministry’s budget, something which Bonhoff is now being reproached for.
The ministry confirmed to H2-international: “The HyMobility innovation cluster is supported by the Federal Ministry of Transport and Digital Infrastructure as part of the national hydrogen and fuel cell innovation program. The grant is up to €1,438,600. The calculation is based on actual expenditure up to the maximum grant level. […] The HyMobility cluster is financed through grants, contributions for cluster membership, and a proportion of the membership contributions of the DWV. […] The funding project facilitates cluster management, cluster coordination, the support and guidance of the expert commission’s work as well as the preparation of findings from the expert commission and from the expert committees and the provision of recommended courses of action to meet further development needs. In addition, the funding covers the venues for cluster meetings, the creation of studies and analyses as well as technical and legal reports. […] The funding is allocated for specific purposes.”
HyMobility’s aims, according to its project outline, include: “Involvement in the formulation of relevant policy and legal conditions at a national and European level for the market preparation and introduction of low-carbon mobility based on renewable hydrogen. […] the creation and strengthening of understanding for and trust in innovative and low-emission vehicle technology based on renewable hydrogen within transport and national and European politics.”
In connection with this, the DWV confirmed to H2-international that the goals of the expert commissions are to “attract attention for the particular topic, raise awareness, bring together stakeholders from the relevant areas and sectors, prepare joint positions and recommend courses of action to policymakers.
LobbyControl makes the following criticism in relation to this: “It is unusual and questionable that an industrial lobbying association such as the DWV should receive a state subsidy for work that it would carry out regardless: maintaining networks and lobbying.”
“The HyMobility project is supported by the Federal Ministry of Transport and Digital Infrastructure through a total of EUR 1.8 million in funding as part of the national hydrogen and fuel cell innovation program. The funding guidelines are coordinated by NOW GmbH and executed by the project management agency Jülich (PtJ).”
https://dwv-hymobility.de/organisation/
Bonhoff told H2-international: “HyMobility is funded in the same way that the environment ministry funds the HySteel project which was approved prior to HyMobility.” Tagesspiegel Background reported on this very subject on Feb. 7, 2024: “The ministry [German environment ministry; editor’s note] is satisfied with the project. ‘Such networking is effective and successful, is conducive to the sharing of best practice and the establishment of horizontal and vertical partnerships in research, testing and production.’”
Among the 22 members of HyMobility are NOW and H2 Mobility Deutschland. H2 Mobility is a consortium of various automotive, industrial gas and petroleum companies plus an investment fund focused on the construction of hydrogen refueling stations in Germany. Practically every station that is built and managed by this Berlin-based company is subsidized to the tune of nearly 50 percent from European funds or the funds of German central or regional government. One of the three directors is Lorenz Jung (see H2-international, October 2023), who took up the role in April 2023. According to information from LobbyControl, he is the son-in-law of Oliver Weinmann. Jung, whose wife (Weinmann’s daughter) works at NOW in the communications department, has been a manager at the company virtually since its inception.
The roles of Weinmann and Diwald
Weinmann is a founder and board member of what was then the German hydrogen and fuel cell association (see HZwei, October 2010). Born in Hamburg, he had initially worked for city’s electricity company (Hamburgische Electricitäts-Werke or HEW) which was taken over by Swedish corporation Vattenfall Europe when it became the majority shareholder in 2001. Weinmann held the position of managing director at Vattenfall Europe Innovation GmbH from 2010 to July 2023, followed by head of innovation management at Vattenfall Europe AG. From 2020 onward he has also worked in a voluntary capacity as the president of the DWV. In addition, he is chairman of the NOW advisory council, vice chairman of the hydrogen body Wasserstoffgesellschaft Hamburg and holds or has held – according to his own HyAdvice website through which he offers freelance consulting services on matters including funding – further leadership positions at various organizations, among them Hydrogen Europe and the Energy Storage Systems Association or BVES.
Oliver Weinmann at a parliamentary evening in Berlin in 2022
Similar to the way Weinmann operates with his HyAdvice consulting business, Diwald offers his services through PtXSolutions, formerly known as ENCON.Europe. The company is the vehicle through which the DWV chairman provides consultation as a sideline to institutions such as the DWV, Encon Energy EOOD (ENCON subsidiary), Enertrag (former employer), NOW, Performing Energy (DWV think tank) and Vattenfall Europe Innovation. Originally, ENCON.Europe had undertaken some work for the DWV (see H2-international, October 2020). According to a statement by Diwald, ENCON.Europe at the time played a considerable part in increasing the visibility of the DWV without itself appearing in the limelight. He says the company positioned the DWV and the Performing Energy expert commission exclusively as brands in the political sphere and negotiated in the interests of the association. From 2017, the company’s staff included Dennitsa Nozharova, Werner Diwald’s wife, who at the same time also worked for the DWV and is also involved in Encon Energy EOOD.
Fig. 3: Werner Diwald has been DWV chairman since 2014
Performing Energy was the first expert commission that the DWV initiated in 2015 on the back of Warner Diwald’s efforts; Diwald himself had previously created this alliance for wind-based hydrogen systems in 2011 and taken up the position of its speaker (see HZwei, January 2012). Participating organizations include Enertrag and Vattenfall as well as other companies which are also involved in other groups within the network.
Werner Diwald addressed the situation regarding some association members by stating in an email seen by H2-international: “The media’s assumptions about a possible breach by the DWV of compliance rules in relation to the funding application made by the HyMobility innovation cluster are unfounded. […] There was no improper influence exerted by the DWV. The DWV does not accept funding to carry out its statutory activities. […] By virtue of the funding of the HyMobility innovation cluster by the BMDV, the DWV has clearly not placed itself in a position of dependence on the government.”
Furthermore, the DWV has yet to issue a public statement, with the exception of a communication disseminated to association members (as seen by H2-international). The message sent, at the end of February 2024, outlined that “initial measures” have been “immediately introduced” that “go beyond the content of the DWV’s ‘Code of Compliance’ in order to make a comprehensive review of the situation.” It goes on to say that the DWV executive committee has “immediately commissioned a comprehensive review of the DWV’s compliance rules and of external and internal processes and procedures in the context of funding applications and funding allocations.” This is to be carried out by Berlin law office Redeker Sellner Dahs.
H2 funding frozen?
The saga then reached its peak after Der Spiegel reported that the transportation minister had allegedly frozen all funding for H2 projects. According to the article, no more funding is to be approved for the sector for the time being and no further agreements are to be concluded. Even amendment notices will require approval at state secretary level, it said.
However, a press spokeswoman for the ministry clarified the issue at a press conference on Feb. 21, 2024, by stating that the ministry had “not stopped hydrogen funding per se” but is carrying out more thorough assessments of funding applications. These “are currently focused on the approvals procedure for the DWV’s HyMobility funding project.” Should relevant evidence be produced during the investigation, further funding projects will also be examined more closely if necessary.
The reason for this tightened approach seems to be the Brunner affair. It relates, among other things, to the email exchange that took place via a personal GMX account through which Klaus Bonhoff and others communicated with Bavarian businessman Tobias Brunner, managing director of Cryomotive and Hynergy and a key figure in establishing the hydrogen technology application center WTAZ in Pfeffenhausen. LobbyControl disapproves of this “use of a private email account for official communication” since it meant this email exchange was not known to the ministry’s internal review department and therefore could not be taken into consideration in its final report. In all, there are 14 gigabytes of data that require sifting, which explains why there is a delay in the processing of further approvals.
The share price of Ballard Power is at an all-time low. The published figures for the fourth quarter of 2023 and the entire year 2023 paint a contradictory picture. The future prospects outlined by the board, however, give cause for optimism. Turnover rose in the fourth quarter to 46.8 million USD – an increase of 132 percent compared to the same quarter previous year. Order intake in the fourth quarter amounted to an impressive 64.7 million USD, and the orders on hand (backlog) decreased slightly by three percent to 130.5 million USD, as Ballard received more orders to execute (deliver). However, the orders on hand fell by 21.7 million USD, as there were delays with one customer. This order has not been lost, but cannot yet be counted.
Total turnover in 2023 lay at 102.4 million USD, so the bottom line for the year as a whole was a loss of 0.48 USD per share. These are, however, all snapshots that obscure the company’s prospects, since important markets for fuel cells are only at the beginning of a long phase of strong growth. In the USA, Ballard is working on the construction of a new production facility, as recently announced. And in Texas: There, 20,000 FC stacks, to start, are to be produced per year as well as the MEAs. Investment volume: 160 million USD, and subsidies amounting to 40 million USD are beckoning. Do you build such a plant if you don’t believe in the future of your own technology and its market? By no means.
FC buses really getting rolling
Impressive is the development in deliveries and incoming orders for FC modules for buses. An example: The bus manufacturer Solaris began its collaboration with Ballard in year 2013 with the purchase of two modules. In the following ten years, Solaris ordered 213 modules. In 2023 alone, it was already 365 modules. According to Ballard, this is just the beginning of a real wave of orders. Similar seems to be the case with cooperation partner for many years NFI: 141 modules in year 2023, which should only be the small beginning of the possible order volume, was the commentary.
NFI unites various bus brands under one roof such as New Flyer (70 percent market share for transit buses in the USA) but also Alexander Dennis (double deckers) and MCI. The annual production amounts to 8,000 buses. The partnership with Ballard has now been strengthened and already 100 FC modules ordered, to be delivered by 2024.
By year 2037, there are to be 650,000 buses globally, according to Information Trends, that will drive with hydrogen. In 2022, it was just about 4,000. Price parity for battery-electric and hydrogen-powered buses should be reached by 2030. Then, there should also be enough H2 stations and the price of hydrogen should be at parity with the price of diesel. Ballard is the clear market leader today and could remain so.
China – the giant awakens
The joint venture with Weichai for the production of FC modules for trucks and buses has still not really got going. Regulatory conditions and support programs as well as initiatives by individual provinces make Ballard confident that things will really get going soon. There, 20,000 complete FC systems (power range from 50 to 200 kW) per year can be built. That corresponds to an annual capacity of 2 GW in FC power. In year 2023, in China, 7,500 FC vehicles were sold – altogether 7,300 FC buses and 13,700 FC trucks. Through special support measures by the province Shandong (where the production is located), the JV will finally get started in 2024.
From the United Kingdom, Ballard has reported an order for 15 MW FC capacity. It entails 150 FCmove modules for an unnamed customer with which a letter of intent for another 296 FCmove modules with delivery by March 2026 exists. It involves off-grid electricity generation from renewable energies. At the same time, Ballard has reported the successful completion of test series for FC backup systems for data centers of Caterpillar and Microsoft. The last could be the basis for major orders.
Has the share price bottomed out?
The share price increase from 1 to 2 USD US-$ (2018 to 2020) to over 40 USD at the end of 2021 and the subsequent decline in the price to currently around 2.70 USD should now lead to a sustained upswing again. This describes the entire H2 ecosystem on the stock exchange: It starts with technological developments that lead to expectations on the stock market, which is reflected in the sharp rise in the share prices of listed companies in the sector.
This was the case at the end of 2021. Then, it came little by little to sharp falls in share prices, related to increasing disillusionment among investors. In accordance with to the Gartner hype cycle, the FC and H2 sector is now entering a long-term upward trend, as the markets are gaining momentum. With hydrogen, this entails production, transport, uses, markets, and much more. It is clear that this is a disruptive new technology and industry.
Combining this analysis with the long-term Elliott wave chart results in a picture in which the Ballard share is now bottoming out (a current sell-off as the end of the downward spiral), just at a time when investors almost no longer want to believe in the company’s success, which is expressed in the very low share price and the market valuation of about 0.8 billion USD with, at the same time, 751 million USD in the bank. Today we have real figures, if you only look at the more than 1,680 buses that drive with Ballard technology. The hydrogen costs per 100 km are sinking massively. The modules are also becoming increasingly competitive thanks to cost-cutting programs and material optimizations – also in comparison to battery-electric and diesel-powered buses.
If the cost of diesel fuel is on average 240 USD per day and battery-electric is 16 USD for electricity per day, then the fuel cell (hydrogen) is in between at on average 85 USD per day. The charging times of a battery-electric bus must also be taken into account, however, whereas vehicles can be refueled in just a few minutes with hydrogen or diesel. Especially for certain applications (with long distances, hilly terrain, weather influences), the hydrogen bus is superior to the battery-electric bus.
In addition, hydrogen is becoming increasingly cheaper. Whereas the average price per kg has been still around 10 euros up to now, an average of 6.48 EUR should be feasible in one to two years, in two to three years 3 to 5 EUR per kg, and in 10 to 15 years, so they say, it could even be as little as 1 to 2 USD per kg. The total cost of ownership for the hydrogen bus will fall massively, and diesel will need to be replaced.
Ballard is calmly focusing on the scaling of its technologies and the imminent ramp-up of important sectors such as heavy transportation. Already in the current year 2024, incoming orders for FC modules for buses are set to rise sharply, where the turnover is expected to be split 30 to 70 percent between the first and second half of the year. Order intake will have an impact on the share price, and the next quarterly figures less so.
Summary: Ballard is very well positioned in terms of its finances. With over 750 million USD liquidity, the company will be able to manage its future growth (expansion of existing capacities, geographical expansion) very well from its own resources. Key markets such as FC buses and trucks are in the starting blocks and will ensure very high growth for the company in the long term. That this all is taking longer than expected is normal for the development of a new market. The year of the actual breakthrough (profit zone) will be 2025/26, as the most important framework conditions (including availability of H2 infrastructure) will be created and the regulation as well as support programs worldwide (USA, EU and Asia) will take full effect in a positive sense. Ballard is likely to be one of the winners of this development. The year 2024 will be characterized by rising order intake. Buy and leave alone. Investment horizon: at least two to three years.
Disclaimer
Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.
Wind, sun and loads of expertise – these ingredients are to be used intensively in Oman to produce green hydrogen in the future. In contrast to other Gulf states, the Sultanate is making great strides in this regard. The green hydrogen is to be exported, but also used locally. First projects are underway and the infrastructure is being expanded. Experts see Oman as a promising partner for the clean energy transition in Germany.
The excavators have rolled in; the sand has been swept out of improvised offices. The go-ahead has been given for a steelworks in the industrial port of Duqm in the Gulf state of Oman. Starting 2027, green hydrogen is to be produced here. “Vulcan Green Steel” is what the Indian owners from the family Jindal have named this business branch, for which a separate quay will be built to ship the products – directly opposite the other quays, from which containers and vehicles are transported across the Arabian Gulf. Customers for the green steel Jindal sees in Europe, for example in the German automotive industry.
The infrastructure in Duqm (see photo on p. 4) is growing rapidly, and the new steel plant is one of the building blocks of Oman’s future, which is to logically develop in the direction of green hydrogen. For the export, according to Dr. Firas Al-Abduwani of Oman’s energy ministry, ammonia and methanol are currently being considered as the main means of transport. Part of the new energy source, however, they want to use within the country. Other parts and products such as green steel are to be shipped via the industrial ports in Sohar, Duqm or Salalah in southern Oman, for example to Germany.
Future plans with the best prerequisites
Experts from the International Energy Agency (IEA) and the German foundation Stiftung Wissenschaft und Politik (SWP, see info box) see ideal conditions for the future plans of Oman: more than 2,000 kilometers of coastline, along which the wind blows around the clock, and eight to more than ten hours of sunshine per day.
Furthermore, the country has leading expertise in hydrogen production, well-developed ports with strategic positions and plants for desalinating seawater. These usually work with reverse osmosis to filter out dissolved substances. The associated costs for hydrogen production Dr. Dawud Ansari from the research group Globale Fragen (global questions) of SWP estimates as very little – he talks of about one percent of the cost per kilogram hydrogen.
The state institution Hydrom, however, does not want to commit itself to this yet. Hydrom has been developing a master plan for the green hydrogen sector in Oman since autumn 2022 and is creating the conditions for production. Also currently being discussed is the use of treated wastewater from the oil and gas industry.
Oman is pressing ahead with the development of green hydrogen as a future energy supplier so that it will be economically no longer predominantly dependent on dwindling oil and gas reserves. Also to be supported will be the country’s climate neutrality plans that the ruling sultan Haitham Bin Tarik set out in Oman Vision 2040. This could make the Sultanate a promising candidate for supporting the energy transition in Germany.
According to the Wuppertal Institut, a think tank for sustainability research, only up to one sixth of the expected H2 demand in Germany can be covered by domestic production in 2030. The majority will have to be imported – partners for this are being sought worldwide.
Pioneering work begins with five local consortia
Against this background, Oman is bringing itself in position: The strategy of Hydrom would allow for Oman to produce one million metric tons of green hydrogen annually starting 2030, and by 2050, it is to be around 8.5 million tonnes. By then, Oman wants to have fully reduced its CO2 emissions and additionally to have created around 70,000 new job positions. Estimated investment cost according to Hydrom and the energy ministry: around 150 billion US dollars.
To achieve the ambitious goals, pioneering work is now required: For example, it is important to attract companies that develop the corresponding technology. Electrolyzers for industrial processes that use sun, wind and water must be built. Furthermore, plans for sustainable, effective and economical business models are still needed.
The first five international consortia have just been awarded contracts by Hydrom to produce green hydrogen and ammonia for export and domestic consumption on a total area of around 1,500 square kilometers (580 sq mi) in the region Duqm. A further 1,800 square kilometers of land are currently being made available in southern Oman, in Salalah, via a second public tender. This auction is running until April 2024.
Potential for German companies
German companies are already involved in development in Oman. But Oman’s high-flying plans offer much more potential. This is the view of, for example, Dr. Abdullah Al-Abri, Omani consultant at the IEA – and hopes that the cooperation that was agreed in a Joint Declaration of Interest with Germany in summer 2022 will gain momentum.
“So far, the potential customers for green hydrogen from Oman are still mainly located in Japan or Korea,” opined the expert. Dr. Ruth Prelicz, expert for hydrogen and renewable energy systems at the chamber of commerce AHK Oman, however, stressed: “In summer 2023, the German energy supply company SEFE (Securing Energy for Europe GmbH) concluded an offtake agreement for liquefied natural gas (LNG) from Oman. This contract for LNG deliveries serves to build trusting business relationships and is also seen as a precursor to later deliveries of green hydrogen.”
Alok Bisen, who works for the Indian steel company Jindal, showing the construction area for green steel production in Duqm
Ruth Prelicz is observing the development on site: She is supporting the hydrogen foreign office Wasserstoffdiplomatie des Auswärtigen Amtes (H2Diplo) and the energy dialogue of the German economy and climate protection ministry (BMWK) in Oman. The expert sees a number of opportunities for German companies to benefit from cooperation with Oman in the field of green hydrogen: “It’s not just about the acceptance of the end product. Oman is also interesting as a market for German high-tech technology. Siemens Energy and ThyssenKrupp are established as potential suppliers of electrolyzers in Oman. And in the area of hydrogen transport, the Bavarian hydrogen experts of Hydrogenious as well as MAN Energy Solutions have presented their technology in the field of liquid organic hydrogen carriers (LOHC) and methanol.”
Also companies specializing in hydrogen compressors, pipelines or measuring devices, in her view, will be in demand in the country in the future. Further opportunities for German companies could be in the areas of green hydrogen certification as well as training and education. According to the expert, TÜV Süd, for example, is already active in this in Oman.
Oman’s stable position in the region
That cooperation with the Sultanate is not only worthwhile from a trade policy perspective stressed Dr. Dawud Ansari of SWP. For him, closer (energy) relations with the Sultanate as Germany’s central partner in the region bring further advantages: “Germany has an interest in strengthening relations with and the economy in Oman, as the Sultanate constitutes a cornerstone of regional peace processes. Oman itself is very stable and safe – both in terms of trade relations and domestic policy and in relation to its neighbors. The Yemen conflict and other regional disputes will, thanks to Oman’s diplomatic fortitude and border security, not spread to the country.”
The research for this text was supported by Park Inn by Radisson Hotel & Residence Duqm as accommodation. https://www.radissonhotels.com
Further reading:
Current information from the state institution Hydrom, which is developing a master plan for the green hydrogen sector in Oman: hydrom.om
Vision 2024 of the Sultanate of Oman: oman2024.om
More information about the port in Duqm, where Oman’s first green hydrogen projects will appear:https://portofduqm.om
Stiftung Wissenschaft und Politik, Publikationen, Dawud Ansari: Wasserstoff aus Oman für Deutschland und die EU – nicht nur aus energiepolitischer Perspektive sinnvoll. SWP-Aktuell 2023/ 9.3.2023 https://www.swp-berlin.org/publikation/wasserstoff-aus-oman-fuer-deutschland-und-die-eu
The International Energy Agency (IEA), a cooperation platform in the field of research, development, market introduction and application of energy technologies, has commented on Oman’s great potential for the production of green hydrogen: https://www.iea.org, subitems News / Oman
The chamber of foreign trade Außenhandelskammer (AHK) Oman maintains a representative office of German industry in Oman’s capital Muscat. There, Sousann El-Faksch and Dr. Ruth Prelicz (ruth.prelicz@ahkoman.com) give information on the topic of green hydrogen:https://www.ahk.de/oman
The share price of Weichai Power has risen by almost 50 percent in the last few weeks. The reason is the partnership with BYD in the electrification of large vehicle fleets. A perfect joint venture, it seems. Weichai Power with BYD could – my guess – be pushing the door open to fuel cells, since alongside battery-electric trucks and other commercial vehicles, the fuel cell is perfect for long-haul journeys.
Weichai has a joint venture with Ballard Power in China (51:49), with a capacity of already 20,000 FC modules per year. And Weichai will be one of the main beneficiaries when in China a large subsidy program for fuel cells and hydrogen comes – maybe 2024 or 2025. Weichai is China’s largest diesel engine manufacturer, which is now moving towards e-mobility – comparable with Cummins Engine in the USA. Weichai is also cooperating with Bosch.
Disclaimer
Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.
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