Hydrogen: a new energy El Dorado?
While it has long been used in the chemical and petroleum industries, hydrogen is an energy carrier that is now being considered for other major applications: decarbonising certain industrial sectors, ensuring electricity storage and, of course, powering the heavy transport sector.
What is sometimes referred to as the "Swiss Army knife of decarbonisation" is proving to be a promising solution to help achieve carbon neutrality, if it is produced using low-carbon processes. Attracting the most interest is green hydrogen produced from renewable energies.
Though still expensive compared to other energies and therefore underused, green hydrogen is expected to take on a prominent role in the renewable energy mix, notably alongside low-carbon electricity, and help meet global ambitions to reduce CO2 emissions.
"Sustainable hydrogen is very likely to become a key element of our clients' energy transition. It is therefore important that BNP Paribas' business lines take proactive approaches in this area. Projects already underway and those to come help us to better understand the path our clients and the industry may take. Local ecosystems using green hydrogen will likely receive funding first and should drive the subsequent development of larger hydrogen ecosystems."
Jean-Laurent Bonnafé, Director and CEO of BNP Paribas
Towards a global acceleration
From America to Asia and Europe, many countries are implementing ambitious policies to promote the development of hydrogen. The situation is evolving rapidly around the world, so rapidly that it is hard to determine the state of its deployment at any given moment. This dynamic is driven both by governments and industry players.
In the United States, the Biden administration is betting heavily on hydrogen: it plans to double or even quadruple its production and reduce its costs by a factor of two or three. China, which opened the world's largest hydrogen station in July 2021, has listed hydrogen as one of its "six industries of the future" in its latest five-year plan. Also in Asia, Japan is continuing the government's decades-long push for hydrogen mobility in partnership with automakers and infrastructure providers.
Europe in the race
The European Commission has adopted a dedicated strategy as part of the European Green Deal. Germany is the leader, producing half of Europe’s hydrogen. France, Spain, the Netherlands, Denmark, Norway and Sweden may soon catch up, given the large-scale projects underway or planned in these countries. The United Kingdom has also announced an ambitious plan to produce blue hydrogen on an industrial scale, notably through the development of carbon capture, storage and recovery (CCSR) infrastructure.
All countries committed to hydrogen have understood that the development of this energy carrier cannot be achieved without massive investments, which are essential for its production, storage and distribution. At the same time, we need to reduce the associated costs, which have remained the main obstacle until now, and in order to develop storage and distribution infrastructure, we need to move forward hand in hand with the mobility industry that will be the main consumers of green hydrogen in the future.
Discover, below, the podcasts of three BNP Paribas experts who share perspectives from the Americas, Europe Middle East and Africa as well as Asia:
- Ravina Advani, Head of Energy, Natural Resources & Renewables Coverage - North America;
- Shalen Shivpuri, Co-Head Investment Banking, Energy, Natural Resources Project and Exports, APAC
- Romain Talagrand, Head of Power – Energy, Resources & Infrastructure – CIB
BNP Paribas committed to the hydrogen transition
Thanks to its global presence, the Group has been able to effect changes in the energy sector. It has created a network of experts, the Low-Carbon Transition Group, responsible for coordinating the expertise developed throughout the Group and for sharing skills between countries and business lines.
The aim is to advise the Bank's clients on their energy transition policy and to help them implement it through financing or investment products: bond issues, IPOs, project financing, bonds or loans conditional on meeting certain environmental criteria, asset management funds and more.
In addition, BNP Paribas has developed a cross-functional, global "Hydrogen Squad" of 30 people to finance and support the development of the most promising hydrogen solutions. The aim is still the same: to use sustainable finance to support the development of hydrogen by creating dedicated funds. In this way, the Group is acquiring expertise in the new market of hydrogen and creating the financial tools to promote its long-term development.
Gray, yellow, blue, green: the hydrogen spectrum
Hydrogen is an energy carrier and not an energy in itself. It is produced from a primary resource through a chemical reaction.
The energy transition, a major driver of sustainable finance
BNP Paribas took part in issuing the UK's Green Gilt, the largest sovereign green bond ever issued to help finance a country's energy transition. The Green Gilt is designed to finance the UK government's first strategic plan to support the hydrogen industry.
In addition, in May 2021 BNP Paribas contributed to Air Liquide's first green bond, which will be used to develop green projects within the framework of its Sustainable Financing Framework, including hydrogen production, storage, distribution and use for mobility.
In Guyana, the Group has put in place the market's first project financing vehicle to enable the consortium of Meridiam, Hydrogène de France and La SARA to implement the CEOG Renewstable® project: the creation of the world's first multi-megawatt hydrogen power plant and the largest storage of green hydrogen from intermittent electricity sources, aiming to supply 10,000 homes with green energy. It will be the first project in the world to combine hydrogen and solar technology to produce 100% renewable electricity. This pioneering project is likely to become a benchmark in the development of renewable energies.
In terms of asset management, the BNP Paribas Energy Transition fund from BNP Paribas Asset Management enables the Group's clients to invest in energy transition opportunities resulting from the increase in energy demand, changes in the energy mix and the growing need for energy-efficient solutions to combat climate change. Of course, this includes green hydrogen.
"Green hydrogen is highly compatible with low-carbon electricity and can therefore play a decisive role in decarbonizing certain energy and industrial uses. BNP Paribas is actively working to help establish local ecosystems that bring together all the players in the hydrogen value chain, with the support of adequate financing methods, thus taking part in achieving our collective carbon neutrality objectives."
Sébastien Soleille, Global Head of Energy Transition and Environment
Hydrogen: the new engine of sustainable mobility
To promote the development of hydrogen in the transport sector, BNP Paribas has set up a global partnership with Hyundai. As part of this agreement, in Switzerland, BNP Paribas has provided the manufacturer with one of the world's first hydrogen mobility financings. In fact, it is to this country that Hyundai will export its Xcient truck, the first hydrogen-powered truck ever produced, which embodies the future of road transport.
The Group is also involved in supporting the sector as a whole: BNP Paribas Leasing Solutions has set up a partnership to finance hydrogen filling stations with Hydrogen Refueling Solutions, a Grenoble-based company that designs high-capacity hydrogen filling stations for light vehicles such as cars, cabs and forklifts, as well as heavy vehicles such as trucks and buses. And Portzamparc, a subsidiary of BNP Paribas and the stock market specialist of BNP Paribas Private Banking, provided support to the company during its initial public offering in February 2021. Later in the year, Portzamparc also floated two other French companies from this sector, Hydrogène de France and Entech.
There is no shortage of examples, that are as diverse as the projects launched or announced in all sectors of the economy and in almost every country. The hydrogen revolution is underway and BNP Paribas' ambition is to support its clients in the large-scale development of green hydrogen.
BNP Paribas: an active member of the Council
BNP Paribas is a member of the Hydrogen Council and a founding member of its investor group. The Hydrogen Council, created in January 2017, now includes more than 120 companies mobilized to accelerate the development of the hydrogen industry. The newly elected board of directors is composed of 13 representatives: Air Liquide, Anglo America, China Energy, Cummins, Engie, Faurecia, Hyundai, Johnson Matthey, Shell, Sinopec, Linde, TotalEnergies and Toyota.