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21 January 2021

Air Liquide edges towards hydrogen leadership

Gas-giant Air Liquide has continued to progress its hydrogen ambitions: this week with the acquisition of a 40% stake in France’s H2V Normandy – a subsidiary of H2V product. For a company of more than 100 years, the deal marks a significant shift in its operations, but not one that should be identified as unexpected.

Through the acquisition of H2V Normandy, Air Liquide aims to demonstrate its long-term commitment to hydrogen energy, and to become a player in decarbonization in its home country of France and across the world. Through H2V Normandy, the company will hope to develop an electrolyzer which can produce and separate both hydrogen and oxygen, providing the company with an additional sales channel for both industrial gases.

The first phase of this will be to develop a 200 MW facility for the production of low-carbon hydrogen in France, in the industrial zone of Port Jerome in Normandy.

Much of the hydrogen produced through this will focus on the transport market. Along with Toyota, Air Liquide also part owns HysetCo, which announced an €80 million plan this week to switch 10,000 of Paris’ diesel-powered taxis to Toyota’s hydrogen-powered Mirai model by the time the city hosts the Olympic Games in 2024.

Other industries that are set to benefit from the company’s production of green hydrogen are those in the refining and chemical sectors in the Seine Valley, where Air Liquide has historically been highly active.

The new partnership will aim to capitalize on France’s national ambition in the hydrogen sector, following the publication of the country’s €7 billion hydrogen strategy in September. With €2 billion of this funding coming by 2022 from Covid-19 stimulus packages, the plan aims to have 6.5 GW of electrolysis by 2030, eliminating six million tons of annual emissions from the country.

It is perhaps unfair to call Air Liquide a ‘Gas-giant,’ and bundle it in with the struggling fossil-fuel majors who largely operate through selling natural gas. Instead, the French multinational focuses on the sales of oxygen, nitrogen, and now hydrogen, to over 3.7 million customers worldwide. It’s revenues of €22 billion in 2019, eclipse those of the swathe of hydrogen start-ups that have seen explosive stock growth in recent weeks, while Air Liquide’s stock has remained steady.

As we’ve seen with clean start-ups in the automotive sector, investors are often rightfully skeptical of the ability of age-old incumbents to rise in value through the energy transition. However, for Air Liquide the case could be different. Instead of overhauling outdated supply chains, establishing a presence in the hydrogen sector represents a value-add to the company, rather than a transformation of existing business.

For Air Liquide, green hydrogen production through electrolysis has the handy biproduct of Oxygen, where the company already has established sales channels – largely to the healthcare sector. With electrolysis offering two sources of revenue in this case, the currently high costs of green hydrogen can be partially offset by the sales of this oxygen, which is often otherwise wasted. This could place Air Liquide ahead of competitors as green hydrogen becomes cost competitive between 2023 and 2024.

The company’s gas storage and distribution infrastructure is already well suited to hydrogen. For hydrogen-powered vehicles, the company has already installed more than 120 refueling stations across the world. In November, the company became part of a 62-party consortium that announced plans to bring 100,000 fuel cell vehicles to Europe’s road by 2030.

In the US, the company is also one of a group of stakeholders calling for a ‘national roadmap to a hydrogen economy,’ citing a market opportunity worth $12 trillion by 2050. In Nevada, Air Liquide has already invested $150 million into a renewable liquid hydrogen generation plant, which will open in 2022. In January 2019, it also acquired a 18.9% stake in Canadian fuel cell specialist Hydrogenics for $290 million, before much of the rest was taken over by engines giant Cummins in July that year.

Air Liquide is a 10% constituent of Rethink Energy’s Hydrogen Index, which has risen 31.58% since the start of 2020, despite falling 5.26% in the past week. With a reduced exposure to the dynamics of the general hydrogen market, Air Liquide’s stock has fallen 2.42% in the first three weeks of the year, with 2.14% of this coming in the week preceding this article.