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Maersk-backed green hydrogen player seals deal on sold-out IPO

22 June 2021 Cristina Brooks

A Danish electrolyzer maker partly owned by the world's largest container ship operator completed an over-subscribed IPO in Europe in recent days.

A.P. Moller Holding, the owner of ship operator Maersk, has a minority stake in electrolyzer manufacturer Green Hydrogen Systems.

Kolding, Denmark-based Green Hydrogen Systems, launched in 2007, manufactures modular alkaline electrolysis units and is seeking to expand production.

The company delivered five units of a 22-strong order book prior to the IPO. Its customers include Danish wind developer Ørsted, and French hydrogen producer Lhyfe.

The 8 June IPO on Nasdaq Copenhagen attracted "demand substantially exceeding the number of shares offered" from large Danish and international institutional investors as well as the general public in Denmark, leading to an early close of the retail and institutional offer on 15 June.

As of 17 June, Maersk's stake in the company had decreased from 17.81% to 12.38%. The manufacturer's other major shareholders are Danish growth fund Nordic Alpha Partners Fund (27.48%) and Danish building utility services provider Norlys Holding (9.53%).

Demand for hydrogen created via electrolysis of water by renewable electricity, or green hydrogen, is surging as it is a carbon-neutral carrier of renewable energy, according to Green Hydrogen Systems.

Green Hydrogen Systems' electrolyzers are designed to meet this demand cheaply.

IHS Markit analysts recently found that the levelized cost of hydrogen (LCOH2) produced via electrolysis had fallen by 35-40% since 2015 due to the falling cost of renewable energy and rising maximum output of electrolysis plants, surging from 5 MW in 2015 to 10 MW in 2020.

The high cost of electrolyzers must keep falling, however, as it still prevents industrial players from switching to electrolysis-sourced hydrogen from fossil fuel-sourced hydrogen.

Maersk invests in greener fuels

Green hydrogen holds promise as an energy transition solution not only for hard-to-decarbonize industry, but also for shipping.

In December, Green Hydrogen Systems secured an investment of €20 million ($24 million) and a new board member, A.P. Møller Holding Principal Simon Ibsen, from Maersk's owner.

Hydrogen is not the only low-or-zero-carbon ship fuel Maersk has its eye on though. It is also investing in methanol and ammonia as future shipping fuels. Maersk plans to operate vessels running on carbon neutral methanol by 2023. However, CEO Søren Skou has said the company does not see a big role for fossil fuels like LNG.

Maersk has signed an MOU on building a facility that would produce green ammonia for use as shipping fuel and fertilizer, according to a February statement.

At the time, Maersk highlighted its "quest" to find future fuels for shipping and said it was exploring not only ammonia, but also methanol and fuels sourced from blends of alcohols and lignin, a bio-polymer from plants that is also a byproduct of production at paper mills.

Fuel options

Tristan Smith, associate professor at UCL Energy Institute and Director of UMAS maritime consultancy, told IHS Markit: "Our research has consistently shown that hydrogen and/or hydrogen derived fuels, such as ammonia, are the long-term sustainable and scalable solution for shipping's energy needs, supported by wind, batteries, and efficiency. "

The shipping industry would likely continue to invest in hydrogen, Smith said. "Shipping needs to start moving away from fossil fuel use this decade. For international [...] shipping, our research and that of many other organizations points to a hydrogen-derived fuel being the most likely alternative. However, there is no large-scale infrastructure and supply chain currently available and a lot of developments that need to be made this decade," he said.

Maersk's potential to become an "early adopter" of hydrogen fuel will appeal to its clients planning to decarbonize in the future. "So, I can see multiple benefits to making an investment now even whilst the policy and business case are still maturing," said Smith.

He agrees with Maersk on the topic of LNG as fuel for ships. "LNG is a fossil fuel and has no role in that long-term—it has had an exaggerated potential role driven by a small number of vested interests. Synthetic or bio versions of LNG are also not likely to be competitive with hydrogen/ammonia. However, we are currently in a situation where the regulation and commercial business case that aligns to that longer-term future is not driving the competitiveness—fuels are competing on their comparative price without their negative externalities, e.g. climate impacts, factored in. In that competition, fossil fuels or LNG wins," said Smith.

A market-based measure could change the fortunes for fossil fuels used in shipping by making them compete on factors other than cost. Smith said: "It's only a matter of time."

But technology allowing ships to burn zero-carbon fuels will take time to develop while LNG fuel technologies are already available.

LNG as a maritime fuel has had momentum on bigger vessels like container ships while LPG is practical for other ship types, the CEO of shipping classification body DNV GL, Knut Ørbeck-Nilssen, told the 14th Annual International Shipping Forum last year.

LNG bunkering allows for a 20% reduction in carbon emissions and is currently the "only" option readily available, he said. "Gas as fuel is not only the best for the next one or two vessel generations, it is also a bridging fuel into even better fuels of the future, that we are not sure will be there in the next 10 years or even in the next 15 or 20 years," he added.

Ammonia was a potential candidate for the next hot maritime fuel in 2050, he said.

Posted 22 June 2021 by Cristina Brooks, Senior Journalist, Climate & Sustainability, IHS Markit

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