Russia's invasion of Ukraine is driving companies to ditch their reliance on Russian gas supplies and suspend operations in the country, leaving an opening for well-positioned firms to take an even greater market share should Europe respond by speeding up its net-zero timeline, according to sector analysts.
"Europe's primary path to reduce reliance on Russia will be to accelerate the deployment of renewable energy. This should result in increased sales opportunities for both solar and hydrogen companies," Wells Fargo Securities told clients March 2, citing American green hydrogen fuel cell producer Plug Power Inc., Danish offshore wind giant Ørsted A/S and Israel's SolarEdge Technologies Inc. as the biggest winners, given their existing European market penetration.
During a March 4 interview, Plug Power President and CEO Andy Marsh said the company is ready to help Europe expand its green hydrogen resources beyond the firm's joint ventures with French automaker Renault SA and Spanish power company Acciona SA.
"It's a huge opportunity for us," Marsh said. "Two weeks ago, the message about hydrogen and green hydrogen specifically was to meet the 1.5 degrees Celsius goal. Today, it's much more than that — it's also a national security issue, not only for Europe but for the whole liberal democratic world."
"We can help Europe move past the present position," Marsh added.
While renewables developers' stock prices had been suffering from a sector-wide sell-off due largely to supply chain bottlenecks and inflated materials costs, Plug Power, Ørsted and SolarEdge have all seen their equity values grow by double-digit percentages since the invasion began Feb. 24.
AB Bernstein analysts agreed in a March 2 note that the "acceleration of renewables and electrification of heat (through heat-pumps)/ using green hydrogen is the only medium- and long-term solution for Germany to structurally reduce reliance on gas supplies from Russia."
Green hydrogen faces higher capital expenditure costs as the price of electricity and raw materials surge, making wind turbines and solar panels more expensive. But the technology still emerges as a winner from the energy crunch over gray hydrogen, made with fossil gas, according to Pierre-Etienne Franc, CEO of green hydrogen fund FiveT Hydrogen.
Since the European Commission launched its hydrogen strategy in mid-2020, many in the market have been disappointed by delayed policy frameworks to incentivize uptake. Electrolysis technology is ready for scale, but uptake from the industry remains a barrier, Franc said.
"We want to move to green processes for industry, from refining to chemicals and transportation. If the bridge to that is well-funded, the thing will move," Franc said.
In Germany, about 60% of gas imports came from Russia in 2021; Bernstein anticipates that the accelerated need to displace those supplies will also benefit RWE AG, Vestas Wind Systems A/S, E.ON SE and Siemens Gamesa Renewable Energy SA. The war in Ukraine could push the German government to resolve permitting delays, the analysts said.
At the end of 2022, Germany will close over 4 GW of nuclear power generation capacity as it simultaneously finalizes its 2030 coal exit. New renewables, according to Bernstein, "can displace 12 [billion cubic meters] of gas demand by 2024" while still accounting for the phasing out of coal and nuclear generation.
The crisis is also expected to generate additional European interest in U.S. liquefied natural gas, with experts warning that it would be extremely difficult to replace imports of Russian gas, which accounts for more than 40% of the region's supplies. German Chancellor Olaf Scholz recently announced that Berlin decided to fast-track the construction of two LNG terminals.
Still, existing LNG exporters remain limited in their ability to cover significant gaps in Russian deliveries on short notice since the highly contracted nature of the global LNG trade constrains the ability of exporters to redirect cargoes.
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