Global Decarbonisation Monthly Report | February

January 2021 – The US Back to Having a Climate and Energy Green Agenda

• Hours after being in office, President Joe Biden used executive orders to formally re-join the Paris Agreement. Biden’s goal is to bring the US electricity sector’s carbon emissions to zero by 2035. On the executive side, the new administration plans to invest $400 billion into federal procurement of renewables, batteries and EVs.[1]
• Earlier in the month, Tesla (TSLA, up 12.4%) announced the launch of its own solar power inverter. The company’s solar power solutions started in 2016 with the SolarCity acquisition.[2] Adding to the Powerwall and to solar roof tiles is their new inverter, a key piece of a solar system now solved by the in house-designed power electronic. The news caused shares in Solaredge Technologies (SEDG, down 9.6%) to drop 16% the day of Tesla’s announcement.   

iClima Global Decarbonisation Enablers Index Performance

Past performance is no guarantee of future performance. Source: Bloomberg, Solactive, HANetf

*TNR Index, in USD. 12 Month figures based on 31.01.20 -31.01.21.

Performance in January

• CLMA closed the first month of the year up 6.24%, after being up 12.5% on Jan 26th. The Dow, S&P and Nasdaq posted their worst month since October, caught by the retail frenzy over GameStop.
• CLMA is currently comprised of 151 shares. In Jan 2021, 68 companies had a negative share performance, 56 were between 0% and 10%, and 27 companies were above 10%. Notably 8 companies were up over 40% in the first month of the year.

Noteworthy subsegments in the month were EV & Bikes, Renewable Energy Equipment, and the Fuel Cell segment. The strength of the Fuel Cell segment is particularly newsworthy, and we are dedicating most of this report on the positive events that led to this strong performance. The climate change ETF provides comprehensive and balanced exposure to the relevant climate change solutions, but many companies in the fund are truly relevant players in the emerging H2 economy.

The Fuel Cell, Electrolysers and Green H2 Production: Ecosystem is in Place, Investments Pouring

Fuel Cells are devices that can convert the chemical energy of a fuel into electricity.  They resemble a battery but don’t need recharging and the only by-product of hydrogen used as fuel is heat and water.  As it can be powered by hydrogen, fuel cell makers have benefited from global initiatives for the development of a new green hydrogen economy.  The period from December 2020 to January 2021 has seen investor confidence in alternative fuels skyrocket.  Several headline events in 2020 provided political backing for the long-term viability of alternative fuels, reinstalling investor confidence, and a proliferation of deals in early 2021 has built on this momentum.

In July 2020, the EU announced its Hydrogen Strategy alongside a ‘European Green Hydrogen Alliance’. In doing so, it pledged to support the sector in becoming ‘an intrinsic part of the integrated energy system’ by 2030;[3] investments of €430 billion until 2030 are estimated as needed, as well as a clear target of installing 40 GW of electrolysers within its borders by the end of the decade.[4]  In the US, the election of President Joe Biden and democratic control of both US houses presented a clear signal to investors, confirming this major shift in outlook. Climate change was a core theme of Biden’s campaign, and he has promised to ‘pursue a historic investment in clean energy innovation’ as part a $2 trillion Green New Deal which will aim to achieve a carbon pollution-free power sector by 2035. 

In the wake of these high-level trends, market leader Plug Power has secured two confidence-inspiring deals with Renault and SK Group. Additionally, large players Iberdrola, Orsted and NextEnergy are making clear signals, investing in pilot green hydrogen projects. Whilst prices may fluctuate in the short term, the direction of travel seems clear.

iClima Global Decarbonisation Enablers Performance Table

As of 31.01.21

Performance before inception is based on back tested data. Back testing is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such a strategy would have been. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. Past performance for the index is in USD. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product. Source: Bloomberg / HANetf. Data as of 31/01/2021

Noteworthy Company News in January 2021

Ballard Power Systems Inc (BLDP, up 46%) Earlier this month, the Canadian Hydrogen Fuel Cell manufacturer announced it will represent the sector at COP26. A deal with Scottish Enterprise, Transport Scotland and the Hydrogen Accelerator means a Ballard Fuel Cell module will power a zero-emissions passenger train demonstration around Glasgow during the conference.[5]  The company’s bid to conquer the European market has received two further boosts since December, in the form of a contract for 10 fuel cell modules to power the Dutch transport company Van Hool buses and a contract to supply Scandinavian telecommunications specialists Eltek Nordic with hydrogen powered 1.7 kW and 5 kW backup power systems.[6]

Bloom Energy Corporation (BE, up 21.8%) From late 2021, the Californian manufacturer of solid-oxide fuel cells will help the city of New York reach its Paris Agreement targets by providing the power supply for One World Trade Centre.[7] The switch aims to save 1,140 metric tons of CO2 per year via use of a 1.2 MW new fuel cell installation, enough to supply one-third of One World Trade Centre’s electrical demand. A deal with Asian giant, SK, will see Bloom Energy later this year supplying their fuel cells and electrolysers to an industrial complex in South Korea, helping to establish their presence in Asia. The 20 MW and 8 MW projects based on Bloom Energy Servers are just the beginning, as South Korea released a ‘Hydrogen Economy Roadmap’ in 2019 calling for 14,000 MW of stationary fuel cells to be installed by 2040.[8] 

Ceres Power Holdings (CWR, up 0.5%) Engineering corporation Bosch owns an 18% stake in UK-based Ceres, a world leader in solid-oxide fuel cell. The German company announced plans over a month ago to scale up production of 200 MW of distributed power stations across Germany by 2024, hoping to bring Ceres £23 million in licensing fees.[9] Beyond licensing out their fuel cell technology to Bosh, they also license to Weichai and Doosan. The company’s most recent news is a strategic partnership with Austrian powertrain developer, AVL, whose reach and reputation could offer significant opportunities for expansion.[10]

FuelCell Energy Inc. (FCEL, up 85.8%) Connecticut-based FuelCell Energy Inc has ridden the hydrogen wave with few festive announcements of its own. Back in October, the company won $8 million of funding from the US Department of Energy’s Office of Energy Efficiency and Renewable Energy.[11] This will be put towards the development of its flagship SureSource electrolysis platform. In the wake of this governmental backing, the market clearly has high hopes for the platform which aims to provide efficient turnkey hydrogen power generation solutions at scale.

ITM Power (ITM, up 6.6%) The British company that manufactures electrolysers is a particular beneficiary of the hydrogen boom promise. In early January, it announced the sale of a 24 MW electrolyser to EPC partner Linde.[12] In October 2019, Linde acquired a minority stake in ITM and is now partnering on clean energy projects across Europe.[13] A week before the Linde deal, a consortium including ITM was granted €5 million by the European commission to investigate the viability of combining an offshore wind turbine and an electrolyser (fellow consortium participants are Iberdrola (IBE, up 3%) and Orsted (ORSTED, up 1%).[14]  In Australia, ITM entered into a deal with Optimal that will see ITM membranes installed in projects across Australia.[15] Back home in Sheffield, ITM’s Gigafactory received practical completion, with ability to manufacture 1,000 MW per annum; the world's first gigawatt-scale electrolyser factory.[16]

NEL ASA (NEL, up 6.2%) ITM’s Norwegian competitor has also had a fruitful period. It was chosen by utility giant Iberdrola to supply over 200 MW of electrolysers in Spain by 2023, with an initial 20 MW plant to start operations in 2021.[17] A partnership with mobility provider Everfuel sees NEL ASA providing a 20MW electrolyser for use at the green H2 Frederica refinery facility in Denmark, a €7.25 million contract with delivery scheduled for late 2021.[18] The two companies have also initiated a venture – Everfuel Norway Retail AS - to develop the hydrogen fuel market in Norway. Finally, NEL ASA will provide the electrolyser for the Netherland’s landmark ‘PosHYdon’ North Sea project, the first offshore green H2 pilot in the world.[19]

Plug Power (PLUG, up 86.3%) The New York-based outfit has retained its place as the market leader in this segment through two landmark deals in early January. A collaboration with SK Group worth $1.5 billion seeks to develop solutions for each stage of the hydrogen energy production value chain.[20] SK Group are South Korea’s second largest conglomerate, and this deal represents a key moment in the penetration of hydrogen fuels into the crucial Asian market. The second deal, a 50/50 joint venture with Renault, targets the light commercial vehicle sector, a market in which Plug Power’s CEO believes light, rapid fuelling hydrogen vehicles could have a competitive edge.[21] 

PowerCell Sweden (PCELL, up 16.2%) Once part of the Volvo group, the fuel cell manufacturer joined the European Clean Hydrogen Alliance at the end of 2020. Bosch’s interest in this field is once again demonstrated by an order of PowerCell S3 Fuel Cell stacks for application in cars, buses and trucks.[22]  Looking ahead to later in 2021, a deal with Statkraft will see the companies exploring the possibilities for stationary power and also for mobile power solutions, peak shaving and smart grid possibilities connected to wind and solar sources.[23]

Outlook – The Conversion of Green Electrons into Green Molecules

• Large renewable energy companies are for that reason investing into green H2 pilot projects: The conversion of renewable source electricity into green H2 via electrolysis can add flexibility and security of supply to the electricity system. NextEra Energy (NEE, up 21.5%) announced last year its first green H2 plant in Florida, a $65million power project using a 20 MW electrolyser to produce 100% green H2 from solar energy. Orsted (ORSTED, down 6.1%) just announced a 2 MW pilot project harnessing offshore wind to power a pilot project that can produce 1 ton of green H2 per day. The power will come from two 3.6 MW turbines.

• As the industry evolves, we see various other CLMA constituents making investments into H2-enabled solutions: Alstom (ALO, down 3.7%) signed in 2020 two contracts for H2-powered trains[24]; NFI Group (NFI, up 16.6%) in 2020 supplied ten fuel cell heavy duty buses to Santa Ana, California, coupled with the debut of America’s largest H2 fuelling station.[25] Acciona (ANA, up 6%) announced last year a pilot project replacing a diesel generator with a H2 generator in a construction site in Spain.[26]

• Green molecules to overtake grey and blue ones: According to ITM Power’s CEO, at £40/MWh electricity cost, green H2 competes with blue H2. To compete with grey H2, electricity costs need to be below £25/MWh.[27] Depending on location, many solar and wind projects can already supply electricity at competitive prices.  He also points out that the EU and Chile are seeking demand for green H2 at 40 GW and 25 GW, respectively, by the end of 2030.

Product Details

iClima Global Decarbonisation Enablers UCITS ETF (CLMA), is a UCITS compliant Exchange Traded Fund domiciled in Ireland. This is the world’s first climate change UCITS ETF that provides exposure to the performance of companies offering products and services that enable CO2e avoidance. CLMA is unique because it shifts the focus from companies’ emission reduction actions, to companies offering products and services that directly enable CO2e avoidance solutions and shines a spotlight on climate change innovators.

The climate change ETF tracks the iClima Global Decarbonisation Enablers Index, an Index designed to measure the performance of securities from five sub-sectors including green energy, green transportation, water and waste improvements, decarbonisation enabling solutions and sustainable products. Please remember that the value of your investment may go down as well as up and that past performance is no guarantee of future performance.

• CLMA Factsheet
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•  CLMA Fund Page